California Gov. Gavin Newsom signed into law on Friday a measure that will require Kaiser Permanente to join other insurers in providing more detailed information on expenses and revenue at each of its hospitals and medical facilities.
State Sen. Richard Pan, D-Sacramento, introduced the legislation, Senate Bill 343, on behalf of Kaiser’s largest union, the Service Employees International Union. SEIU-United Healthcare Workers West has been in contract negotiations with Kaiser for about a year, and the union is part of a coalition voting on whether to launch a strike in California, seven other states and the District of Columbia.
“This law arms employers and others with the information they need to fully understand why the cost of their health insurance with Kaiser Permanente may be rising,” Pan said in a news release issued Friday.
SB 343 also has been backed by the California Public Employees’ Retirement System, consumer groups such as Health Access California, business groups such as Small Business Majority, and other labor groups.
As part of the legislation, Kaiser will have to break out expenses and revenue for each of its facilities; break out revenue by type of payor (Medicare, Medi-Cal or private insurance) at each facility; and break out rate increases by type of service (hospital, physician services, pharmacy, radiology and laboratory).
“We think it’s an important transparency measure,” said Anthony Wright, the executive director of Health Access California. “Right now, we do require rate review of our insurers, and Kaiser has had a fairly broad exemption from much of the rate review processes that other insurers have to follow, and what this bill does is fairly simple. It ensures Kaiser is providing the same types of information justifying their rates as other health insurers have to do.”
Pan has said he introduced the legislation because it’s important to hold Kaiser to the same rules as its competitors. But in letters to legislators, Kaiser has stated that what is being characterized as an exclusion by SEIU, is merely an acknowledgment that Kaiser has always done its business and its record-keeping differently from other health-care insurers since its inception in 1945.
“Because of our unique model, we requested and received language in the two laws that are the subject of SB 343 so we could accurately file reports that reflect our underlying operating model,” wrote Teresa Stark, Kaiser’s senior director, government relations, in a letter dated April 15. “Our filings are not inferior or incomplete, they are simply different because we are different. We do not build rates and calculate cost trend in the same way as other claims-based systems or capitated (fee per patient) systems.”
She stated that SB 343 would require the company to deconstruct its model and establish an entirely new structure to look at unit costs for provision of care.
Later, in a July 3 letter, Stark thanked Pan and SEIU for working with Kaiser to make changes to the legislation that omitted filing of two financial statements that the company could not provide by facility because of its legal structure. She also thanked them for delaying the start of annual reporting requirements and noted that, if they also would delay the start of quarterly financial filing, that the company would withdraw its opposition to the legislation.
Those changes, however, were not integrated, so Kaiser will have to start reporting the quarterly information later this year. That means the company will have to immediately make arrangements for changes to its computer software and staffing to accommodate the new reporting requirements.
CalPERS staff, in a June 19 background document submitted to board members, noted that SB 343 “may provide an additional tool for CalPERS to use to verify that the information it does receive is accurate. In addition, it may increase other purchaser’s ability to access healthcare pricing and utilization data, which could help them develop cost containment measures that are similar to those employed by CalPERS.”
Mark Herbert, the California Director of Small Business Majority, a small business advocacy organization, said the organization’s scientific opinion polling indicates that the cost of health insurance remains a challenge for small business when trying to attract and retain talent.
“We recently released a poll a few months ago that showed 91 percent of California’s small business owners believe there should be more transparency in the health-care marketplace, and we believe SB 343 does just that.”