News & Views

How SEIU-UHW’s Initiative Threatens Kaiser Permanente

January 23, 2018

  REGIONS: National 

Kaiser Permanente logo, white letters on blue background


On Feb. 6, 2018, the leadership of SEIU-UHW notified California’s elections officials that they have withdrawn their ballot initiative described below. We acknowledge the union’s decision to set aside their proposed initiative.

There is more work to be done in reaffirming our Labor Management Partnership, and recommitting to our core principles of Partnership, and that work is underway. This includes reaching an agreement on mutual standards of conduct that will hold all of us in the Labor Management Partnership to a high standard of behavior and ensure accountability to our shared principles in the future.

SUMMARY OF PROPOSED INITIATIVE: SEIU-UHW’s initiative is supposed to seem like a rate freeze, but will affect just a few plans. It hits plans like Kaiser Permanente the most because it classifies our hospital system as “excess surplus” that should be eliminated. If passed in November, this measure would undermine our model of care, and jeopardize our ability to provide care to our members and the communities we serve.

What Would This Initiative Do?

This initiative would place a cap on how much in financial reserves a California health plan can have on hand. Any health plan with more in reserves than the initiative’s limit would not be able to raise rates until their reserves fell below the limit.

However, because of the way it is written, most California health plans could pretty easily avoid the limit. Some health plans are specifically exempted, and others are given an alternative way to avoid the limit. According to the first official state analysis, one of the very few plans that would be hit by the reserve limit is Kaiser Permanente.

Why Does It Apply Differently to Kaiser Permanente?

It applies differently to Kaiser Permanente because we are an integrated care delivery system, and not just a health plan. For most health plans, reserves are likely to be cash and investments to guard against a big, unexpected, negative event. But under the definition the initiative uses, Kaiser Permanente’s reserves also include our 39 hospitals and over 680 medical office buildings, the money we need to support our hospital and care delivery work, the value of our technology investments, and the money we need to support our employee benefits, like our employee pensions and retiree medical benefits.

Of course, Kaiser Permanente does have cash and investments. But those are offset by a similar amount of debts and long-term liabilities. The big difference is the value of our land, buildings and equipment — essentially our hospital system. Other health plans don’t have those kinds of assets.

So, because Kaiser Permanente owns hospitals medical offices and clinical technology, and because we need resources to provide employee benefits, we would be hit by the limit in this initiative, while most other California health plans would avoid the limit with little difficulty.

What Will Happen if It Passes?

Being trapped over the initiative’s financial limit means being subject to a mandatory rate freeze. Since costs continue to go up each year, Kaiser Permanente would have to start using up the money that we need to run our care system and support employee benefits, just to keep up with rising medical costs. We would not be allowed to pay these costs through increased rates — to stop this financial bleeding — until we lose about 75 percent of our reserves — nearly the value of our entire national hospital system.

If this initiative were to be enacted, it would leave our care delivery system out in the cold, unprotected from risk and without the resources needed to maintain it, let alone keep it up-to-date. Our ability to continue to build significant new care facilities in California — hospitals and medical office buildings — would be severely limited. Of the nearly 190,000 Kaiser Permanente employees, over 150,000 work in our 39 hospitals and 680 medical office buildings, the areas of our organization that would be the most affected by this measure. This measure would remove our fundamental ability to maintain the resources we need to care for our members and communities.

The official analysis by the California Department of Finance and Legislative Analyst Office does a very good job of describing the effects this initiative could have on Kaiser Permanente, as well as on state and local governments, small and large employers, and individuals and families. Their report confirms the negative effects that the measure would have on Kaiser Permanente. If enacted into law, the measure could:

  • Force KP to no longer own our hospitals or medical office buildings;
  • Put at risk the integrated and seamless care between hospitals and medical groups;
  • Reduce financial reserves to support essential services — including advanced medical technology — making it harder to take excellent care of our patients;
  • Decrease the funds needed to support employee benefits including pensions and post-retirement medical benefits;
  • Diminish our ability to support the most vulnerable people in our communities;
  • Specifically target and disadvantage Kaiser Permanente while specifically protecting other health plans from its harmful effects; and
  • Provide only limited and short-lived rate freezes, if any, while increasing the likelihood of increased health care costs for consumers and employers

You can read the state’s official analysis yourself, by visiting the California Legislative Analyst Office website. You can read the letter we sent the California Attorney General to inform him of our concerns about this ballot initiative by clicking here.

What Is Really Going On Here?

The backers of this initiative claim their measure is needed because too many health plans are stockpiling cash while continuing to raise rates. But this initiative is written to leave out almost every health plan in California. And the one hit hardest, Kaiser Permanente, is hurt because of its hospital system, not because it has too much cash.

The truth is that this initiative was sponsored by the leadership of SEIU-UHW as retaliation after Kaiser Permanente refused to agree to the union’s inappropriate demands involving an inter-union dispute. In late 2017, SEIU-UHW requested that Kaiser Permanente bargain with them as the sole representative of the Coalition of Kaiser Permanente Unions (“the Coalition”). It would have been inappropriate — and a violation of our agreements with the Coalition — for Kaiser Permanente to negotiate with SEIU-UHW as the sole representative for the Coalition without explicit consent of the other nearly three dozen Coalition unions. When Kaiser Permanente refused SEIU-UHW’s request, SEIU-UHW filed this ballot initiative.