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In recent years, group purchasing and business alliances have grown increasingly popular among California employers looking for health care coverage, and with good reason. By pooling resources, businesses can wring lower premiums out of managed care plans.

One business segment large public retirement plans has been employing this strength-through-numbers approach for years.

The nation's largest public retirement system the million-member California Public Employees' Retirement System recently closed its health plan open enrollment period, during which members can switch among the various plans offered without penalty.

And switch they did, much to the rue of a couple of Los Angeles County managed care companies.

First the victors. The biggest winner among HMOs was Northern California's Lifeguard HMO, which gained 1,455 members for an increase of 19.8 percent of its CalPERS membership. Blue Shield of California likewise gained 1,300, or 9 percent.

But topping the losers list were two L.A. companies. Foundation Health of Pasadena lost 3,146 members, or 10 percent of its CalPERS membership, while CIGNA HealthCare of California in Glendale lost 1,192 members, a reduction of 8.5 percent.

"Cost and disruptions in medical service providers appear to be the key factors in members changing health plans," said Kurato Shimada, chairman of the CalPERS health benefits committee.

Although Foundation won a plumb account when the California Correctional Peace Officers Association made it the group's plan administrator (winning that job away from Blue Cross of California), contract disputes with medical centers in Sacramento and Fresno apparently shook CalPERS members' confidence in the plan's reliability of service, according to Shimada.

Foundation spokeswoman Lisa Haines said that price Foundation is slightly more expensive than many other plans also contributed to the company's loss.

CIGNA spokesman Jim Harris said the losses came primarily from San Luis Obispo County, where CIGNA recently contracted with a new physician network. This required many CIGNA members there to switch their primary care physician, he said.

"A number of people decided they'd rather keep their primary care physicians and change their health plan. That's unfortunate but we understand it," Harris said.

While the losses themselves are relatively small CIGNA has nearly 700,000 members statewide, Foundation 621,000 they are of concern because of the threat that more members may desert for rival plans.

CalPERS is the second largest purchaser of health plans after the federal government, with a whopping $108 billion in assets. As such it represents a potential goldmine to those plans its members value.


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