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Healthcare Costs Go Viral

It’s a national epidemic finally getting some long overdue attention. To put rising costs in perspective, a dozen oranges today would cost $134 if adjusted at the same rate of price inflation that we’ve seen in healthcare since 1945.

And, it’s only getting worse. California health insurance premiums soared 185% since 2002. But we’ve heard these complaints before, it’s not new.

What is new is that the largest unions in San Francisco are doing something to reign in price gouging by insurers like California-based Kaiser Permanente, the nation’s largest HMO with 9.1 million subscribers.

For UNITE-HERE Local 2, one of the city’s largest unions representing 13,000 employees of restaurants and hotels in and around San Francisco, it has become a necessity.

The union’s senior research analyst, Ian Lewis, told me that his members were confronted with an average increase in health charges of 10% each and every year for the last ten years.

During this time, Local 2 was forced to take action. They had a strike/lockout in 2004, a number of strikes in 2009-2010 and a strike last summer by food and beverage concession workers at AT&T Giant’s Park.

In each and every case, Lewis said, healthcare was a major issue.

In fact, he emphasized, “rising healthcare costs has been the major issue in almost every labor dispute I’ve observed throughout the country during the last ten years. Rising costs have to be dealt with or working people will continue falling behind.”

Local 2’s experience is not an exception.

SEIU 1021 represents 54,000 members in northern California and has lent its considerable influence to a labor campaign supported by the San Francisco Labor Council that seeks to hold all California insurers accountable for their price increases.

The union argues on its website that “health insurance premiums and out of pocket health costs are eating up our paychecks and straining family budgets. Last year, San Francisco’s government Health Service System (HSS) estimates that from 2010 to 2012, one health care provider [Kaiser] charged $87 million above the true cost of care.

“We estimate the City will try to shift extra healthcare costs to city workers and our families. In one example, the cost for the Kaiser option — an employee plus one — will rise to $1,200 more a year,” wrote SEIU 1021 Vice President of Representation Karen Joubert.

Furthermore, the union indicates, the city’s HSS analysis shows “per member per month” costs from Kaiser soared between 31%-54% during the past seven-year period despite an actual overall decline in members using Kaiser services.

The union is currently negotiating for its 12,000 San Francisco city workers so their concerns are gaining more attention.

Sally Covington, staff member of SEIU 1021 with expertise in healthcare policy and benefits, painted a similar picture at a Feb. 24 healthcare forum sponsored by the San Francisco Labor Council.

“Costs are passed on to us year after year with little accountability or explanation,” Covington told the audience of 85 labor delegates. “Why do we allow insurers to bill us for their undisclosed mistakes? We are no longer going to be an ATM for an industry that resists accountability and transparency.”

She explained that Kaiser refused to budge from its 5% price increase for city workers in 2014, running out the clock until the City was forced by administrative deadlines to approve the Kaiser rate increase, adding $15 million to the premium even though HSS’s data analysis, as cited earlier, showed decreasing utilization of health services by workers.

“This $15 million increase that went into Kaiser’s pockets represented a potential 2% wage increase for each of our 12,000 city workers,” Covington stated during our interview.

Plus, added SEIU 1021 San Francisco COPE (political education) co-chair, Ed Kinchley, “It is not OK for city costs to go up like this. Funds are taken from services that many people in the community need and reduced services also jeopardize our jobs. It’s a lose, lose situation for working people of San Francisco.”

This was a theme repeated several time during the Feb, 24 Labor Council healthcare forum as expressed by elected leaders from San Francisco building trades’ unions and from both public and private sector unions.

They described hard choices made during contract negotiations the last several years just to keep their health benefits intact. The list included wage freezes, reduced pension contributions and delayed health coverage for new employees. All agreed things had to change.

And, thus, a statewide union coalition is forming to demand pricing accountability from insurers. There has already been some success.

For example, as a result of insurers refusing all requests by unions for documented cost analysis, the city of San Francisco agreed to conduct its own independent analysis and produced data that ultimately exposed unjustified higher costs.

Finally, union leaders say, there was undisputed evidence revealing what had long been suspected: higher prices being charged for fewer health services actually provided to city workers who were generally younger and healthier than previous years.

As a result, the San Francisco Board of Supervisors issued a blistering resolution in 2013 criticizing Kaiser. It is actually quite remarkable for its candor. It reads more like an indictment.

