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Medicare HMOs Trim Premiums, Boost Benefits

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Times Staff Writer

Several of California’s largest health insurers said Monday that they were slashing premiums and increasing benefits for seniors in Medicare HMOs, reversing a four-year industrywide retreat from the federal program.

The actions by PacifiCare Health Systems Inc., Aetna Inc. and others came in response to a Medicare overhaul that took effect Jan. 1. It is expected to renew competition among health maintenance organizations that insure the elderly and disabled.

The government announced last month an average Medicare payment increase to health plans of 10.6% in 2004, up from the 2% to 3% increases of previous years. Federal officials hope the premium hike will encourage health plans to remain in Medicare, which covers 40 million disabled and elderly patients, and to improve benefits.

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Since 1999, health plans have shed more than 2 million Medicare beneficiaries because payment increases haven’t kept pace with annual 10% jumps in healthcare costs.

Health insurers had to file their 2004 coverage plans with Medicare by Monday.

Insurers said they were using their federal payment increases to lower the cost of HMO programs for seniors and to enhance benefits. If approved by Medicare, the coverage plans would take effect March 1.

“In Southern California, where it is already competitive, it will become more competitive,” said Susan Rawlings, head of Aetna’s programs for retirees. She said Aetna was studying new markets in California for its Medicare HMO program.

However, some consumer advocates said they weren’t impressed with the benefit enhancements.

“You would expect to see some fine-tuning of benefits here and there,” said Gail Shearer, director of health policy analysis for Consumers Union.

Shearer said Medicare reform “is throwing money at the insurance companies. What it failed to do was build in performance and efficiency standards.”

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The far-reaching Medicare law signed by President Bush last year added a drug benefit for seniors, which is expected to cost $534 billion over 10 years.

Health insurers announced adjustments in three areas: premiums, co-payments and drug benefits. Benefits vary by county, often significantly.

Oakland-based Kaiser Permanente, the nation’s largest operator of Medicare HMOs, said it planned to eliminate premiums in Riverside, San Bernardino and San Diego counties. Enrollees in Los Angeles and Orange counties currently pay no premiums. In addition, Kaiser said it would lower the co-pay on office visits for all 167,000 Southern California Medicare HMO enrollees to $10 from $20. It planned no changes to drug benefits.

Cypress-based PacifiCare, the second-largest Medicare HMO operator, said that in Los Angeles County it would increase the coverage limit on brand-name drugs to $1,300 from $1,000.

Enrollees in Los Angeles and Orange counties would see their co-payments for office visits drop to $5 from $10 for its standard plan. Those members currently pay no premiums.

Brand-name drug coverage would be added in Orange County with a limit of $500.

PacifiCare plans to eliminate monthly premiums in Riverside and San Bernardino counties and reduce the co-pay on office visits to $5 from $10 in Riverside. In contrast with Los Angeles County, brand-name drugs would be covered up to a maximum of $500 in Riverside County and $350 in San Bernardino County. PacifiCare has 183,500 enrollees in the four counties and 349,000 in the state.

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Hartford, Conn.-based Aetna, with 30,000 enrollees in four California counties, said it would eliminate monthly premiums in San Bernardino and Riverside counties; enrollees in Orange and Los Angeles counties currently pay no premium.

In Los Angeles County, the company said it would raise the quarterly coverage limit on brand-name drugs to $150 from $125; brand-name drugs aren’t covered in the three other counties.

Health Net Inc. of Los Angeles, with 101,000 Medicare beneficiaries in California, said Monday that it planned to reduce costs and improve benefits for some seniors but did not provide details.

In New York Stock Exchange trading Monday, Aetna’s stock rose $1.38 to $71.38, Health Net closed up 16 cents at $33.46 and PacifiCare fell 52 cents to $32.33.

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