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S.F. supervisors back Kaiser rate hike, demand more transparency

Legislation sponsored by state Sen. Mark Leno (D-San Francisco) would require health insurers selling coverage to employers with 50 or more workers to provide more detailed information about how and why they raise rates. The measure is backed by the San Francisco Health Service System board.
(Rich Pedroncelli / Associated Press)
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SAN FRANCISCO -- The San Francisco Board of Supervisors has reluctantly approved a Kaiser Permanente rate hike for more than 45,000 public employees and their families, after aggressively pressing the nonprofit healthcare coverage provider for months to justify the increases with greater transparency.

Supervisors unanimously backed the 5.25% hike on Tuesday after determining that blocking it could jeopardize coverage for too many families. But they secured a commitment from top Kaiser executives to take several steps toward greater transparency and implement a multiyear “wellness plan” that could translate into cost savings for enrollees.

The board also crafted a unanimous resolution -- to be voted on next week -- slamming Kaiser for profiting unduly off San Francisco public workers and urging the healthcare giant to “immediately begin” negotiations with the city Health Service System “toward a fair and transparent pricing model.”

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The resolution requires that supervisors be regularly informed on the progress of negotiations.

The pressure resulted from an unusual partnership between the Health Service System, which oversees the healthcare plans of public employees, and a coalition of unions representing those workers.

An analysis released in May by Health Service System Deputy Director Lisa Ghotbi showed that Kaiser took in $87 million more from city workers and their dependents between 2010 and 2012 than it cost to serve them, a 15% profit that outpaces the company’s overall margin of 5%.

Ghotbi also found that while members’ use of hospital, doctor and prescription services has declined by as much as 16% since 2011, plan costs had risen by 11%. Hospitalizations too had dropped by more than a third over the last seven years, but charges in that category had risen nearly 90%.

With union leaders in lock step, health service system staff and commissioners pressed Kaiser during a series of public meetings to explain the math, noting that the pool of workers insured by Kaiser is younger and healthier overall but has nevertheless been asked to pay more.

Kasier’s response was that much of the information requested was “proprietary.”

But after several members of the board of supervisors threatened to block the rate hike -- and possibly sever the city’s more than six-decade ties with Kaiser -- a top executive apologized.

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“I really regret the use of that word and I wish our organization had not said that,” Peter Andrade, senior vice president for California sales and account management, told supervisors during a board subcommittee meeting last week.

The unusual public standoff came as part of a national movement urging greater transparency and accountability to consumers from the healthcare industry as a path to reducing costs.

City leaders here have vowed to keep the pressure on.

Supervisor Mark Farrell, who also sits on the health service system board, is consulting with the city attorney on local legislation that would require a more detailed accounting of rates. And the board has backed state legislation sponsored by Sen. Mark Leno (D-San Francisco) that would require health insurers selling coverage to employers with 50 or more workers to provide more detailed information about how and why they raise rates.

Andrade has promised an improved collaboration, saying Kaiser wants to “be a good citizen of the city and county of San Francisco.”

“At this point our relationship is not where either one of us wants it to be,” he told officials. “We can move closer or we can move farther apart. We want to move closer.”

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Twitter @leeromney

lee.romney@latimes.com

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