Steep New Kaiser Rate Hikes Further Imperil Nonprofits

by Randy Shaw on May 8, 2012

At the April 18 overflow hearing on the fiscal crisis faced by San Francisco’s nonprofit contractors, many highlighted the annual double-digit health care increases imposed by Kaiser. The city has not picked up the cost of these increases for the past five years, forcing workers to pay more and organizations to cutback elsewhere to provide health care for employees. Now, Kaiser is raising nonprofit rates for 2012-13 as much as 20%, despite making $5.7 billion in profits since 2009 and $1.6 billion in its most recent year. It’s clear that the city must change its approach to funding nonprofit health care. Rather than individual nonprofits dealing with health giants directly, all nonprofit city workers should be placed in a large pool to achieve lower rates. The current system is broken, outdated, and unsustainable, as rising health care costs are injurious to workers’ and organization’s financial health and wellbeing.

While Kaiser promotes a benevolent public image of putting people before profits, its steep premium increases for nonprofit groups say otherwise. San Francisco nonprofit groups routinely see annual premium hikes exceeding 10%, and it appears many will see a 20% hike for 2012-13.

These increases reveal Kaiser as far more profit-driven than its warm and fuzzy image suggests. And there are other recent signs.

Last July, a National Labor Relations Board administrative law judge found that Kaiser illegally interfered with its workers right to select a new union. This was the contest between SEIU-UHW and NUHW in the fall of 2010, in which Kaiser so desperately wanted to keep its cozy relationship with SEIU-UHW that it acted illegally on its partner’s behalf.

Kaiser’s wrongdoing was so severe that the NLRB took the unusual step of requiring a new election.

Last November, SEIU-UHW announced a hospital cost-cutting state ballot initiative with great fanfare. I described it at the time as “smoke and mirrors” rather than a serious effort to rein in health care costs.

I raised these suspicions before learning that SEIU-UHW’s measure excluded Kaiser and Dignity (formerly Catholic Healthcare West) from any cost restrictions. The union’s misrepresentation of the initiative’s coverage was later exposed by the Los Angeles Times on March 12, 2012, and led Jamie Court, president of Consumer Watchdog, a Santa Monica-based advocacy group, to observe “it’s like a marijuana regulation initiative that leaves out Humboldt County. There’s no good reason” to exclude Kaiser and Dignity, “two of the largest providers in the state.”

In other words, the union representing Kaiser workers – SEIU-UHW – was in cahoots with management in supporting steep rate hikes. And this occurs despite SEIU-Local 1021 and other SEIU locals themselves experiencing steep Kaiser hikes, both for members and staff.

SEIU-UHW abandoned its costly initiative drive last week, claiming to “have made a landmark agreement with the hospital industry” on issues of common concern. Since Kaiser was not covered by the measure, limiting its rate hikes could not be part of any “deal.”

With Kaiser imposing huge rate hikes during years when they are reaping profits in the billions, it appears that the company’s profit expectations require such steep hikes each year. In case anyone thought that Kaiser would lower rates to compensate for its huge profits, this year’s hikes are a wake-up call.

City Must Create a Nonprofit Healthcare Pool

The April 18 nonprofit hearing established that in contracting out large segments of its health and human services operation – particularly homeless, AIDS, and supportive housing programs – San Francisco city government cannot simply allow nonprofits to fend for themselves in the new healthcare environment.

Specifically, when the city is reimbursing nonprofit groups for health care costs covering thousands of employees, it makes absolutely no sense that the city is not negotiating a single rate for this large employee pool. The city regularly negotiates health rates for city workers, so why not for the nonprofit workers whose salaries are also paid with city dollars?

Individual nonprofits negotiating health care rates on their own cannot obtain the lower rates offered to larger employee pools. The steadily increasing Kaiser rates (and Kaiser is used by most nonprofit employees) has made individual group health care contracting untenable.

The city has not pushed to include nonprofit employees in a single pool because it has had no economic motive – nonprofits have been forced to eat all the increased health costs over the past five years, and absent mass protests will continue to do so in the future.

Some may also be surprised to learn that most nonprofit contractors (and my organization, the Tenderloin Housing Clinic, is an exception) do not provide health care for dependents. So San Francisco is not only casting adrift nonprofit workers to fend for themselves when it comes to Kaiser health care cost hikes, but the very structure of most nonprofit contracts assumes that the children of workers will not be covered at all.

It’s too late to get nonprofits into a single health care pool for 2012-13, but the 2013-14 cost hikes will be here sooner than we think absent city action. The nonprofit health care crisis is structural, and the city must provide a systemic change in how nonprofit workers whose entire salaries are paid for with city funds pay for health care.

So when you hear those soft and fuzzy Kaiser commercials about “Wellness Programs” and “Healthy Living,” think of the nonprofit workers forced to pay more and more of their wages to ensure that billions in profits keep flowing to the company. And also think of the stress experienced by workers forced to cutback elsewhere in order to pay these unaffordable premiums. This is a strain that attending Kaiser-sponsored “wellness” trainings will not alleviate.

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