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Blue Shield and UCLA fight over contract rates


A contract dispute between one of California’s largest health insurers and UCLA could force thousands of patients at the university’s medical centers to seek treatment elsewhere if the disagreement is not resolved by the end of December.

Executives from Blue Shield of California and the University of California’s health system are quarreling over reimbursement rates for medical treatment at Ronald Reagan UCLA Medical Center in Westwood and nearby Santa Monica-UCLA Medical Center and Orthopaedic Hospital.

Blue Shield says the rates for care at the hospitals have nearly doubled in the last five years, and that the costs for inpatient treatments are already 41% higher than what it pays on average for similar care in Southern California hospitals.

“Every dollar they asked for comes from our customers, and they certainly aren’t in any mood to be paying large increases,” said Paul Markovich, Blue Shield’s chief operating officer.

UC officials say they have negotiated in good faith and hope to still reach an agreement before the contract expires Dec. 31. The negotiations affect the hospitals as well as two doctor’s groups.

“What the health system is offering at UCLA is incredibly fair,” said Santiago Muñoz, chief strategy officer for UC Health, the system that oversees UCLA’s hospitals and four other UC medical centers around the state.

At stake is care for more than 200,000 of Blue Shield’s customers who live within 15 miles of UCLA. Of that group, about 8,000 policyholders got inpatient or outpatient care last year at the two hospitals. This group is covered through Blue Shield’s preferred provider organization policies.

If the contract is allowed to expire, these people would have to pay higher out-of-pocket costs to get medical care at UCLA or seek cheaper treatment through doctors and hospitals still in the Blue Shield network. Customers with HMO coverage will largely be unaffected because their doctors do not typically refer patients to UCLA hospitals.

This dispute is not new: Blue Shield let contracts with UCLA expire in 2006 for two months and in 2008 for four months after it could not reach agreements on new reimbursement rates.

Blue Shield’s Markovich said the company negotiated with UCLA in the past. This time, he said, the insurer is having to talk instead with UC’s statewide health system, which is overseeing insurer contracts for each of its five medical centers.

Markovich said the system-wide negotiating strategy has given UC officials leverage to secure higher reimbursement rates. That, he said, is putting more pressure on Blue Shield, which earlier this year pledged to return money to policyholders when its net income exceeds 2% of revenue. This year, it is returning $450 million.

Muñoz said the centralized negotiating strategy saves administrative expenses and that reimbursement rates reflect prices in each local healthcare market.

Officials at the UCLA Health System said they want an agreement that “adequately reimburses” its doctors and hospitals for the complex medical care they provide. “It remains our goal to put patient care first and to avoid any disruption to our patients,” a spokeswoman said in a statement.


California spends less on healthcare than most states

Use of retail medical clinics is rising, study says

More U.S. firms using high-deductible insurance plans

-- Duke Helfand

Photo: Front entrance of Ronald Reagan UCLA Medical Center in Westwood.

Credit: Stefano Paltera  


More U.S. firms using high-deductible insurance plans


U.S. employers, struggling to contain rising healthcare costs, are expanding their use of high-deductible insurance plans, which help reduce monthly insurance premiums by shifting a greater share of medical expenses to workers, a new survey shows.

In 2011, 32% of companies with 500 or more employees offered high-deductible plans. That was up from 23% in 2010, according to the survey of 2,844 private and public employers by the benefits consulting firm Mercer.

In all, 13% of insured employees in the survey were enrolled in such a plan this year, up from just 3% five years ago.

Under high-deductible plans, employees pay for more of their initial medical expenses with money deposited by them and their employers into health savings accounts. Money in the accounts can be rolled over from year to year, allowing workers to build up large sums for future medical expenses.

“One feature of the [high-deductible] plans that employers like is the flexibility in funding employees’ spending accounts,” said Laura Baker, a principal in Mercer’s Los Angeles office. “A growing number of employers are making their account contributions contingent on the employees’ willingness to take steps to improve their own health.”

Companies say the approach is a benefit to them and their workers because it helps keep a lid on monthly insurance expenses. The Mercer survey showed that the average cost of employee coverage under high-deductible plans was nearly 20% lower than traditional insurance plans -- $7,787 compared to $9,385.

