Magazine article Government Finance Review

Health Care Benefits Plans: GFOA Members' Perspectives

Magazine article Government Finance Review

Health Care Benefits Plans: GFOA Members' Perspectives

Article excerpt

Many state and local governments, in an effort to curb health benefit plan costs, increasingly rely on cost sharing with their employees--both by requesting contributions toward insurance premiums and by increasing deductibles for employees and their dependents. Some jurisdictions are cutting benefits, especially coverage for drug and alcohol rehabilitation programs, mental health benefits and, in some instances, dental and vision benefits. Many governments are switching from traditional plans to various managed care programs and self-funding alternatives; they also provide incentives for their employees to utilize these lower cost alternatives when other options also exist.

The GFOA obtained this information through its survey of members in March 1993. The goal of the study was to assess GFOA members' main health care benefits concerns, their approaches to containing rising costs, and the types of GFOA services and products that would best assist them. All GFOA members received the survey along with GFOA's March research bulletin, Diagnosis of Health Care: Issues for State and Local Governments. The questionnaire, which requested information on practices and concerns in the health care area, was developed by the health care task force of GFOA's Committee on Retirement and Benefits Administration, chaired by Sheryl Wilson, director of the State of Washington's Department of Retirement Systems. Trends and results presented in the following summary of responses are based on an analysis of the first 1,000 questionnaires received between March 25 and April 15.

Major Trends

Along with cost-sharing and reduction of benefits, state and local governments are employing a number of techniques to control health care benefits costs. Public employers are trying to keep their workforce healthier by implementing wellness programs--health fairs, newsletters/magazines, fitness classes, smoking-cessation classes and others. Another alternative is a flexible benefit cafeteria-style plan, where participants can choose from a menu of benefits and pay for them with pre-tax dollars. To promote cost savings through competition, local governments are sending out requests for proposals for health care services more frequently, with some jurisdictions asking for new bids on an annual basis. Reviewing utilization of benefits and outcomes of care given are other techniques used to determine how effectively benefits are being used. Others are exploring their options with the help of health care consultants.

Managed care. The move toward managed care programs is evident in the percentage of jurisdictions participating in health maintenance organizations (HMOs), preferred provider organizations (PPOs) and other non-indemnity plans. Generally, members indicated that their governments are most likely to utilize HMOs (46 percent) to provide health benefits to their plan participants. Self-insured indemnity plans and PPOs each were reported by about 39 percent of respondents, and insured indemnity plans came in at 31 percent. Many governments indicated that they were moving toward new plans and approaches; at present, however, only 3 percent participate in purchasing coalitions. Other options listed typically were various combinations of the plans discussed above.

Finance Officials' Role

Seventy-eight percent of respondents participate in the administration of their governments' health benefits plans. Half of this group is solely responsible for this function, while the rest share the responsibility most often with the personnel department. As for communicating health benefits to employees and retirees, respondents were split down the middle: about 50 percent were directly responsible for this function, while the rest relied on the skills of their personnel/human resources, administration or payroll departments. In some instances, risk managers, third-party administrators and insurance committees also were responsible for communicating information on health benefits to employees and retirees. …

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