“WHEREAS, Utilization of healthcare services by City Health Service System (HSS) members enrolled in Kaiser has declined each year for the past seven years, while Kaiser has increased the charges paid by HSS in each of the same seven years; and

“WHEREAS, Hospitalizations for HSS Members enrolled in Kaiser have declined by more than a third over that period of time, while Kaiser has increased its charges per hospitalization by nearly 90%, all without presenting any data to support these increases;

“WHEREAS, Kaiser has made profits of more than $8 billion since January 2009;

“WHEREAS, Kaiser is making a profit of at least 15% from the City and County of San Francisco, and is likely making similar profits from other large San Francisco employers;

“FURTHER RESOLVED, That Kaiser provide specific documentation on the drivers of healthcare costs among HSS members, and commit to a plan for controlling these healthcare cost drivers and sharing with HSS the benefit of the resulting cost reductions.” [partial text of the full resolution]

Under mounting pressure from the forming union coalition, a resolution calling for accountability and transparency  was also passed by the hugely influential California Public Employees Retirement System (CALPERS). It provides health benefits to over 1.4 million public employees, retirees and dependents.

Another union-backed resolution is working its way through the state legislature after being approved by the state Assembly.

What’s Wrong with this System?

Tom Moore, Jr. has over 30 years’ experience in health policy, having held major federal and state government positions including the Director of California Department of Social Welfare and Director of the Office of Legislation for the U.S. Public Health Service.

He has lots of experience with insurance companies and frankly explained to me the mystery of how and why prices increase. “Why have prices gone up?” Moore asked rhetorically.

“The answer is, because they can. Kaiser wanted to reach revenue goals. So, with fewer hospitalizations, less use of emergency care and less use of other categories of care as documented by San Francisco in 2014, Kaiser saw its revenue from city workers reduced.

Their response: create new billing charges without explanation and just hand them to the city.” Only this time, they got caught due to the vigilance of frustrated and angry San Francisco unionists.

Every person interviewed for this article supports a Single Payer government healthcare system that eliminates gouging by private insurers. This includes veteran organizer Don Bechler, director of Single Payer Now.

With his organization’s emphasis on having a national healthcare system minus insurance companies, he stresses support for the California Universal Healthcare Act and pending national legislation, HR 676, the Expanded and Improved Medicare for All Act.

Bechler also reminds us that “In 2008, the AFL-CIO State Federation of Labor came to the conclusion that the insurance industry is beyond regulation and should be removed from our lives.”

This same point was made at the Feb. 24 Labor Council healthcare forum where I observed a new resolve to campaign for Single Payer. The sense of urgency was palpable.

For example, UNITE-HERE Local 2 leader Mike Casey, who is also Labor Council president, made a special plea at the meeting urging unions to campaign for Single Payer with renewed energy.

As Kinchley expressed to me: “When you hear a president of the Labor Council, who is also head of the most dynamic union in our city, come out and strongly urge all unions to get more serious about putting Single Payer at the top of our priorities, well, that is something new and something real.”

A few days later, the topic was mentioned again in a conversation with Tim Paulson, executive director of the Labor Council, who told me he was taking personal responsibility for directing the Council’s Single Payer efforts and “proud to have been elected to the Campaign for a Healthy California (CHC) steering committee. This is a priority of the San Francisco Labor Council.”

Local 2’s Lewis agrees. It is a practical question, he told me, we cannot keep going the way we are, dependent on profiteers, “the costs will overwhelm us.”

He explained his view that Californians deserve a cost analysis from insurers, which is the immediate purpose of the current statewide transparency campaign, and perhaps, he told me, this will lead to state regulation of the industry.

“But, ultimately,” Lewis underscored, “healthcare has to be separated out from employment. From a health perspective, our state would be better off if there was one single purchaser of health care services like Medicare is for seniors. We need Single-Payer!”

It’s true, revitalizing labor’s commitment for a government healthcare system is essential or we risk the peril of being overwhelmed by an ever increasing cost structure imposed by private insurers “just because they can.”

San Francisco unions deserve credit for recognizing reality, acting to dramatically reshape it for the general good and encouraging by example others to respond similarly to the same dangerous trends.

Carl Finamore is Machinist Lodge 1781 delegate to the San Francisco Labor Council, AFL-CIO. He can be reached at local1781@yahoo.com

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Carl Finamore is Machinist Lodge 1781 delegate, San Francisco Labor Council, AFL-CIO. He can be reached at local1781@yahoo.com

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