The shift to the high-deductible plans may be one reason behind slower growth of health insurance costs reported by employers.

The average per-employee cost of health benefits grew by 6.9% last year. The average costs have grown by 6.1% this year, and are expected to rise by 5.7% in 2012, the survey found.


Proposed health insurance rate regulation initiative submitted

Wal-Mart cuts health coverage for part-timers, raises premiums

New California healthcare laws expand consumer protections

-- Duke Helfand 

Photo credit: Andre Panneton /  

California's big health insurers profited in 2010, data show

Patient and doctor

California’s largest health insurance companies enjoyed a profitable year in 2010 even as they complained about shouldering rising costs for hospital care, doctors’ services and prescription drugs, new data show.

The state’s insurers and health plans collected $105 billion in revenue last year, and the largest insurers posted profits after paying medical claims for their policyholders, according to the California HealthCare Foundation’s annual Health Care Almanac.

For example, the state’s largest for-profit insurer, Anthem Blue Cross, posted a 4.2% profit margin, earning $206 million, in 2010 on preferred provider organization policies regulated by the California  Department of Insurance.

The Woodland Hills company also enjoyed 3.7% profit margin, earning $414 million, for HMO business overseen by a second regulator, the Department of Managed Health Care.

To learn more about revenue, profit and other data on California's insurers, go to


WellPoint profit drops even as revenue grows

Blue Shield of California to return money to customers

Cost of employer health coverage climbs, survey finds

-- Duke Helfand

Photo: A patient visits a doctor. Credit: Jay L. Clendenin / Los Angeles Times

Consumer Confidential: Medicare rates, peanut butter prices

Here's your I'll-take-you-there Tuesday roundup of consumer news from around the Web:

-- Good news for seniors: Premiums for Medicare Part B coverage for physician and outpatient services will increase less than projected next year. Also, the deductible will actually decrease. Premiums will go up $3.50, to $99.90 per month for 2012. The Medicare Trustees report had previously projected an increase of $10.20, to $106.60 for 2012. Premiums have not increased for retirees since 2009. The premium for new retirees in 2011 was $115.40; this group of retirees will now pay the standard premium of $99.90 per month, for a reduction of $15.50 in their monthly premium. And the Medicare Part B deductible decreased by $22, from $162 last year to $140 for 2012.

-- Your PB&J is about to get pricier. Sharp increases in peanut butter prices have begun going into effect after one of the worst peanut harvests in decades. Kraft is raising prices for its Planters brand peanut butter by 40%, while ConAgra has instituted increases of more than 20% for its Peter Pan brand. J.M. Smucker, which makes Jif, is introducing price hikes of about 30%. Consumers, meanwhile, are already seeing these increases reflected at grocery stores. Americans spend almost $800 million on peanut butter and consume an average of more than 6 pounds of peanut products each year, according to the National Peanut Board, a farmer-funded research group.

-- David Lazarus

Photo: Medicare rates won't go up as much as expected. Credit: Ricardo DeAratanha / Los Angeles Times


Lap-Band sales fell 16% in third quarter, Allergan says

Get-thin photo

Sales of Allergan Inc.’s Lap-Band weight-loss device dropped 16% in the third quarter of the year, the company said.

The Lap-Band is familiar to many Southern California residents because it is marketed extensively by a company called 1-800-GET-THIN on freeway billboards, television, radio and the Internet. The ad company is not affiliated with Allergan.

In a Wednesday conference call with analysts, Allergan Chief Executive David E.I. Pyott blamed the slump in Lap-Band sales on the sluggish economy, high unemployment and steep insurance co-payment requirements. In a statement, the company said it “remains committed to the Lap-Band business, as we strongly believe it represents an important tool in addressing the obesity epidemic.”

Since 2009, five Southern California patients have died after undergoing Lap-Band procedures at clinics affiliated with the 1-800-GET-THIN ads, according to lawsuits, coroner’s records and interviews.

Several lawsuits have been filed against the advertising company, clinics at which the surgeries were performed and the doctors involved in the surgeries. Through their attorneys, the marketing company and surgery centers have denied wrongdoing.

