SAN FRANCISCO — It’s a trend many public employees can relate to: Health insurance premiums climb year after year, while at the bargaining table workers have agreed to kick in more for pensions, take salary cuts and sign on to furlough days.
But when Kaiser Permanente — which insures 45,000 public workers here — proposed another hike for 2014, San Francisco’s Health Service System teamed up with labor unions to say “no more.”
In a rare show of unity, they are demanding that Kaiser craft an alternative proposal, one that caps profits, links rates to the use of services and provides for more transparency. That means explaining whether rising costs are a result of potentially avoidable complications, such as hospital infections, and breaking down just what the city is paying for in a ballooning category known as “other medical services/integrated care management.”
The showdown introduces local political muscle into the national push, under the Affordable Care Act, to make the industry more responsive to consumers.
“It’s a huge … opportunity,” said Sally Covington of the Oakland-based Community Campaigns for Quality Care, a nonprofit that has guided unions nationwide to press health plans for accountability and is working with the San Francisco labor coalition.
“What we’re seeing unfold here … is very unusual,” she said. “We do not know of any other instance where these kinds of forces have been realigned in this manner.”
Final contracts must be approved by the San Francisco Board of Supervisors, which is watching the negotiations closely. So is Mayor Ed Lee, who a spokeswoman said was confident that the parties would “work toward a proposal that will serve our employees and protect the fiscal health of the city.”
In a statement, a Kaiser Permanente spokeswoman said the 2014 proposal was “fair and competitive,” adding that the organization would continue to meet with city representatives “to explain our renewal pricing and cost structure.”
For years, city administrators and labor leaders bristled at the rate hikes. Then they joined forces.
“If you are going to get people healthier, it has to translate into a reduction in cost for employers, employees and taxpayers,” said Rebecca Rhine, executive director of the Municipal Executives Assn. and part of a coalition of labor groups pushing for change. “We began talking about how they all fit together.”
When health service system Deputy Director Lisa Ghotbi analyzed the data, she found that overall, Kaiser’s San Francisco members have been using fewer services because of the enrollment of families with young children, who tend to have fewer health problems.
Yet while their use of hospital, doctor and prescription services has trended down by as much as 16% since 2011, plan costs had risen by 11%. (Kaiser proposed a 5.5% rate hike for next year.)
And although hospitalizations had dropped by more than a third over the last seven years, Ghotbi said, charges in that category had risen by nearly 90%.
City workers’ families have been cared for by Kaiser for 64 years, “and we certainly value the quality of care,” she said. “This has nothing to do with that. It really has to do with pricing practices.... We have concern that there is a lot of profit being made off the public employers.”
Ghotbi’s department previously structured its contract with Blue Shield, which covers 40,000 city workers, to include “accountable care organizations” of partnered medical groups and hospitals. She said the result has been improved quality of care — and no rate increases for the last two years. The company also pledged to cap its profits at 2%.
At a health system board meeting earlier this month, Ghotbi asked Kaiser for a 4% cap. Between 2010 and 2012, she said, Kaiser took in $87 million more from members here than it cost to serve them, a 15% profit that outpaces its overall margin of 5%.
Wendy Sack, vice president of underwriting for Kaiser, responded that its pricing structure was “put together to compete in the marketplace” and was not directly tied to utilization of services. Hospital patients are sicker overall, she said, and more surgeries are performed on an outpatient basis.
Commissioners called her answers “confusing” and directed Kaiser officials to return for further discussion at a board meeting Thursday.
“You have to come forward with much better explanations for those fees,” health service Commissioner Jean Fraser told Sack. “You’re losing a PR battle.”
In response to an inquiry from The Times, a Kaiser spokeswoman later said that the organization stands apart from competitors because it is fully integrated — with its own hospitals, medical groups and so on. That means “other medical services” and “integrated care management” — which account for 29% of the company’s proposed 2014 premium proposal — include services that other healthcare plans either don’t provide or bill for separately. Examples include injections given during medical visits, secure email communication with doctors, health education classes and disease management.
“It is absolutely untrue to suggest that these categories are used for any purpose other than to classify and account for tangible services delivered to members,” Gerri Ginsburg, director of communications, said in a statement
Ginsburg also noted that as a not-for-profit organization, Kaiser’s “margin” is needed for “investments in new hospitals, medical offices, equipment and technology.”
Brent Fulton, a healthcare market expert at UC Berkeley, said the public pressure on Kaiser was an interesting development, but that the company — which long has underpriced competitors — probably had the negotiating advantage.
“It’s like going to Wal-Mart and saying, ‘You’re making too much profit,’ ” he said. “Wal-Mart will say, ‘OK, so go shop someplace else.’ ”
Still, as a “large employer, with so many customers,” San Francisco is well-positioned to press for change, said Supervisor Mark Farrell, who also is a health system commissioner.
“You’re starting to see it at the federal level, you’re starting to see it at the state level, and I’m certainly going to push for it at the Board of Supervisors here at the city,” he said.