With the economy hitting California hard, the pressure is on more than ever for health insurers to respond to the small employer group market, in particular, with plan designs that get the premiums down. Two ways they're doing that now is through narrow-network products that steer members to low-cost doctors and hospitals, and also through high-deductible HMOs that combine the predictability of a familiar managed-care mainstay with the lower premiums of cost-sharing. The narrow-network approach is one reason the California Public Employees' Retirement System was able this year to approve 2010 rate increases that average under 3 percent. Meanwhile, the large pension fund is about to put out bids for a new pharmacy benefit manager to handle its PPO business. In the Medicaid space, the health plans are seeing their ranks swell at a time when the state is in the midst of its worst budget crisis in years. Anthem Blue Cross has revamped its main small-group flagship product portfolio, among other things, bringing pharmacy benefits more in line with its competitors. Blue Shield of California is adding a cash incentive to its consumer-driven plans, while UnitedHealthcare is helping to advance a large electronic health information exchange in California.