Pooling Public Employee Health Care

Updated November 2016

Cost Containment header

The following NCSL Issue brief has been distributed to state legislators and legislative staff across the country.

Pooling Public Employee Health Care #10-  PDF File

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Cost Containment Strategy and Logic

Pooled public employee health benefit programs refer to efforts to merge or combine state employee health insurance with that of other public agencies and programs.  About half the states have opened participation in their state employee health benefit plans to other public-sector employers, such as school districts or cities and counties. Two states have piloted programs to allow private sector employers to join their state employee pools.
Some public purchasers regularly try to lower overall administrative costs and negotiate lower prices from providers and insurers using their large numbers of enrollees as a bargaining tool. Health costs are controlled by using size, volume purchases and professional expertise to:
  • Minimize and combine administrative and marketing costs;
  • Facilitate negotiations with health insurers for more favorable premium rates and broader benefit packages; and
  • Relieve individual employers of the burden of choosing plans and negotiating coverage and payment details.
In addition to cost containment and simplification, multi-agency purchasing arrangements also can give employees more choices of health benefit plans. This option often is not available if each smaller agency were to obtain coverage independently.  Small public employer groups often benefit the most from purchasing pools and alliances. As Figure 1 illustrates, the larger the employer group, the lower the percentage of the health premium devoted to administrative costs versus medical care payments.

Summary of Health Cost Containment and Efficiency Strategies - Brief #10- Pooling Public Employee Health Care

State/Private Sector Examples  Strategy Description Target of Cost Containment Evidence of Effect on Costs
California, West Virginia Programs that pool or combine health insurance purchasers across or beyond traditional jurisdictions or associations, including public employee health coverage pools and private sector health purchasing alliances. High administrative costs as a proportion of small and mid-sized employer premiums.
Limited ability of small and mid-sized groups to negotiate lower health care prices or premiums or benefit .
Evidence indicates arrangements may benefit small groups that join large state pools but have not slowed overall insurance premium increases.

 Colorado Supplement: Pooling Public Employee Health Benefit ProgramsPDF File


New Jersey has one of the most extensive combined or pooled programs, linking local public employees, school district employees and the state, formally termed State Health Benefits Program (SHBP) and School Employees' Health Benefits Program (SEHBP).  The members generally have the same or similar benefits. ~~The State Health Benefits Program (SHBP) was established in 1961 under N.J.S.A. 52:14-17.25 et seq. to provide health benefits to State employees, retirees, and their dependents.  > Health Benefits Fact Sheets Their website describes the 2016 plans, at health-benefits. 

  • The SHBP was extended to employees, retirees, and dependents of participating local public employers in 1964. Local employers must adopt a resolution to participate in the SHBP. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code.
  • The State Health Benefits Commission is the executive body established by statute to be responsible for operation of the SHBP. The Commission meetings are open to the public and are conducted at the Division of Pensions and Benefits in Trenton. Plan members are entitled to appeal to the Commission for resolution of any complaints after they have completed the formal grievance procedure of their plan administrator.
  • The School Employees' Health Benefits Program (SEHBP) was established by Chapter 103, P.L. 2007. It offers medical and prescription drug coverage to qualified school employees and retirees, and their eligible dependents. Local employers must adopt a resolution to participate in the SEHBP. The School Employees’ Health Benefits Program Act is found in the N.J.S.A. 52:14-17.46 et seq. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code.

Virginia, in November 2015 conducted and published an actuarial review of the impact on the state, the school boards, and other political subdivisions, from including the employees, and their dependents, of local governments including local school divisions in the state employee health program or in one statewide pooled plan for employees of political subdivisions. It included an examination of The Local Choice program's policies, including its pooling and rating methodology, to determine whether overall improvements may be made to the program, with a specific goal of trying to increase The Local Choice program's appeal among rural school divisions and local governments.
 Read the Virginia report, Review-of-the-public-employee-health-programs-in-the-Commonwealth. Nov., 2015 (92 pp, PDF) 


About this NCSL project

NCSL’s Health Cost Containment and Efficiency Series will describe two dozen alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is led by Richard Cauchi (Program Director) and Martha King (Group Director) with Barbara Yondorf as lead researcher. 
NCSL gratefully acknowledges the financial support for this publication series from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado