Sorting out the complexities of healthcare reform has kept health plans and employer groups busy this enrollment season, overshadowing the typical product innovation seen this time of year. Financially stressed employers are turning to new plan designs to hold down costs, even when it means giving up grandfathered status under reform. The trend toward lower-cost products with restricted provider networks continues to heat up in San Diego. A new Performance HMO that PacifiCare developed for a schools purchasing coalition sets up three tiers of benefits, charging the lowest copays to employees who choose physicians ranked tops in cost and quality. Medicaid budget woes are putting a strain on rates for the Healthy Families program for children, prompting withdrawal from some counties by the state’s two Blue plans. Meanwhile, Medicaid managed care organizations are being financially penalized by the state for spending too much on generic drugs—the first result of a new push for efficiencies. The new Medicare products are out for 2011—starring a new Wal-Mart plan from Humana—but there’s also growth forecast for the alternative Medicare supplement market. CalPERS is starting one pilot and ending another regarding its prescription drug program. California’s huge pay-for-performance program is undergoing a major transformation that will focus more developing a total-cost-of-care standard that plans can use in performance-based contracting.