DOMINO EFFECT; EMPLOYERS, WORKERS COULD BEAR THE BRUNT OF HMO RATE HIKES.Byline: Ben Sullivan Daily News Staff Writer After several years of slow to no increases in HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, premiums, area managed care firms say they will raise rates significantly next year, forcing businesses to either pay more or pass the costs on to workers. In a survey of five health maintenance organizations operating in and around the San Fernando Valley San Fernando Valley Valley, southern California, U.S. Northwest of central Los Angeles, the valley is bounded by the San Gabriel, Santa Susana, and Santa Monica mountains and the Simi Hills. , all of them said they planned to raise prices from 3 percent to 12 percent. In each case, the companies said, rising drug costs, past policies that kept prices unsustainably low and increased charges from providers were to blame. ``We're coming out of a period in which we gave zero rate increases, and as a result there were a number of us hurting,'' said Cora Tellez, president of Prudential HealthCare's western division. Woodland Hills-based Prudential will boost rates up to 6 percent, Tellez said, an amount that is ``certainly an increase over 1997, but in line with the expenses we're seeing.'' Prudential's price boost pales next to what Kaiser Permanente Kaiser Permanente is an integrated managed care organization, based in Oakland, California, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield. has planned. Oakland-based Kaiser is the largest HMO operating in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, , with more than 1 million members. After a devastating dev·as·tate tr.v. dev·as·tat·ed, dev·as·tat·ing, dev·as·tates 1. To lay waste; destroy. 2. To overwhelm; confound; stun: was devastated by the rude remark. 1997 in which it lost $270 million, the company in May said it would raise rates by up to 12 percent. Two large purchasing groups - the California Public Employees Retirement System and the Pacific Business Group on Health - balked balk v. balked, balk·ing, balks v.intr. 1. To stop short and refuse to go on: The horse balked at the jump. 2. at the figure, and negotiations whittled their premium increases down to 10.75 percent and 8.1 percent, respectively. But for smaller groups that contract with Kaiser, the increase is likely to remain in the double-digits. At Woodland Hills-based Foundation Health Systems Inc., parent to Health Net HMO and one of the nation's largest publicly traded managed care companies, prices are set to rise up to 7 percent in 1999. CareAmerica Health Plans, also based in Woodland Hills, will add an extra 5 percent onto premiums this year, ``And we don't anticipate it being less than that next year,'' said CareAmerica Senior Vice President David Schmidt. Schmidt said a bevy bevy a flock of birds. of new drugs expected to come on the market in the next 12 months will drive up future prices. Among the drugs expected are new treatments for arthritis and memory loss, widespread conditions that could generate public demand reminiscent of what was seen for the anti-impotence drug Viagra, he said. HMOs also face increased costs from health care providers whom they pay to treat members. Woodland Hills-based WellPoint Health Networks Inc., which runs the Blue Cross of California HMO, said it will stop referring its members to facilities run by Catholic Healthcare West Catholic Healthcare West (CHW) is a California not-for-profit public benefit corporation that operates hospitals in California, Arizona, and Nevada[1]. As such, it is exempt from federal and state income taxes. , a large hospital chain, because of a price squabble squab·ble intr.v. squab·bled, squab·bling, squab·bles To engage in a disagreeable argument, usually over a trivial matter; wrangle. See Synonyms at argue. n. A noisy quarrel, usually about a trivial matter. . Catholic Healthcare, which operates 30 hospitals in California List of hospitals in California (U.S. state), grouped by county and sorted by hospital name. Alameda County
``We are not going to pass these (proposed increased) costs on to our members who want affordable health care,'' Coulter said. The new wave of price increases at HMOs comes at a time of otherwise low inflation, ironically brought on in part by managed care's control of health costs in the early and mid-1990s. But HMOs' past squashing of health inflation came largely from cut-throat competition that led to artificially low prices as plans scrambled for market share. The bill for that strategy is now coming due, some industry participants say. The result of HMO price gains is that employers will see their operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. rise, while employees will sacrifice more of their paycheck to health services health services Managed care The benefits covered under a health contract . But given the tight labor market labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience , businesses risk losing employees if they put too much of a pinch on their workers. ``With a small increase, we'll typically take most of the hit ourselves,'' said Christine Thomas, head of human resources at Valencia-based UltraViolet Devices Inc. Still, Thomas said, even if UltraViolet Devices picks up the tab for higher HMO costs, the company's 80 employees will one way or another share in the pain. ``If it affects (company) profits, that affects employee bonuses,'' Thomas said, ``so eventually it's going to be felt.'' RISING RATES Citing rising drug costs and past pricing that made premiums unsustainably low, a number of local HMOs say they will raise premium rates in the coming year. HMO Average rate increase Blue Cross of California 3-4 percent CareAmerica 5 percent Foundation Health Systems 5-7 percent Kaiser Permanente 7-12 percent Prudential HealthCare 4-6 percent SOURCE: HMOs; Daily News research CAPTION(S): Box Box: RISING RATES (See Text) |
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