Commercial membership in California health plans dropped by 12 percent in the first six months of 2008, according to data from HealthLeaders-InterStudy, and insurers are bracing for an additional drop as they cope with job losses and their impact on health benefits. A trend toward increased cost-sharing by consumers likely will accelerate in 2009 as employers struggle to afford health benefits. California's trailblazing pay-for-performance program has reached a crossroads as its leaders accelerate a focus on affordability and consider changing the way physician groups are paid. The budget plan from Gov. Arnold Schwarzenegger proposes $132.2 million in healthcare savings could be achieved in 2010 if the state contracts directly with insurers instead of CalPERS for state employee benefit packages. Kaiser Permanente has become the first HMO to achieve a four-star rating in the eight-year history of the California HMO report card. Meanwhile, the small-group market in California is shifting to deductibles and away from copays in an effort to manage pharmacy benefit costs.