Kaiser Skirting State Regulations in January Rate Hike on 660,000 Californians

NewsDecember 22, 2011

Emeryville, California – Today, the National Union of Healthcare Workers (NUHW) and the Courage Campaign requested that the Department of Managed Health Care (DMHC) “exercise its full statutory authority” to investigate insurance rate hikes that Kaiser Permanente plans to impose on 660,000 Californians on January 1, 2012, due to Kaiser’s failure to provide data required by regulators for their rate review process.

Today, in a letter submitted to DMHC Director Brent Barnhart, the two organizations pointed to “significant deficiencies” in Kaiser’s October rate review filings, and its failure to provide information on six of fourteen factors required by DMHC in its review process. On January 1, Kaiser seeks to boost rates for individual and small group plan subscribers by an average 9.0% and 8.2%, respectively. The rate increases would yield an additional half-billion dollars in revenues for Kaiser.

In its filings to DMHC, Kaiser provided incomplete data on the company’s rate of return, financial surpluses and executive compensation, among other factors that would militate against an economic justification for the increases. The ostensibly not-for-profit HMO has made more than $5.6 billion in profits since the beginning of 2009, and Kaiser’s CEO, George Halvorson, received nearly $9 million in compensation in 2010.

This is the second time in less than a year that Kaiser has attempted to push through a rate hike without submitting crucial data required by the state. This summer, Kaiser imposed a rate increase on 300,000 rate payers in California after submitting a rate review filing with many of the same missing data as in its October filing.

Then, as now, NUHW and the Courage Campaign urged DMHC to investigate the economic justification for Kaiser’s rate hike, based on its inadequate rate review filing. In September, after discussions with DMHC regulators and at their urging, Kaiser retroactively rolled back its increase by 1.2 percentage points, yielding an estimate $30 million in savings for California consumers. A recently obtained letter describes DMHC’s “deep disappointment” with Kaiser’s July rate hikes in the midst of California’s ongoing recession as well as Kaiser’s failure to justify hikes on consumers.

“Despite DMHC’s clear rebuke of Kaiser’s failure to justify its rate increase from earlier this year, Kaiser administrators have elected to do the same thing once more,” said Rick Jacobs, Founder and Chair of the Courage Campaign. “This is becoming par for the course with Kaiser: rip off policyholders when they’re hurting the most, ignore state regulations, and funnel even more patient care dollars into obscene executive salaries. Governor Brown and DMHC need to let Kaiser know they’ve got Californians’ interests at heart, and bring some accountability to an HMO that’s increasingly out of control.”

“It’s unconscionable for Kaiser to boost its massive profits and exorbitant executive compensation on the backs of California’s small businesses and non-profits, which are struggling to stay afloat, and at the expense of individual consumers still staggering under the impact of the Great Recession,” said Sal Rosselli, President of NUHW. “Kaiser’s finances make clear these rate hikes are excessive, and its repeated failures to meet the state’s reporting requirements show its complete contempt for California’s current rate oversight process.”