Foes of 2 HMO Bills Say They Would Cost Jobs

An industry group opposed to two upcoming ballot measures that would tighten regulation of HMOs declares in a new study that the initiatives would cost California between 27,000 and 60,000 jobs and lead to sharply higher medical insurance premiums.

The study, released Tuesday, is one of the first shots fired in what is expected to be an intense battle over two competing versions of HMO regulatory initiatives slated for the November ballot.

Supporters of the two initiatives--both heavily backed by labor unions--contend they are necessary to protect against excesses by HMOs, such as extreme profits or so-called gag orders that limit what doctors can tell patients about HMO policies.

But the HMO industry, with support from the California Chamber of Commerce, has denounced both initiatives as union-backed efforts to protect health-care jobs. They say the measures would dramatically expand government’s role in health care and impede HMOs’ ability to control health-care costs.

The business group, Taxpayers Against Higher Health Costs, said the new study found that the two measures would raise medical premiums as much as 14.5% and cost California employers between $1.3 billion and $2.7 billion in 1997.

The cost estimates were prepared by Washington-based Barents Group, an economic research unit of KPMG Peat Marwick. Taxpayers Against Higher Health Costs paid for the study.

“The initiatives would severely restrict health plans’ use of tools that reduce costs and control quality,” said Dave Gross, a Barents health economist who oversaw the study.

Backers of the initiatives denounced the study as flawed.

“It’s the same old story of the powerful HMOs and insurance companies trying to distract voters . . . with a phony study concocted by industry hacks and pseudo-economists,” said Harvey Rosenfield, an author of one of the measures, Proposition 216.

Robin Kane, a spokeswoman for the other, Proposition 214, called the study’s estimates “outrageous.”

While both measures would impose tougher regulations on HMOs that supporters say are needed to protect consumers from abuses, the measures differ in some key areas. Proposition 216, for example, would impose fees on hospitals that restructure and on some other health-care mergers.

Kane said the Barents study failed to account for significant difference between the two initiatives, particularly related to economic costs. “We believe [opponents of the initiatives] are specifically doing that to confuse voters.”

Janet Maira, a spokeswoman for Taxpayers Against Higher Health Costs, countered, “We went to an internationally recognized firm, and they have a reputation to consider.”

The HMO industry also says parts of the two ballot measures are unnecessary because they duplicate existing regulations or pending legislation that is likely to be passed soon. For example, one feature of both measures is a ban on gag orders, protecting doctors and nurses from retaliation when they buck managed-care-company rules to advocate on behalf of patients.

Gov. Pete Wilson on Tuesday signed legislation that would protect doctors from such retaliatory action by health plans. Two other gag-order bills, more comprehensive in scope, are making their way through the Assembly with little opposition and are expected to reach Wilson’s desk later this year.

HMO executives say the Legislature, not the initiative process, is the proper arena to regulate the industry.