If the Medinas [teachers in Salinas] opted for an insurance plan that includes the local hospitals, they would pay an extra $3,000 per month in premiums, about $30,000 annually.
“It’s just too much,” Jeannie Medina said.
They get insurance through a local plan called the Municipalities, Colleges, Schools Insurance Group, which serves government employees. It has about 10,500 members, 40% of whom are enrolled in the plan that excludes the local hospitals, group Executive Director Neddie Sarmiento said. That’s about 4,500 people, most of whom are teachers. The number grows every year, Sarmiento said.
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Local hospital executives fired back at critics of their prices, saying charging less would erode their financial stability and jeopardize health care delivery in the region.
“Discounting our rates to a level that does not sustain the long-term viability of our local hospital would be irresponsible. Buckling to rates that could result in large-scale layoffs or cutting vital services would be management malpractice,” said Matt Morgan, vice president and chief financial officer for Montage Health, the parent company of Community Hospital of the Monterey Peninsula, in a statement.
Morgan pointed to two financially distressed hospitals in neighboring counties as examples of cheaper hospitals that could not remain viable. Hazel Hawkins Memorial Hospital in San Benito County declared bankruptcy in May, and Watsonville Community Hospital in Santa Cruz County, which emerged from bankruptcy in 2022 after years of financial trouble.
Today more than half of the state’s hospitals are operating in the red, according to a report from the California Hospital Association, the industry lobby. Fears of hospital closures became reality when Madera Community Hospital in the San Joaquin Valley shuttered one year ago, prompting lawmakers to create a $300 million bailout loan fund for distressed hospitals.
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Morgan with Community Hospital of the Monterey Peninsula also blamed insurers for passing high premiums onto consumers. The hospital has kept price increases below 5% annually for the past five years, he said in his statement.
But according to the California Association of Health Plans, the industry lobby representing state-regulated insurers, premium increases are directly tied to hospital prices. Hospital spending accounts for 37% of health care cost, the single largest share, spokesperson Mary Ellen Grant said.
“The best two examples of ever-increasing costs are prescription drugs and hospital costs,” Grant said.
State-regulated insurers are required to pay for hospital costs, Grant said. Plans like the local government and school insurance group are able to skirt those requirements because they are federally regulated or self-funded plans.
Sarmiento with the local government and school insurance group said Monterey County hospital prices are the primary driver for premium increases for its plans. For example, the plan that excludes the local hospitals saw a 2.8% premium increase for 2024. In contrast, the plan with the next highest enrollment that allows members to use the hospitals had a 13.3% premium increase.
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For comparison, the average price for one night in the hospital in Monterey was $12,300 in 2022, the health plan’s hospital payment data shows. In New York City it was less than $7,000, and in Chicago it was $3,500. The price reflects just the cost of the hospital room and does not include the cost of treatment, Krajcinovic said.
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