Politics & policy

Insight into federal and state health care legislation & CMS regulation

Kaiser-CalPERS Deal: Rate up, Oversight Too

The nation's second-largest health care purchaser and the country's largest not-for-profit health plan have ended a two-month standoff over rate increases.

The California Public Employees' Retirement System and Kaiser Permanente agreed on a 10.75-percent rate hike in 1999 for premiums for current enrollees. Kaiser originally proposed a 12-percent boost — far higher than the average 5-percent increase CalPERS negotiated with nine other HMOs — prompting a CalPERS threat to freeze new enrollment into Kaiser plans.

Kaiser does not negotiate rates, but it did some horsetrading with CalPERS to get an increase both parties could accept. In exchange for the 10.75-percent hike, Kaiser gave CalPERS auditing authority to investigate the HMO's justification for future increases. In addition, Kaiser and CalPERS will hold quarterly meetings to monitor Kaiser's progress in solving the HMO's financial problems. The proposed 12-percent rate hike was a result of Kaiser's 1997 $270 million loss.

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