State Employee Health Benefits, Insurance and Costs

Because state and local governments employ more than 7.4 million full-time workers in the us. In the US, public employee benefits, such as health insurance coverage, are of great importance to state legislators. All 50 states provide health insurance coverage for their state employees. the scope of coverage, who is eligible to enroll, and employer versus employee premium contributions vary from state to state.

state employee health plans have attracted the attention of legislators, governors and state legislators because:

Reading: How much do state employees pay for health insurance

  • rapidly rising commercial health plan premiums for state employee health plans are straining state budgets; and
  • Copayments, deductibles, and out-of-pocket costs are increasing in many states, on top of premiums.
  • State legislators, who may also receive coverage through state employee health plans in certain states, have several policy options to control rising health care costs and maintain quality coverage options for the workforce. employment of state employees. In addition, policymakers can test innovative strategies to control health care costs for public employees to demonstrate the effectiveness of a policy on a smaller scale.

    state employee health plan costs

    Behind Medicaid, state and local employer contributions to public employee health insurance premiums represent the second largest cost driver for state health care spending. The Pew Charitable Trust released a comprehensive report in 2014 highlighting health care costs for state employees and found that:

    • states and their employees spent $30.7 billion on insurance premiums in 2013; states paid $25.1 billion (nearly 82 percent) of this total.
    • While health insurance premiums varied widely across states, the average monthly premium per employee was $959; states paid an average of $805 (nearly 84 percent) for premium contributions.
    • Plan wealth, or the relative cost sharing between a health plan and an enrollee based on required deductibles, copays, or coinsurance, affected premium variations from state to state. state health plans were generally considered wealthy with health plans covering an average of 92 percent of employee health care costs.
    • In addition, most states provide some level of health care coverage to retired state employees as part of their employee benefits package. According to a 2016 Pew Charitable Trust report, states spent an estimated $18.4 billion in 2013 funding retiree benefits beyond employee pensions, known as other post-employment benefit programs.

      self-funded state employee health plans

      States have significant control over how they choose to fund and operate their state employee health plans. One strategy many states use is self-funded state employee health plans. When self-funding, an employer typically pays a third-party administrator an administrative fee for processing health care claims, but the employer ultimately bears the risk of paying these claims. This differs from traditional “fully insured” health plans, where the insurance company (rather than the employer) is responsible for paying members’ medical costs. Self-funding has the advantage of eliminating most premium taxes and gives the employer more control over the benefits they offer, but the employer bears the financial risk of setting premium levels and paying claims for these plans.

      Currently, 48 states self-fund at least one health plan option offered to state employees, and 29 states self-fund all state employee health plan options. The following table lists the states of self-funding for all health plan options, self-funding for some health plan options, or fully insured for state employee health plans.
















      See also: The impact of demographic and perceptual variables on a young adults decision to be covered by private health insurance | BMC Health Services Research | Full Text

      new hampshire

      new jersey

      new mexico

      north carolina



      rhode island

      south carolina

      south dakota




      west virginia










      See also: Best Cheap Health Insurance in Wisconsin 2022 – ValuePenguin





      new york








      north dakota

      Please note: Results are summarized from Millimeter’s Atlas of Public Employer Health Plans. milliman is not aware of any material changes to the above table as of January 2020.

      establish cost control strategies

      As state employee health care costs continue to strain state budgets, state lawmakers are leveraging several strategies to curb rising health care spending. certain strategies include sharing the benefits of state employees with local government or university employees; adopt value-based purchasing models; and initiate consumer-driven health care strategies.

      combine state employee health benefits

      More than half of the states allow, and in some cases require, state employee health plans to cover employees of local or regional government. By “pooling” insurance benefits among multiple employers, government entities can spread risk among a larger number of people and increase their purchasing power with a larger group of purchases. as of 2018:

      • grouping with city, town and county government employees is allowed in at least 22 states.
      • grouping with public school employees is allowed in at least 19 states.
      • grouping with employees of universities and colleges is allowed in at least 16 states.
      • Other districts or local units, such as fire or recreation districts, may be included in some states.
      • adopt alternative payment models

        Some states are moving away from traditional fee-for-service payments, which provide payment for each individual service and procedure, and are instead adopting alternative payment models (apms) for their state employee health plans. apms aims to increase the value and quality of health care services while lowering overall costs through financial incentives. States can leverage various MPAs to test the effectiveness of such models in reducing state health care spending. The following are two examples of states adopting APMS for state employee health plans:

        • tennessee has added bundled payments, also known as episodes of care, to its state group insurance program (sgip) for five separate services and procedures, including maternity care and hip and knee replacements. as part of the tennessee health care innovation initiative, sgip pays providers on a fee-for-service basis. After the procedure and recovery period, providers may receive additional payments if the average cost per episode remains below an agreed-upon threshold for that particular procedure or service. however, providers may have to pay sgip if the average cost per episode is above the threshold. after the program showed modest cost savings and improvements in the overall quality of care, sgip announced plans to implement additional episodes of care.
        • in 2014, the washington legislature mandated the washington health care authority (hca), which administers health care coverage for the state’s public employees, higher education employees, medicaid recipients and retirees , which will increase the use of value-based purchasing models. As the largest purchaser of health care in the state, HCA implemented an Accountable Care Organization (ACO) model, which establishes networks of providers with shared medical and financial responsibility for an entire population. Through better care coordination and communication throughout the care continuum, each network of ACO providers aims to meet certain financial and quality goals. According to a 2016 Catalyst for Payments report, HCA spent $2.7 million less on ACO members compared to those enrolled in the Public Employee Benefits Board’s self-insured plan.
        • initiate consumer-driven health care strategies: health savings accounts and right to shop

          States are initiating consumer-driven health care strategies to increase health care cost savings. For example, several states are promoting health savings accounts (HSAs) as a way to reduce health care expenses for state employees. hsas are a type of savings account that allows consumers to set aside money for certain health care services on a pre-tax basis. HSAS are tied to high-deductible health plans (HDHPs), which require plan members to pay out-of-pocket for medical expenses until they meet their deductible. hdhp members can use hsa funds for certain qualified medical expenses not fully covered by their insurers, such as doctor visits, prescription drugs and dental care. HDHPs are commonly known as “consumer-driven health plans.” As the name suggests, consumer-driven health plans aim to strengthen the role of consumers in seeking needed and more affordable care, and avoiding costly care and overuse of services.

          according to a 2017 segal consulting report, 30 states offered hdhps as an option for state employees. However, the report noted that HDHPS along with HSAS may be unaffordable for certain segments of the state employee workforce due to increased out-of-pocket costs and recommends greater investment in participating health consumer education programs. .

          States are also establishing right-to-buy programs for state employees, which provide financial incentives for patients to seek high-quality, low-cost health care providers and services. Through right-to-buy programs, insurers often share a portion of their cost savings with health plan enrollees to offset any pre-deductible or out-of-pocket expenses.

          new hampshire, kentucky and utah are examples of states that have established right-to-purchase programs as part of their state employee health plans to curb rising health care costs in state budgets. new hampshire was the first state to establish a shared incentive program with 90 percent of affiliates using the right to buy program within the first three years of the program.

          additional resources

          ncsl resources

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