These 2 Health Care Giants Will Run California’s Vaccine Program

Feb. 12—Several months after Blue Shield and Kaiser Permanente provided free help to Gov. Gavin Newsom's administration on COVID-19 testing, the state has selected the health care companies to run the state's vaccination campaign.

Blue Shield and Kaiser are not supposed to profit from the arrangement, according to intent letters released by the administration. Experts, however, say the health care companies could still benefit in the long run.

State officials have refused to answer specific questions about what Blue Shield and Kaiser's specific roles will be in the vaccination process, saying they are still finalizing the details. Newsom said the state will release the contracts soon.

Newsom is turning to the companies as his administration is under fire for a vaccine rollout plagued by confusion, delays and data problems.

Yolanda Richardson, a top administration official whom Newsom has called his "vaccination czar," told lawmakers during a Wednesday hearing that California needs a centralized vaccine distribution process.

"We identified a need to scale up quickly and determined that using a trusted health plan partner would be the best approach," she said. "Going forward, using a single statewide network gives us the insights we need to ensure that we have an eye on equity."

When asked why the choice was made, a spokesman for the Newsom vaccine rollout pointed to the two companies' reach in California: Kaiser is the largest provider, and Blue Shield is the only insurer on the state's health insurance exchange with a statewide network of providers.

A spokeswoman for Blue Shield said the company will work with the state to distribute vaccines quickly and equitably.

"At Blue Shield of California, our mission as a nonprofit health plan is to help ensure all Californians have access to quality, affordable healthcare," Blue Shield spokeswoman Erika Conner wrote in a statement. "Our commitment is to help California solve this public health crisis at cost without making profit from the state."

Kaiser Permanente spokeswoman Chyresse Hill pointed to the health system's existing work on vaccines.

"We believe the state is including Kaiser Permanente because we've demonstrated that we're already acting quickly to provide vaccine to those who are eligible as soon as we receive it," Hill said in a written statement.

It's not the first time Newsom has tapped the health care companies to help with his coronavirus response. Blue Shield executives dominated Newsom's testing task force last year. The insurance company's CEO served as co-chair of the task force for months until Newsom replaced him with a Kaiser executive.

According to the intent letters signed by Richardson and company executives, Blue Shield will serve as "a third-party administrator for California's vaccine distribution effort" by managing a network of providers to administer vaccines, including through mobile clinics, mass vaccination sites and at-home visits.

The company will also distribute money, including "incentive payments," to providers to encourage efficient work and a focus on communities hard hit by the coronavirus. It will also create a data platform to track allocation of vaccine doses.

Kaiser, meanwhile, will stand up and oversee at least two mass vaccination sites and "other efforts to vaccinate hard-to-reach and disproportionately impacted populations." The letters do not give specifics about those mass vaccination sites.

Groups representing counties and local public health departments have raised "urgent concerns" about the plan, saying in a letter to Newsom that it threatens to eclipse the leading role they currently play in vaccinations. Graham Knaus, executive director for the California State Association of Counties, said counties are best positioned to vaccinate the most vulnerable people in their communities.

"We have to ensure that those hard-to-reach populations, those that are most at risk in our communities which are not going to go to a super site, that they are not going to get lost in a Blue-Shield run system that is focused on statewide efficiency," Knaus said. "So it is paramount that counties have a primary role in determining how vaccines are allocated."

Benefits for Kaiser, Blue Shield

Wendell Potter, a former insurance executive turned industry critic, said the state's argument for hiring Kaiser makes sense because the company acts as both a health insurer and provider, meaning it's already in the business of delivering health care.

But he said the choice of Blue Shield, an insurance company, makes less sense.

"I don't see the logic of hiring or contracting with a big insurance company for this," Potter said. "There are a lot of very big hospital systems and other systems that do provide care that I would think would be better positioned."

It's good that the agreements will be not-for-profit, Potter said, but there could be other benefits for the companies. One question will be whether the companies will have access to valuable data collected on those receiving vaccines, he said.

