sfhealth/–19.5 inches/dp1st/mark2nd By SHELLY GARCIA Staff Reporter Twelve San Fernando Valley chambers of commerce got a rude surprise a few weeks ago when a health care plan the group had been negotiating for was pulled at the 11th hour. The Blue Shield of California plan would have offered discounted rates to as many as 3,000 member companies from the chambers. But the volatility of health care pricing, fueled by increases in HMO and pharmaceutical costs, is making it too risky to insure such groups. “Right now, the volatility is causing all these insurance companies to reexamine who they’re contracting with and what their potential risk is,” said Michael Dwyer, principal and managing director of health care advisory services at BDO Seidman LLP, Century City-based consultants. The plan would have included chamber members in Agoura Hills, Calabasas, Encino, Mid-Valley, Northridge, Tarzana, Toluca Lake, Woodland Hills, Sherman Oaks and Chatsworth/Porter Ranch. The move to pull the plan angered members all the more because it came after contracts had been drawn up, several chamber directors said. Blue Shield said the decision was based on the expectation that rates would have to be raised sharply in the coming year. “We studied the costs (of insuring the San Fernando Valley chambers) and found they were much higher than we thought,” said Larry Tallman, director of sales for the Southern region of Blue Shield. The heads of several chambers countered that if Blue Shield provided a rate it could not sustain, the agreement could have been renegotiated. “There was no discussion at all,” said Pam Campeau, chief executive of the Chatsworth/Porter Ranch Chamber of Commerce, who spearheaded the effort to develop the group health insurance plan. “I said ‘what can we do to look at this again?’ and the answer was, ‘the door is shut.’ ” Tallman said Blue Shield has not discounted the possibility of working with the consortium in the future, but added that the company is not offering an alternative fee schedule. “It wouldn’t be fair to pull them in on this (rate) and a year later give them a big rate increase,” Tallman said. Other factors specific to groups such as the chamber consortium might also have played a role in the Blue Shield decision, consultants said. Because membership of the different chambers includes a wide range of companies each with different employee profiles it’s especially difficult for insurers to predict which services the group will use and how often. “This is a common problem when trade associations and chambers try to negotiate these deals,” said Steve Valentine, president of the Camden Group, a health care consultancy in El Segundo. “Typically, you don’t know who is going to sign up, so you can’t properly assess the risk.” Insurance broker Bonnie Milani, whose company Milani Insurance Services worked with Blue Shield to develop the chamber plan, believes Blue Shield was specifically concerned about health care costs in the Valley. She pointed out that Blue Shield currently insures the San Diego Chamber of Commerce and a consortium of chambers in Santa Barbara and Ventura counties. “This is simply a more expensive area to do business,” she said. Others stress that with costs rising so rapidly, and with the possibility of new legislation likely to broaden the services that health care companies are required to offer, insurance companies are taking a second look at many of the decisions made in the past, especially in cases involving new contracts.