News in brief - July 21, 2003

CalPERS rate hike at 18% - Legislation brings insurer back to N.H. - Blues administrative expenses up - Calif. proposes patient rights signs - HCA cuts staff at headquarters - Baxter plans to cut 2,500 jobs - DMS acquires medical supplier

CalPERS rate hike at 18%

California's insurance system for state, municipal and school employees and retirees will see an 18% average increase in health plan premiums for 2004.

The program, which covers 1.4 million enrollees, initially faced HMO contract bids that would have raised the average member's premium by 31%. But CalPERS, the California Public Employees' Retirement System, said it cut proposed increases nearly in half by signing a multiyear contract with BlueShield of California. It also worked more closely with fewer managed care plans, designing more cost-effective insurance options and gaining more access to pricing information than when it had partnered with several additional insurers.

Legislation brings insurer back to N.H.

Fortis Health, a Milwaukee-based insurer of small businesses, announced it will re-enter the New Hampshire small-group medical insurance market in January 2004, a result of a new law aimed at bringing more competition into the state's managed care market.

Fortis left New Hampshire five years ago when it decided it couldn't be profitable there under the state's community rating health insurance system. Since 1994, when the state instituted community rating, the number of insurers selling health coverage in the state has dropped from more than two dozen to three, and the market has become virtually dominated by Anthem BlueCross BlueShield, which has a market share of about 60%.

The state Legislature, seeking to increase the number of insurers in the market, passed a bill in June reversing the practice of community rating and allowing insurers to vary group plan pricing by such variables as employees' health status, occupation and location. Fortis and some other insurers had lobbied for the bill, while Anthem had opposed it.

Blues administrative expenses up

BlueCross BlueShield plans had average administrative expenses of about 13% of premiums in 2002, according to a report by Sherlock Co., a Gwynedd, Pa.-based health plan consulting firm.

Those expenses represented an average of $25.26 per member per month for the 17 Blues plans that participated in the Sherlock study.

Administrative expenses were highest for commercial point-of-service plans, at 15.1%, and lowest for Medicare+Choice plans, at 8%.

The consultant attributed a 9% overall increase in administrative expenses since 2001 to higher commissions charged by brokers.

Calif. proposes patient rights signs

HMOs doing business in California would be required to post signs in doctor's offices and hospital waiting rooms telling patients of their basic rights, under a new rule proposed in July by the state's Dept. of Managed Health Care.

Health plans will have to post signs outlining the essential provisions of the patients' bill of rights and give contact information for the managed care department's help center.

The new regulation will become final after the department holds hearings on it.

HCA cuts staff at headquarters

HCA Inc. is eliminating 100 jobs at its 2,000-employee Nashville, Tenn., headquarters because of its decision to abandon the development of a multimillion dollar accounts receivable system.

The for-profit hospital chain reorganized its information, technology and services department after scrapping the project and found it no longer required the same level of staffing, said HCA spokesman Jeff Prescott.

Baxter plans to cut 2,500 jobs

Deerfield, Ill.-based Baxter International Inc. announced plans earlier this month to cut 2,500 jobs and close 26 plasma collection centers across the country to cut expenses. The medical products supplier said it would take a second-quarter charge of about $200 million, or about 30 cents a share, for the related severance costs and facility write-offs.

The loss of 2,500 jobs represents a 5% reduction in the company's global work force.

DMS acquires medical supplier

DMS Health Group, a Fargo, N.D.-based firm that sells and services diagnostic imaging and patient monitoring equipment in 40 states, acquired the assets and operations of North Star Medical Systems Inc. earlier this month in a cash deal. Terms were not disclosed.

North Star Medical Systems is a Shoreview, Minn.-based company that sells patient monitors, defibrillators, respiratory products and other medical products to health care facilities in Minnesota, North Dakota, South Dakota and Iowa. The company reported revenues of $1.1 million in 2002.

DMS Health Group, an operating company of Otter Tail Corp., reported revenues of $93.4 million in 2002.