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PacifiCare Unit Seeks Changes in Benefits

Health care: Secure Horizons' proposed tiered programs are pending federal approval. Plan is an attempt to keep parent company as a Medicare provider.


Secure Horizons, the nation's largest Medicare HMO, has asked the federal government for permission to make a number of changes in benefits and premiums for next year, ranging from limits on prescription drug coverage to increases in monthly premiums.

At the same time, the company, a division of Santa Ana-based PacifiCare Health Systems, has begun to implement a number of innovative programs aimed at allowing greater choice of doctors and hospitals for consumers who are willing to pay more out of their own pockets.

One such plan--begun as a pilot program in Ventura County--would allow consumers who opt for it to pay an extra $20 per month to use the region's more expensive doctors and hospitals, including St. John's Medical Center in Santa Monica and Simi Adventist Hospital in Simi Valley.

Similarly, in San Diego, consumers would be able to choose among three plans, each of which has a different level of benefits and a progressively higher premium.

The idea behind all of the proposed changes, said Kathy Feeney, senior vice president for Secure Horizons, is to make it financially feasible for PacifiCare to remain in the chronically under-funded Medicare program at a time when other health plans are dropping out in droves.

The tiered programs in Ventura and San Diego counties, she said, are particularly important, because they will allow the company to remain in business in those counties despite low federal reimbursements. By comparison, health plans representing about 1 million seniors--many of them in California--have dropped out of Medicare managed care entirely, citing higher costs and low payments from the federal government.

PacifiCare announced earlier this year that it was dropping out of the business in several states, but the company has clung to its business in California, agreeing after tense negotiations with federal regulators not to pull out of any counties in the state. It has 600,000 Secure Horizons members in California.

In order to accomplish that, however, the company has significantly raised prices in several counties. Although rates in Los Angeles County will remain largely unchanged.

For example, members in rural El Dorado County will pay $100 per month for Secure Horizons starting Jan. 1, more than twice the $40 they paid this year. And the company has reduced pharmaceutical benefits for members there as well. Whereas this year members there had unlimited pharmaceutical benefits if they stuck to generic drugs, now they have a $1,200 annual limit on all drugs, including generics.

In Los Angeles County, where the federal government pays health plans much more than it does in most places because of a complicated formula that favors some urban areas, benefits will hardly change at all. Members will pay no premium, and will have unlimited pharmacy benefits if they stick to generic drugs. Reimbursement for brand name drugs will remain capped at $2,000 per year.

In Orange County, members will continue to not be charged a premium, but pharmaceutical benefits will be limited to a total of $2,000 a year--even if members only use generics. Co-payments for drugs in Orange County will also go up.

In the Bay Area, where several plans have dropped out entirely, premiums will more than double. Alameda County residents will pay $40 per month next year, up from $20, and San Francisco County residents will pay $50 per month, also up from $20.

The premium increases and other changes have yet to be approved by federal regulators. On Friday, officials at the federal Health Care Financing Administration are scheduled to release data on all changes and price hikes that have been approved for Medicare HMOs.

PacifiCare stock rose $1.69 to close at $50.81 on Nasdaq on Tuesday.

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