The Lap-Band represents just a small fraction of Allergan’s sales. The Irvine company also markets Botox wrinkle treatment, breast implants, an eyelash lengthening drug and a number of eye medications. Allergan reported $1.31 billion in sales for the third quarter, down slightly from the $1.33 billion that analysts had expected. Its shares fell $3.22, or 3.7%, to $83.74 on Wednesday.


Another patient dies after Lap-Band surgery

Ad firm, two doctors sued over death of Lap-Band patient

Lap-Band clinic directed to improve

-- Stuart Pfeifer

Photo: An advertisement for Lap-Band surgery. Credit: Mariah Tauger / Los Angeles Times

WellPoint profit drops even as revenue grows

PICTURE -- WELLPOINT -- 10-26-11

Health insurance giant WellPoint Inc.’s profit dropped 7.6% in the third quarter compared with the same period last year even though enrollments and revenues rose.

The nation’s largest insurer by membership and parent of Anthem Blue Cross in California earned $683.2 million in the three months that ended Sept. 30, down from $739.1 million in the year-earlier period.

Executives at the Indianapolis company said profit was down partly because of lower investment income and higher expenses from the purchase of CareMore Health Group, a Cerritos healthcare provider that serves seniors. The company also said last year’s performance was aided by the release then of $110 million in reserves for operating expenses.

Despite smaller profit, earnings per share rose 3% in the third quarter to $1.90, up from $1.84 during the same period last year, primarily because the company bought back 13.4 million shares.

“Our ability to add new customers while controlling costs demonstrates our execution and emphasis on creating a more affordable operating model for our customers,” Chief Executive Angela F. Braly said in a statement.

WellPoint, which operates Blue Cross Blue Shield plans in 14 states, said enrollment in the third quarter grew 2.6% to 34.4 million, up from 33.5 million during the same period last year. The company has added more than 1 million new members since the beginning of the year.

Enrollment in its senior business grew faster, up 14.8% to 1.44 million policyholders from 1.26 million last year, aided by the company’s acquisition of CareMore.

Third quarter revenue rose 5.7% to $15.4 billion, up from $14.6 billion at the same time last year.

WellPoint raised its 2011 earnings forecast, saying it will be $6.90 to $7 per share, not counting investment gains. Previous guidance was $6.75 to $6.95 per share.

WellPoint shares were up $2.58, or 3.9%, to $69.58 on Wednesday.


Cost of employer health coverage climbs, survey finds

Wal-Mart cuts health coverage for part-timers, raises premiums

Census: Nearly 1 in 5 Californians lack health insurance

-- Duke Helfand

Photo: WellPoint headquarters in Indianapolis. Credit: Darron Cummings / Associated Press

Consumer Confidential: Wal-Mart cuts benefits, Starbucks goes 'Blonde'

Here's your fly-like-an-eagle Friday roundup of consumer news from around the Web:

--The nation's largest employer will provide fewer health benefits to some employees. Wal-Mart will no longer offer health insurance to new part-time employees who work fewer than 24 hours a week and will charge workers who use tobacco more for coverage as healthcare costs rise. The company is also slashing the amount it puts in employees' healthcare expense accounts by 50%. Wal-Mart isn't alone in looking for ways to cut spending on healthcare. Starting next year, Wells Fargo will ask employees to fund their own medical expense accounts or choose to pay higher insurance premiums and have the company fund them, following the lead of companies such as General Electric that offer account-based healthcare plans. A study last month by the Kaiser Family Foundation found that the average annual premium for family coverage through an employer increased 9% to $15,073 this year.

--Do "Blondes" have more fun? Starbucks hopes so. The company is launching a decidedly non-European new Blonde roast. It will launch in both Starbucks outlets and supermarket aisles in January. Speaking at a Chicago press conference, Annie Young-Scrivner, Starbucks' chief marketing officer, said 40% of the 130 million coffee drinkers in the U.S. prefer a lighter-roast coffee. The new blend is aimed at them, as well as at the millions of one-time customers who had their first cup of Starbucks and announced it tasted like rocket fuel. Starbucks Blonde will come in two varieties: Veranda and Willow. You know, classic coffee flavors.

