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My Recent Experience with Kaiser Health System

Any views or opinions presented in this article are solely those of the author and do not necessarily represent those of the company. AHP accepts no liability for the content of this article, or for the consequences of any actions taken on the basis of the information provided unless that information is subsequently confirmed in writing.

I moved from the east coast to the west coast seven years ago.  My employer had several options to choose from for my healthcare benefits.  In addition to options with national insurers, such as Aetna and United Healthcare, and regional Blue plans, such as Anthem Blue Cross and Blue Shield of California, Kaiser HMO was one of the options available.  Coming from the east coast, Kaiser was never an available option.  However, working in the health insurance field, I have always heard great things about Kaiser so their brand reputation was known to me.

Reviewing the prices of each plan offering available from the various insurers, a Platinum Kaiser plan could be purchased for slightly less than the Gold options from the other insurers.  For reference, a Gold plan has a benefit design where the insurer is expected to pay 80% of the total annual costs with the patient paying the remaining 20% in the form of deductibles, copayments, and coinsurance.  A Platinum plan has a benefit design where the plan is expected to pay 90% of the annual costs.  Based on the slightly better price for richer benefits, I decided to give Kaiser a try and choose their Platinum offering.

The main difference between Kaiser compared to the other available options is that Kaiser is a Group Model HMO.  HMO stands for Health Maintenance Organization and legally is considered pre-paid healthcare benefits rather than insurance, but from a consumer perspective, an HMO functions mostly the same as a health insurance product.  There are a few different ways HMOs can be organized with the Group Model being one type of arrangement.  Another, and more common, arrangement is the Staff Model HMO.  The main difference between the two models is whether the physicians, nurses and other professionals are employed by the HMO organization.  In the Staff Model, they are employed by the HMO whereas in the Group Model they are not.

Kaiser Permanente is the trademark name of the collaborative partnership among the non-profit HMO, its non-profit hospital subsidiary, and the PMG organization.

Within Kaiser, there is a tight-knit partnership between three distinct entities: Kaiser Foundation Health Plans (KFHP), Kaiser Foundation Hospitals (KFH) a KFHP-owned subsidiary, and the physician-owned Permanente Medical Groups (PMGs).  KFHP is the HMO entity that markets to employer groups, enrolls members, and underwrites their healthcare benefits.  KFH is the entity that owns and operates hospitals, medical offices, other healthcare facilities, and employs nurses and other medical staff.  The PMGs are separate entities that primarily employ physicians.  The PMGs exclusively contract with KFHP to provide professional health care services to KFHP’s members and exclusively contract with KFH to staff their hospitals, offices, and other facilities.  Kaiser Permanente is the trademark name of the collaborative partnership among the non-profit HMO, its non-profit hospital subsidiary, and the PMG organization.  When a patient selects KFHP for their healthcare benefits, they are agreeing to exclusively use the PMGs and KFH as their provider network.

After six years with Kaiser coverage, it was difficult to evaluate the decision to choose Kaiser since I had been fortunate enough that I did not need to use the benefits for anything major.  Then my wife and I found out we were going to have our first child so this would be the start of our first major medical event where we would utilize our benefits.  The pregnancy went smoothly for the first seven months.  Then at a scheduled appointment for a 32-week non-stress test, my wife was admitted to the hospital for preeclampsia.  After a couple of sleepless nights in the hospital, her blood pressure was not stabilizing so we agreed to the doctor’s recommendation for a cesarean section delivery.  The surgery was very quick and felt like it was over before it even got started.  The delivery went smoothly and, other than being eight weeks pre-term, we delivered a healthy baby.  My wife stayed in the hospital for a week while our baby remained in the Neonatal Intensive Care Unit (NICU) for five weeks before being discharged home.

Weeks and months prior to giving birth, we had friends and relatives that recently had babies themselves telling us to be prepared for several thousand dollars in medical bills and be prepared to hit our out-of-pocket maximum.  I kept telling them we have Kaiser “insurance”, our copay is $500 per admission, and since all services are being provided by Kaiser, the $500 is all-inclusive.  The only question I wasn’t certain about is whether mom and baby are considered the same admission or separate admissions.  Again, they kept telling us to be prepared to receive separate bills from the hospital, surgeon, anesthesiologist, and laboratory.  My reply was simply that I will just have to wait and see and hope there are no surprises.

We were charged $500 the day my wife was admitted to the hospital.  It wasn’t until several weeks after the baby was discharged that we received the explanation of benefits (EOB) in the mail.  The combined billed charges between my wife and baby were over $400,000, and we owed an additional $500 for the NICU admission.  Our total out-of-pocket cost was $1,000 between mom and baby.  I think it may have been $500 total if mom and baby were discharged together, but since our baby had to stay longer, it was considered a separate admission.  Anyway, I consider $1,000 to be a great bargain considering my wife had a 7-night hospital stay that included surgery and our baby spent 35-nights in the hospital NICU.  The only downside was the hospital is a 45-minute drive from our home, but as a consolation, the hospital had a dorm-style room available for us to stay in, free of charge, each weekend while our baby was in the NICU.  It felt like the only accommodation we were not provided during our weekend stays was free food.

Overall, my wife and I were very satisfied with the quality-of-care Kaiser delivered throughout our medical episode, and I am equally satisfied with the transparency related to our out-of-pocket expenses.  With Kaiser, I can rest assured my family will not be surprised by unexpected medical bills since all services are exclusively provided by Kaiser Family subsidiaries.  We are very grateful to reside in an area where Kaiser is an available health insurance option.  Not everyone may be as big a fan of Kaiser as we are, and there’s nothing wrong with preferring a plan with a broader network, but I still feel lucky that this type of option is even available to us.  There are other HMO plan options available to us, but none have anywhere near the level of care integration nor the large presence in our area as Kaiser does.  The only minor issue is our hospital being 45 minutes away. However, a new Kaiser hospital is scheduled to open next year that will only be 15 minutes away.

About the Author

William BednarConsulting Actuary
William Bednar, FSA, FCA, MAAA is a Principal and Consulting Actuary with Axene Health Partners, LLC

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