Conducting a Review of State Employee Insurance

You may have read recent headlines regarding an increase in rates that state, school and county governments will be paying for the insurance of their employees. An increase in the cost of the co-pay provisions of the primary PPO plan (state-run self-insurance program known as HealthChoice) will be handed down to state, school and county employees.

Over the past two years, it appears HealthChoice has kept rates from significant increases by subsidizing them with investment income derived as part of a increasing amount of reserve funding. However, during this time, because of this subsidy, and possibly because of investment income reversals as part of the downturn in the economy, the plan's reserve fund appears to have dropped from the 170 million dollar level down to about the 100 million dollar level.

These changes led me to predict earlier this year that the HealthChoice board would probably stop subsidizing the rate premiums which would result in a large rate increase for the upcoming year.

Because rates were artificially kept lower in the past couple of years, much of the impact of three years of health care cost inflation will be felt this year.

The HealthChoice board appears to have made the decision to split the cost of the increase among the employees by raising their co-payments and the employers by raising the cost of the premiums.

Fortunately, House and Senate leadership, working with Insurance Commissioner Kim Holland, foresaw this issue and passed legislation impaneling a five-person study group to look at various solutions to the problem. As a member of that group, I believe it is essential for us to develop legislation to keep costs to employees and employers as low as possible.

There are some innovative and creative concepts that have been pioneered in the private enterprise system that I feel we should attempt to incorporate. One of the most exciting is an incentive plan developed by the Safeway Corporation that aims to drive down costs by incentivizing wellness and prevention by rewarding those who stay fit by lowering their insurance costs (which I believe many who are experiencing an increase in co-pays would be happy to take advantage of in order to lower their co-pay).

Another important reform must be to put a benchmark in place so that the entire system can be evaluated on a regular basis and a cost comparison can be conducted to make sure the lowest cost is being passed down. A key component of this ongoing benchmark should be to require the state-run plan to participate in a process designed to compare it to the plans being offered in the private sector. As is often the case, the private sector is much more incentivized to produce a quality product than a government entity.

I hope we can find a solution to reverse the costs increases of this year and I think it is our job as Legislators to make sure these types of increases are avoided in the future.