When Potter worked for insurance company Cigna he ran the company's philanthropic arm. He said much of the charitable work was designed to make the company look good.

"This is essentially buying a whole lot of goodwill with policymakers," he said. "You think in terms of PR when you're doing a lot of these kinds of things."

Goodwill with Newsom could be particularly beneficial after the pandemic as the governor tries to enact promised health care changes, Potter said. Newsom has endorsed creating a government-run health care system in California, something Blue Shield and other insurers have opposed because it threatens their business model.

Whether Blue Shield is a good fit for the job will depend on what exactly the job is, something we don't fully know without the contract, said Anthony Wright, director of consumer advocacy group Health Access. As an insurance company, Blue Shield contracts with a network of doctors and other health care providers. If that's the role it'll serve in the state's vaccination campaign, it may be a good choice, he said.

In 2019, Kaiser and Blue Shield plans had the highest flu vaccination rates among health care plans on the state's Covered California insurance exchange.

Wright said that's a good sign, but noted that their rates — 56% for Kaiser and 47% for Blue Shield's PPO plan, according to Covered California survey data — are still far below what would be needed to achieve herd immunity for COVID-19.

Blue Shield and Kaiser have an interest in shaping many Newsom administration policies that affect them, from health care regulations to market share on the state's insurance exchange and state worker health plans. Wright said, however, "that would be true of virtually anybody who would do this as a vendor."

The companies are already powerful forces in Sacramento. If they succeed in accelerating California's vaccinations, that could help them gain influence, but it also could backfire if they don't succeed, Wright said.

"They're already folks that have the ability to make a case to the governor on certain issues," Wright said. "Does this contract increase their influence? It's significant already, but you can imagine that it would enhance it, especially if they do a good job."

Past lobbying and influence

Blue Shield spent $1.9 million lobbying the Legislature and Newsom administration during the 2019-20 legislative session on issues ranging from insurance payments to drug pricing. Kaiser Permanente spent more than $3 million lobbying at the Capitol during the same time frame, including on COVID-19 testing requirements and vaccinations.

In the last two years, Blue Shield has contributed $400,000 to support Newsom's reelection and ballot measure campaigns.

At a recent press conference, Newsom dismissed the suggestion that campaign donations influenced his decision to pick Blue Shield for the contract.

"That's nonsense," he said, adding that the Blue Shield and Kaiser contracts were recommended to him by his vaccine advisers. "They have the kind of scale, they have the capacity, they have the allocation distribution mindset that we were looking for. And that's why the team recommended this partnership and I concurred."

Potter said he thinks campaign donations are always a relevant factor when it comes to insurance companies.

"What I do know from my years in the insurance industry is that campaign donations mean a lot in terms of access to people in high places," Potter said.

Newsom's testing task force

At one point, Blue Shield executives made up nearly half of the leadership positions on Newsom's testing task force, and represented the biggest private-sector influence in the group. Blue Shield CEO Paul Markovich led the task force for months alongside then-assistant director for the California Department of Public Health Dr. Charity Dean.

The company provided the work for free. When he spoke with The Sacramento Bee in May, Markovich estimated he and about seven of his colleagues were donating about half their working hours to the task force.

He said they were motivated by a desire to help fight COVID-19.

"All of us are equally affected by the virus," Markovich said. "We all have friends and families who have been affected by it. We want to save lives, not just livelihoods."

Newsom credited the task force with helping the state dramatically ramp up testing, although supply shortages and increases in demand have still caused testing availability in California to fluctuate.

In July, Newsom replaced Markovich and Dean with Kaiser Permanente senior vice president Dr. Bechara Choucair and another California Department of Public Health official, Dr. Gil Chavez.

Potter said the companies' work on the task force probably provided them with valuable experience that will make it easier for them to step in.

"The thing that I think would be in Blue Shield's favor would be having done that work," he said. "They have information that other potential vendors would not have."

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