-- David Lazarus

Photo: Wal-Mart is cutting health coverage for some workers. Credit: Paul Sakuma / Associated Press


Blue Shield of California names grant recipients

Blue Shield of California is handing out $20 million in grants to healthcare providers who are setting up partnerships to deliver care more efficiently
Blue Shield of California said it is preparing to hand out $20 million in grants to hospitals, medical groups and other healthcare providers who are setting up new partnerships to deliver medical care more efficiently.

The nonprofit insurer named 18 groups of providers across California who will receive grants of as much as $2 million by Dec. 1.

The list of recipients includes St. John's Health Center in Santa Monica, Children's Hospital Los Angeles and Huntington Memorial Hospital in Pasadena.

St. John's is to receive $2 million to implement a program to better integrate the work of its doctors and to decrease unnecessary patient readmissions, among other things.

Children's Hospital is set to receive $1.1 million to improve its case management, enhance its information technology system and take other steps to improve care for its pediatric population.

Huntington is to receive $980,000 for initiatives to decrease readmissions and emergency room use.

The providers are all setting up so-called accountable care organizations that bring together hospitals, doctors and insurers in some cases to improve patient care and cut costs. The federal healthcare overhaul calls for the expansion of these organizations as a way reduce unnecessary healthcare spending.

Twelve of the 18 partnerships are located in Southern California. They include the Greater Los Angeles Care Innovation Corridor, a partnership among USC, the Catholic Healthcare West hospital chain and Methodist Hospital of Southern California. That team is scheduled to receive $300,000 from Blue Shield to develop a "seamless" system of medical care.

Blue Shield said it is making the healthcare grants as part of a promise to return money to policyholders and the community when its net income exceeds 2% of revenue.

The San Francisco-based insurer announced last week that it would credit $283 million off December insurance bills for nearly 2 million customers in the state as part of that promise.

The company announced a similar $167-million give-back in June; that money is being credited to insurance bills this month.

Blue Shield said it is applying an additional $10 million from each of those announcements for the healthcare grants. Officials said they received nearly 60 applications from healthcare providers across the state.

"This demonstrates overwhelming interest among providers in collaborating to reduce costs and enhance the quality of care," Paul Markovich, Blue Shield’s executive vice president and chief operating officer, said in a statement. "We're proud to support all of our grantees as they work to materially improve care and succeed under federal health reform."


New California healthcare laws expand consumer protections

Providence partnership with doctors seeks improved care, savings

Cost of employer health coverage climbs, survey finds

-- Duke Helfand

Photo: A money changer counts U.S. dollar bills. Credit: Tomohiro Ohsumi / Bloomberg

Blue Shield of California to return money to customers

PICTURE -- CASH 2 -- 10-12-11

Health insurer Blue Shield of California, which last summer said it would return $167 million in excess profit to nearly 2 million policyholders, now says it will give them an additional $283 million in December.

Policyholders are seeing the first round of money this month through credits on their insurance bills. The next giveback, to be announced by the insurer Thursday, will cut most of the bills in December by more than half.

Individual policyholders will see their December premiums reduced by an average $135. A family of four will get a $420 average cut, but the reductions could be as much as $700.

Chief Executive Bruce Bodaken said the San Francisco nonprofit is trying to help policyholders cope with rising healthcare costs by making good on a pledge to return money when its net income exceeds 2% of its revenue.

“Today’s announcement provides more tangible evidence that we’re putting affordability before profit,” Bodaken said in a statement. “We hope our action will inspire others in the healthcare industry to look for ways to make quality healthcare more affordable.”

Blue Shield’s action comes as insurance companies face the prospect next year of returning millions of dollars collected from policyholders but never spent on healthcare.

Under new federal regulations, insurers must spend at least 80% of consumers' premiums on medical care and not reserve that income for administrative costs or profit. But with consumers going to doctors less and often skipping treatment during tough times, insurers may not meet the 80% requirement and be obligated to issue refunds.

Some healthcare experts, while not singling out Blue Shield, said they are skeptical of insurers issuing refunds before they are required to do so.

“It certainly seems like a good public relations move to do it proactively than to be forced to do it,” said Larry Levitt of the nonprofit Kaiser Family Foundation’s Initiative on Health Reform and Private Insurance.

Blue Shield said that the money being returned this month comes from excess 2010 profit, while the money announced for December is from extra 2011 earnings.

