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INSURANCE: Willis buys HRH; CalPERS slows health premium increases

ALSO: STATE LOOKING AT ALTERNATIVES TO COVER RISING COSTS OF FIRES

Willis Group Holdings Limited, the world’s third-largest insurance broker, has plans to purchase another big name and double the London-based company’s North American business.

Executives detailed the plan to take over Richmond,Va.-based Hilb Rogal & Hobbs last month, which is valued at about $2.1 billion. The company plans to pay about $46 a share in cash and stock and will assume about $400 million in debt.

A North Bay HRH spokesperson said the company will meet with Willis this week. The deal is expected to close some time in the fourth quarter of 2008, subject to shareholder approval.

***

The agency that provides health benefits to approximately 1.5 million public employees, retirees and their families may have finally slowed the rapid HMO rate hikes after approving the lowest increases in more than 10 years.

The board of administration for CalPERS, the third-largest purchaser of health care in the nation, authorized the 2009 rates on June 19 after extensive efforts to cut costs by about $200 million through negotiations with Blue Shield.

The overall health maintenance organization premiums increased by 4.3 percent on average, where in recent years the number has been closer to 7 percent and 10 percent. In 2004, the basic HMO premiums increased by 18 percent and Medicare HMO plans by 26.8 percent.

Medicare HMO members will see an even lower increase in 2009, with an average increase of less than one percent. Preferred provider organization members will see small decreases or no change.

CalPERS’ Kaiser Permanente rates will jump about 8.2 percent, which is still below the projected increase in the cost of providing care. Industry analysts estimate an increase in cost of care of about 10 percent.

“Our members deserve to have premiums based on utilization, not on general cost trends,” said Rob Feckner, president of the CalPERS Board of Administration.

Blue Shield was able to negotiate lower premium increases with the group by cost-cutting measures, including removing more expensive hospitals from the network, adding a lower cost health plan and crediting CalPERS for lower utilization in 2007.

***

California is still weeks away from the time when firefighting costs are the highest, and already the state has paid 40 percent more than that same period last year.

In the face of a severe budget deficit estimated at about $17.2 billion, Gov. Arnold Schwarzenegger proposed several new funding strategies this month, including adding a fire protection surcharge to all home and business insurance policies.

Though the plan would give the state an estimated $130 million more, the Legislative Analyst’s Office said the fee would unfairly tax those that are not necessarily at risk of fire. The agency instead offered a plan to fix the surcharge to property taxes in areas that are at high risk for fire.

Several Democratic lawmakers have voiced support for governor’s proposition, but at a higher rate, suggesting a 2.8 percent surcharge on policies in high-risk areas and a 1.3 percent charge for owners in all other areas. That plan would raise an estimated $280 million.

Another bill similar to the insurance charges was proposed earlier this year by Sen. Christine Kehoe, D-San Diego. The tax would ask property owners in areas under state jurisdiction to pay an extra $50 surcharge to property taxes beginning in 2009 that would be placed in a fire prevention fund.

According to the legislative analyst, about a third of California falls under the state’s firefighting responsibility, but only 1 percent of that land is publically owned.

***

A Senate committee has approved a bill aimed at offering California drivers insurance premium reductions for driving their car less, but some consumer advocates worry the legislation will lead to an increase in insurers using spyware technology.

Assembly Bill 2800 introduced by Assemblyman Jared Huffman, D-San Rafael, would enable insurers to apply a different rating system to policyholders that voluntarily allow their carrier to track daily mileage. The bill does acknowledge, however, that insurers currently have few accurate ways to measure driven miles.

The bill says “insurers may request, but not require, mileage verification through odometer readings based on recent vehicle service reports or mileage-tracking technology.”

The bill is opposed by several organizations including the Consumer Watchdog, which said in an opposition letter that “AB 2800 threatens motorists’ privacy by allowing insurance companies to require Californians to place satellite-linked spyware in their cars or pay higher insurance rates.”

If passed, the bill does not require insurers or the insured to use mileage-counting technology.

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Submit items for this column to D. Ashley Verrill at 707-579-2900 ext. 215, averrill@busjrnl.com or fax 707-579-8475.