NLC Examines Impact of Health Care Costs for Municipalities

By Konde, Pamela Sosne | Nation's Cities Weekly, October 18, 2004 | Go to article overview

NLC Examines Impact of Health Care Costs for Municipalities


Konde, Pamela Sosne, Nation's Cities Weekly


The costs of health care and insurance are expensive and rising at astronomical rates. In the past three years, health insurance costs have increased on average of 12.5 percent annually.

As municipal employers, members of the National League of Cities provide health care coverage for thousands of workers and their dependents. Providing health insurance to city employees and their dependents is becoming an increasing drain on municipal budgets.

The cost of such a benefit has escalated so dramatically that it is beginning to threaten the ability of municipalities to adequately provide services to their citizens without imposing higher property tax bills or fees.

In some cities, municipal governments are also health care service providers (i.e. city hospitals or clinics providing for the indigent and/or uninsured), adding to an already burdened budget.

Increases in health care costs are affecting the U.S. economy as businesses have difficulty providing adequate health care coverage to their employees and still competing in the global economy, affecting the economic vitality of cities.

Because health care coverage has become so expensive, more than 40 million Americans are uninsured, and that gap can affect cities, that are often providers of last resort.

In a recent fiscal survey released by NLC, 96 percent of city finance directors said that employee health benefits had increased between 2003 and 2004. Asked about the effect of these and other factors on city finances, 91 percent cited rising employee health benefits as having negative effects.

Because of these escalating costs and the impact on city budgets, NLC, through the Human Development (HD) Policy and Advocacy Committee, is studying the health care reform landscape and reviewing its policy positions to ensure that NLC's health care policy goals are current.

Concurrent with the HD Committee's decision to evaluate health care, the state municipal league directors also decided to concentrate some of their resources on the issue.

During the state league directors' meeting in Biloxi, Miss., in August, more than 30 state league directors and staff held a meeting to discuss the dramatic rise in health care costs to cover city employees with health care coverage. In addition, of the 34 state municipal league risk pools, nine include group health and employee benefit programs, and their costs have been escalating too. NLC is working on developing strategies so that each of these groups can come together to focus on the issue.

Health Care Costs

Health care costs have been escalating dramatically for a variety of reasons, including higher administrative costs, advances in medical technology, increased cost and use of prescription drugs, rise in nursing home costs and hospital spending, aging of Americans (and the resulting need for more health care), insufficient preventive medicine or disease management, unhealthy lifestyles (i. …

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