Employers also will get a break on their December bills under the Blue Shield plan. Firms with two to 50 employees will get an average credit of $220 per worker. Larger companies will receive an average of $195 per employee. Companies that pay part of their workers’ premiums will decide how much to share with them.

Aside from the break on insurance costs, Blue Shield said it also is devoting $12 million for hospitals and physician groups to build stronger collaborations and for other healthcare-related reforms. That is on top of $13 million it announced in June for such efforts.


New California healthcare laws expand consumer protections

Videos shed light on complexities of healthcare reform

Census: Nearly 1 in 5 Californians lack health insurance

-- Duke Helfand

Photo: New $10 notes shown in an uncut sheet. Credit: Alex Wong / Getty Images 

New California healthcare laws expand consumer protections

Photo: Dr. Samuel Oregel examines Alicia Carrera, 70, at the Long Beach Comprehensive Health Center. Credit: Jay L. Clendenin / Los Angeles Times

Gov. Jerry Brown has signed a bevy of new healthcare laws designed to expand consumer protections for Californians in need of health insurance or medical care.

One measure, SB 51, requires health insurers in the state to comply with mandates in the new federal healthcare overhaul. Under federal reform, insurers must spend at least 80% of the premiums they collect on the healthcare of their customers in the individual and small-business markets. The figure rises to 85% for premiums collected from large businesses.

The new state law will give small firms in California — those with fewer than 50 employees — a boost by making it easier for them to afford health insurance and keep “more money where it belongs, in their pockets where they can use it to grow their businesses and with it our state’s economy,” said John Arensmeyer, chief executive of the advocacy group Small Business Majority.

Another bill signed by Brown will make it easier for low-income Californians to apply for subsidized insurance starting in 2014 under the federal healthcare overhaul.

That measure, AB 1296, requires the California Health and Human Services Agency to streamline forms and procedures for people seeking subsidies that will be available through a new online insurance exchange.

Brown also signed bills aimed at protecting maternity services for pregnant women and new mothers.

One measure, SB 299, bars employers from refusing to maintain and pay for coverage under group health insurance plans while women are on maternity leave.

Another, SB 222, requires individual health insurance policies in California to provide coverage for maternity services starting July 1, 2012. A third measure, AB 210, extends the same requirement and time line to group health insurance plans.

In a signing message accompanying the maternity bills, Brown said they will give children the “best possible start” to their lives.

“Healthy mothers mean healthy babies,” he said.


Cost of employer health coverage climbs, survey finds

Census: Nearly 1 in 5 Californians lack health insurance

Alternative medical services growing at hospitals in U.S.

— Duke Helfand

Photo: Dr. Samuel Oregel examines Alicia Carrera, 70, at the Long Beach Comprehensive Health Center. Credit: Jay L. Clendenin / Los Angeles Times


State-run workers' compensation insurer to lay off 1,800

Tom Rowe external use photoIn an effort to streamline operations and cut expenses, California's largest workers' compensation insurance company plans to lay off almost a fourth of its 6,800 employees.

Tom Rowe, the president and chief executive of the government-controlled State Compensation Insurance Fund, announced Thursday that the company was overstaffed by approximately 30% and plans to let go 1,500 to 1,800 civil service workers by the second quarter of next year.

It's the first layoff at the San Francisco-based firm since the 1930s.

"The positions being eliminated are in areas where business processes have changed significantly enough that work has been substantially reduced," Rowe said in a companywide email. "We spend more operating the company than we do on benefits to injured employees."

The layoffs are expected to save the company about $350 million per year.

The century-old company was created by the California Legislature to act as an insurer of last resort for employers that cannot get legally required workers' compensation coverage from private sector insurance companies. Last year, it collected about $1 billion in premiums from approximately 150,000 employers representing 15% of the California workers' compensation insurance market.

State Fund officially is a state agency, staffed by government workers, but it operates as an independent company and does not rely on any funding appropriated by the Legislature or the governor. State Fund is governed by a board of directors, mainly appointed by the governor.


Inquiry into State Compensation Insurance Fund ends

Workers' comp insurer State Fund to cut back operations

State Fund inquiry has gone very quiet

-- Marc Lifsher

Photo: State Fund President Tom Rowe. Credit: State Compensation Insurance Fund


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