U.S. Lets Bay Area Firms Form Health Co-Op

The Justice Department said it won’t object to plans by a Bay Area coalition of big employers to negotiate jointly for the purchase of health insurance.

Plans by the Bay Area Business Group on Health to form a health care purchasing cooperative are a preview of the type of large buying alliances envisioned by President Clinton’s health care reform plan. But a growing number of businesses across the country are moving ahead of health care reform to form health care buying groups.

The Justice Department’s decision to not challenge the Bay Area group’s plan “provides impetus for other employers to do the same,” said Patricia Powers, executive director of the group.

The nonprofit group’s members include 19 public and private businesses, such as Bank of America, Chevron Corp. and Pacific Gas & Electric. The group plans to negotiate directly with health maintenance organizations for coverage for employees, dependents and retirees.

The group had asked the Justice Department last fall for a formal opinion on whether its health care buying consortium would violate antitrust laws.

Founded in 1989, the Bay Area group is among a small but growing number of employer health care purchasing cooperatives in cities such as Minneapolis-St.Paul. Most of the other groups include mostly small or medium-size businesses, said Powers, while the Bay Area group includes some of the state’s biggest employers.

Together, its members account for $3 billion in annual health care spending and provide coverage for 2.5 million people.

Powers said the coalition “is not just trying to beat on the (health) plans and say ‘Give us a great price.’ ” The group has also worked to establish standard HMO benefits packages, customer satisfaction surveys and guidelines for preventing disease.

The buying consortium would seek bids from HMOs to provide coverage beginning in 1995. Not all of the 19 members would participate during the first year. For example, the group includes the giant California Public Employees Retirement System, which recently completed negotiations for member health coverage for its 1995 contract year.

Other members of the Bay Area group include the Federal Reserve Bank of San Francisco, McKesson Corp., Mervyn’s, Pacific Telesis Group, Safeway Stores and Wells Fargo Bank, among others.