State Employee Health Benefits, Insurance and Costs

9/16/2018

With state and local governments employing over 7.4 million full-time workers throughout the U.S., public employee benefits like health insurance coverage are of great importance to the state policymakers All 50 states provide health insurance coverage for their state employees, however, the extent of coverage, who is eligible to enroll, and employer versus employee premium contributions vary from state to state.

State employee health plans have attracted attention among state legislators, governors and policymakers because:

  • Rapidly rising commercial health plan premiums for state employee health plans are effecting state budgets; and
  • Co-payments, deductibles and out-of-pocket costs are on the rise in many states, separate from premiums.

State lawmakers—who may also receive coverage through state employee health plans in certain states—have various policy options for controlling rising health care costs and maintaining quality coverage options for the state employee workforce. Additionally, legislators can pilot innovative strategies for controlling public employee health care costs to demonstrate a policy’s effectiveness 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 expenditures. The Pew Charitable Trust published a comprehensive report in 2014 highlighting state employee health care costs 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 greatly across the states, the average per-employee per-month premium was $959; states paid an average of $805 (nearly 84 percent) toward premium contributions.  
  • Plan richness—or the relative cost-sharing between a health plan and an enrollee based on required deductibles, copayments or coinsurance—affected premium variations state-to-state. State health plans were considered generally rich with health plans covering an average of 92 percent of employee health care costs.

Additionally, 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 approximately $18.4 billion in 2013 funding retiree benefits beyond employee pensions—referred to as other post-employment benefits programs.

Self-Funding State Employee Health Plans

States have significant control over how they choose to finance and operate their state employee health plans. One strategy many states use is self-funding state employee health plans. When self-funding, an employer generally pays a third-party administrator an administrative fee for processing health care claims, but the employer is ultimately at risk for paying these claims. This is differs from traditional “fully-insured” health plans, where the insurance carrier (rather than the employer) is responsible for paying for enrollees’ 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 assumes the financial risk for setting premium levels and paying claims for these plans.

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

All Self-Funded Some Self-Funded Options All Fully Insured

Alabama

Alaska

Arizona

Arkansas

Connecticut

Delaware

Indiana

Iowa

Kansas

Kentucky

Maine

Minnesota

Mississippi

Montana

Nebraska

New Hampshire

New Jersey

New Mexico

North Carolina

Ohio

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Utah

Vermont

West Virginia

Wyoming

California

Colorado

Florida

Georgia

Hawaii

Illinois

Louisiana

Maryland

Massachusetts

Michigan

Missouri

Nevada

New York

Oklahoma

Oregon

Texas

Virginia

Washington

Wisconsin

Idaho

North Dakota

Please note: Results are summarized from the Milliman Atlas of Public Employer Health Plans. Milliman is unaware of any material changes to the above table as of January 2020.

State Strategies for Controlling Costs

As state employee health care costs continue to impact state budgets, state policymakers are leveraging several strategies to curb growing health care expenditures. Certain strategies include pooling state employee benefits with local government or university employees; adopting value-based purchasing models; and initiating consumer-driven health care strategies.

Pooling State Employee Health Benefits

More than half of the states allow, and in a few cases require, state employee health plans to cover local or regional government employees. By “pooling” insurance benefits across multiple employers, government entities can spread risk across a greater number of individuals and increase their purchasing power with a larger purchasing pool. As of 2018:

  • Pooling with city, town and county government employees is allowed in at least 22 states.
  • Pooling with public school employees is allowed in at least 19 states.
  • Pooling with university and college employees is allowed in at least 16 states.
  • Other local districts or units—such as fire or recreation districts—may be included in some states.

Adopting Alternative Payment Models

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

  • Tennessee incorporated bundled payments, also referred to as episodes of care, for 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. Following 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 costs savings and improvements in the overall quality of care, SGIP announced plans to roll out additional episodes of care.
  • In 2014, the Washington Legislature directed the Washington Health Care Authority (HCA)—which administers health care coverage for the state’s public employees, higher education employees, Medicaid beneficiaries and retirees—to increase its 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 financial and medical responsibility for an entire population. Through improved care coordination and communication across the continuum of care, each ACO provider network aims to meet certain quality and financial targets. According to a 2016 Catalyst for Payment report, HCA spent $2.7 million less on ACO members compared to enrollees in the Public Employee Benefits Board self-insured plan.

Initiating Consumer-Driven Health Care Strategies—Health Savings Accounts and Right to Shop

States are initiating consumer-driven health care strategies to increase health care costs savings. For example, several states are promoting health savings accounts (HSAs) as a way to lower state employee health care spending. HSAs are a type of savings account allowing consumers to set aside money for certain health care services on a pre-tax basis. HSAs are linked to high deductible health plans (HDHPs), which require plan enrollees to pay out-of-pocket for medical expenses until their deductible is met. HDHP enrollees can use HSA funds for certain qualified medical expenses not fully covered by their insurers, such as doctor’s visits, drug prescriptions and dental care. HDHPs are commonly referred to as “consumer-driven health plans.” As the name suggest, consumer-driven health plans aim to bolster the role of consumers in seeking necessary, more affordable care—and avoid costly care and over-utilization 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 coupled with HSAs may be unaffordable for certain segments of the state employee workforce due increased out-of-pocket costs and recommends greater investment in participant health consumer education programs.

