S.F. grudgingly backs Kaiser rate hike for public workers

SAN FRANCISCO — Officials who oversee the healthcare plans that cover San Francisco public employees this week excoriated Kaiser executives for failing to adequately explain a proposed rate increase but ultimately voted to back it.

The city’s public workers have seen their healthcare costs spiral while they have accepted pay cuts and furlough days at the bargaining table. In an unusual move, labor unions teamed up with San Francisco’s Health Service System earlier this year to demand greater transparency from Kaiser.

The showdown introduced local political muscle into the broader nationwide push under the Affordable Care Act to make the healthcare industry more responsive to consumers.

Health Service System commissioners had directed Kaiser officials to show up at a meeting Thursday with a detailed accounting of the proposed 2014 rate hike of more than 5% — which comes as San Francisco’s 45,000 Kaiser members as a pool are younger, healthier and using fewer services.

But in response to detailed questions, Cindy Striegel, vice president of strategic accounts for Kaiser Foundation Health Plan, and Andrew See, vice president of actuarial services, repeatedly said the answers the commissioners sought were proprietary.

“There is some concern about a nonprofit having a profit margin that they can’t reveal,” Commissioner Jean Fraser said during a lengthy public scolding. “You’re struggling with a … perception issue that you’re hiding something.”

After Kaiser officials declined to approximate the portion of the increase going toward company salary hikes, Supervisor Mark Farrell — the sole elected official who serves as a health service commissioner — lost his patience.

“To bear your wage increases on our shoulders is incredibly difficult for us to swallow, and at some point it has to stop,” he said, noting that city workers had been subject to years of salary freezes and reductions.

An analysis released by San Francisco last month 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%.

Health Service System Deputy Director and COO Lisa Ghotbi also found that while members’ use of hospital, doctor and prescription services has trended down 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%.

Kaiser officials have said that the system’s integrated model of care makes it difficult — if not impossible — to itemize certain costs.

Public workers and union leaders at the meeting pushed the board to reject Kaiser’s renewal proposal.

“We are tired of being gouged,” said Brenda Barros, a clerk at San Francisco General Hospital. “We need to force them to tell us the truth about why they need more money. And if they don’t, you shouldn’t approve it.”

But Ghotbi said the commission’s decision had to be placed before the Board of Supervisors by Tuesday in order to keep a planned fall open enrollment on track.

Ultimately, the board voted 4 to 2 to approve the rate increase and “immediately begin negotiations for 2015” — telling Kaiser officials that more detailed financial accounting would be required.

“We find ourselves in a stuck place,” Commissioner Randolph Scott said. “We cannot cancel your contract or run around outside with our hair on fire saying: ‘This is awful’ because it’s just not helpful” to our members.

lee.romney@latimes.com