The Pacific Business Group on Health, one of the largest employer purchasing coalitions in the nation, is expanding its service area from California to Arizona and may negotiate for its members companies in other Western states as well.
"We had looked for geographic expansion for our employer members and what looked good for them. Arizona was a state where a lot of members have employees," said Emma Hoo, project manager for San Francisco-based coalition.
Twelve of the PBGH's 20 employer members have employees and retirees in Arizona. Among them are Bank of America, McKesson Corp., US West, Safeway and Wells Fargo Bank.
Combined, the coalition's companies provide healthcare benefits to 25,000 employees and 5,000 retirees in Arizona. In California, the coalition's employers insure 500,000 employees and 50,000 retirees.
"We're evaluating other states as well," Hoo said, adding that the PBGH already works with the Colorado Business Coalition. US West also has a large number of employees in Colorado.
Industry officials are unsure whether the coalition's expansion plans represents a trend.
James Mortimer, president of the Chicago-based Mid-west Business Group on Health, which originally represented employers in six states and now operates in 11, said he believes such growth comes slowly.
"It's a gradual thing. It happens mostly when you find members who need help in other regions who want to join up," Mortimer said.
He added that aside from the Vermont Employers Health Alliance recently negotiating for members in New Hampshire, there have been few other recent interstate forays made by coalitions.
Also, it remains to be seen whether the PBGH can wield the type of influence it has in California.
The smaller mass of employees in Arizona and its lower managed-care penetration hindered the coalition from negotiating rates as favorable as they are in California, Hoo said.
Premiums for 1998 increased about 3% in Arizona, compared with only 1% in California, according to data released by the coalition last week.
"Arizona is a different market, with fewer HMOs," Hoo said.
At least one coalition member-San Francisco-based Bank of America-may have had better fortune negotiating on its own in Arizona, where it has 5,000 employees.
"We've had very, very good experience. Premiums have basically been flat for a few years," said Sherrie Matza, vice president of benefits for the bank.
Matza said Bank of America was willing to accept the coalition-negotiated increase, but she added: "I think we would have had some sort of upward trend anyway. It's close to where the rates might have ended had we negotiated on our own."