State Spending on Employees' Health Insurance Varies Significantly, According to New Report

News provided by

Aug 12, 2014, 04:05 ET

WASHINGTON, Aug. 12, 2014 /PRNewswire-USNewswire/ -- Spending on health insurance for state employees was up slightly in 2013 over the previous two years, with the cost varying widely from state to state. According to a first-of-its-kind analysis from the State Health Care Spending Project, an initiative of The Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation, 49 states (data for Pennsylvania were unavailable) insured 2.7 million state employee households in 2013 and spent nearly $31 billion on health insurance.

The report, "State Employee Health Plan Spending: An examination of premiums, cost drivers and policy approaches," found that paying for employee health insurance is second only to Medicaid as a portion of states' overall health care spending. On average, monthly premiums were $963 per employee, with the state covering 84 percent of the premium and the employee picking up 16 percent. Researchers analyzed data for the states and examined the factors driving spending on state employee health care—and states' ability to influence these factors.

The report's key findings include:

Arkansas, Mississippi, New Mexico, South Carolina, and South Dakota had relatively low per-employee premiums in 2013, while the average per-employee premiums for Alaska, New Hampshire, New Jersey, Vermont, and Wisconsin were comparatively high. The range is due to a number of factors, including: regional differences in the cost of health services and physician treatment approaches, and in the size and health status of enrollee households; and differences in plan benefits and states' cost-containment strategies. Because of the range of variables that influence spending, higher spending is not necessarily an indication of waste, and lower spending is not necessarily a sign of efficiency.
State health plans were generally "rich," a commonly used term of art within the actuarial community that refers to the share of services the health plan pays. State plans, using premium contributions from states and employees, paid for 92 percent of the average enrollee's health care costs in 2013. By way of context, these would be designated "platinum" plans within the new health insurance exchanges.
Nineteen states offered their employees at least one health plan with an annual deductible of at least $1,500 in 2013, up from 16 states in 2011. Among the 19 states, a median of 7 percent of state employees enrolled in the high-deductible plans in 2013. Nationwide, 4 percent of state employees enrolled in such a plan, and 45 percent enrolled in plans with no deductible.
After controlling for plan richness and household size, a substantial range in premiums across the states remains. This suggests that other factors have an important effect on premiums, such as variation in physician treatment approaches, service utilization, and age and health status of employees.

"A state's ability to recruit and retain qualified staff to deliver critical public services, as well as the need to provide for their employees' physical, mental, and financial well-being, are affected by how they manage their employee benefits and their costs," said Pew's Maria Schiff, director of the State Health Care Spending Project. "Until now, little has been known about how state health plans and costs compare to one another. This analysis offers important context for policymakers as they work to make their employee benefit systems effective, affordable, and sustainable."

Researchers worked with Milliman Inc., an actuarial firm, to create nationwide benchmarks against which to compare states' health plans and costs. Milliman's database, which contains publicly available state and local governments' health insurance data, includes key pieces of information, such as total premiums, employer and employee share of premiums, cost-sharing arrangements, number of enrollees, and total health care expenditures, among others.

This report is part of a project series examining seven major areas of state health care spending, which will provide a comprehensive examination of health programs funded by states.

The Pew Charitable Trusts is driven by the power of knowledge to solve today's most challenging problems. Learn more at www.pewtrusts.org.

The John D. and Catherine T. MacArthur Foundation supports creative people and effective institutions committed to building a more just, verdant, and peaceful world. Learn more at www.macfound.org.

SOURCE The Pew Charitable Trusts