RATE TRENDS: Pacific Business Group Says They Are Under Control

      The Pacific Business Group on Health, an "influential California purchasing coalition," says the 1999 rates it negotiated with HMOs "demonstrate success at keeping healthcare inflation under control." But Modern Healthcare reports that "observers say that questionable success might not last." While PBGH managed to negotiate a rate increase averaging 8.1% (3.8% not counting a Kaiser Permanente increase that is believed to be about 12%), analysts think the coalition will have more trouble keeping rates under control once Health Net and PacifiCare Health Systems "renegotiate at the end of the decade." In addition to Kaiser, Health Net and PacifiCare are the two other major league players in California's HMO game, accounting for 30% of PBGH's members.

Going Up
      "There's going to be a lot of pressure for rate increases. (Health plans) are looking for better returns, and everyone is looking for more dollars. Also, PBGH's stance has been not to cost shift to enrollees, and that will make it even tougher to resist increases," said Steve Richter, head of Watson Wyatt Worldwide. Another foreboding factor is "the maturity of California's managed care market," according to Jon Gabel, director of KPMG Peat Marwick's Center for Survey Research. "There's been more intense price competition in markets like California, and that will have to be made up," he said. But PBGH Senior Project Manager Emma Hoo disagreed. "We've been pretty successful in negotiating rate caps in the past and expect that to continue," she said (Shinkman, 7/6 issue). To visit PBGH's website on California health plans, click here.