The Bay Area Business Group on Health and 17 California HMOs last week concluded agreements they said would result in uniform benefit packages, quality-improvement measures and rate reductions averaging 5% to 10%.
The reductions are effective Jan. 1, 1995.
The agreements, on behalf of 11 BBGH member companies, demonstrate the power of purchasing alliances such as those outlined in many healthcare reform proposals. The companies-including Bank of America, Bechtel Corp., Chevron Corp., the Federal Reserve Bank of San Francisco, Fireman's Fund Insurance Co., McKesson Corp., Mervyn's and Wells Fargo Bank-provide healthcare benefits for 300,000 beneficiaries through California HMOs.
"I think California is just ahead of the country," said Patricia Powers, executive director of BBGH, a San Francisco-based not-for-profit group of 19 employers. The agreements show "managed competition can really work here," she said. Market pressures in California, including providers forming integrated delivery systems, have resulted in HMOs "becoming aggressively competitive," she said.
Almost all the major HMOs bid for the BBGH members' business, including Kaiser Foundation Health Plan's Northern California Region, Health Net, Blue Shield of California HMO, CaliforniaCare, PruCare of California, Aetna Health Plans of Northern California, MetLife Healthcare Network of California, and Cigna HealthCare of Northern California. A handful of HMOs that don't now serve the member companies also bid, she said.
The agreements call for the HMOs to be at risk for 2% of premiums, based on meeting certain quality standards.
The HMOs also agreed not to shift costs to other customers to recoup any lost revenues from the arrangement. The HMOs said they're confident that efficiencies will cut their costs and make up for lower premiums.