The giant California Public Employees' Retirement System isn't resting on its laurels. After holding its premiums to a 1.4% increase this year--vs. 9% for employers nationwide--CalPERS told its insurers on Oct. 13 to cut rates by 5% next year. The challenge for 18 health-maintenance organizations that serve CalPERS' 900,000 covered employees and dependents: eliminate unneeded procedures and cut overhead without sacrificing quality. A Kaiser Permanente official says the state's biggest HMO is "prepared to work with CalPERS" but stressed negotiations are just beginning.

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