States are also establishing Right to Shop programs for state employees, which provide financial incentives for patients to seek lower cost, high quality providers and health services. Through right to shop programs, insurers typically 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 shop programs as part of their state employee health plans to curb growing health care costs to state budgets. New Hampshire was the first state to establish a shared incentive program with 90 percent of enrollees using the right-to-shop program within the first three years of the program.

Additional Resources

NCSL Resources

 

Archived Information

Archived Information

All 50 states provide health insurance coverage for their state employees. However, the amount of coverage, who is eligible to enroll, and the state employer paid portions and individual paid portion vary from state to state.
 

State benefit plans have attracted attention among legislators, governors and policymakers. Often, this is because:

  • Rapidly rising commercial premiums are impacting state budgets;
  • State fiscal pressures are leading to more proposals to increase employee share of costs;
  • Co-payments and deductibles are on the rise in many places, separate from the established premiums.

A few general facts about state employee health plans, based on several national surveys: 

  • For 2016 State government employees totaled 4,360,635 individuals including higher education workers. Of those, 2,443,484 were non-education state employees. A 25-year graphic table illustrates changes.  [Published by Governing magazine, 2017].
  • A 2017 federal survey calculated state employees and families covered by employer health insurance totaled 5,368,428 in 2017 (compared to 5,281,911 in 2013.)
  • Local government employees similarly covered totaled 14,037,911 in 2017 (compared to 13,804,380 in 2013), as reported by the AHRQ 2017 MEPS Survey III.B.1 
  • For the state employees surveyed above: 
    • 79.0% had a choice of 2 or more plans
    • 100.0% could choose a managed care plan
    • 100.0% could choose a mixed provider plan
    • 30.6% could choose an exclusive provider plan
    • 1.7% could choose a conventional indemnity plan
    • 53.2% of plans had a waiting period
      [Source: AHRQ/MEPS 2017]
  • In 2013, six states paid 100 percent of the premium for employee-only coverage. (CPR Report, 10/2014)
  • Nearly all full-time state workers were eligible for coverage (97%), and take-up was high across most plans, averaging 91%.
  • 74% of part-time state employees had the option of electing health benefits (compared to 48% nationally.)
  • In state employee plans, 37% of workers were in HMOs, 42% in PPOs, 16% in POS plans and 5% were in conventional indemnity coverage. However, Indemnity plans enrolled a majority of retirees in the Midwest, Northeast and South. 
  • State employer retiree or "post-employment benefits" (OPEB) liabilities and funding progress are featured in a November 2014 report from Standard & Poor’s that contains information about each state’s actions (see Table 2). This research suggests that 32 states hold some amount in trust, though the amounts are generally quite small, as 93 percent of state liabilities remain unfunded. A December 2014 issue brief from National Association of State Retirement Administrators and the Center for State and Local Government Excellence highlights the relative distribution of state OPEB assets and unfunded liabilities. 

Elected state legislators naturally are state employees; however, within state personnel definitions, some are considered part-time employees.  The following states offer health insurance to legislators but describe it as "optional at legislator's expense" -- Nebraska, Nevada, New Hampshire, New Mexico, Vermont and West Virginia. In addition, South Dakota and Wyoming do not offer health benefits to legislators, but do cover legislative staff.  

At times states use their employee benefit plans as a demonstration for a policy - for example several states initiated a mental health coverage mandate specific to the state plan. At least half the states provide for selected non-state employees coverage under the same, or parallel, health benefit plans.  Most commonly, states include: city, town and/or county workers; public school teachers or employees, or public higher education employees.  A few states have experimented with including segments of the general population in their state plan - see the examples from Connecticut and West Virginia, below. 

Reports and "In the News"

List of State Employee Health Plan Agencies with Links

Each of the states has evolved a distinct structure for administering state employee health benefits.  Many states offer a relatively complex matrix of plans and premiums, varied by family size, type of plan (HMO, PPO, Indemnity).  A majority of states have some type of employee unions or collective bargaining units that may play a substantial role in defining benefits and costs.  The table below provides some examples from the agencies that run these state programs.

STATE

Agency Administering State Employee Health 

Alabama

Alabama State Employees Insurance BoardPublic Education Employees' Health Insurance Plan

Alaska

Alaska Benefits Section, Department of Administration

Arizona

Arizona Benefit Options (AzBO), Dept. of Administration

Arkansas

Arkansas Employee Benefits Division

California

CalPERS - California Public Employees Retirement System

Colorado

Colorado Dept. of Personnel & Administration, Division of Human Resources

Connecticut

Healthcare Policy & Benefits Services, State Controller

Delaware

Delaware Statewide Benefits Office, Office of Management and Budget

Florida

Florida Div. of State Group Insurance, Department of Management Services

Georgia

State Health Benefit Plan (SHBP) Division,  Dept. of Community Health  

Hawai'i

Hawaii Employer-Union Health Benefits Trust Fund (EUTF)

Idaho

Office of Group Insurance

Illinois

State Employee Benefits, Dept. of Central Management Services

Indiana

State Personnel Department: Benefit Information 

Iowa

Department of Administrative Services, Human Resources 

Kansas

Kansas Department of Health & Environment

Kentucky

Kentucky Employee's Health Plan; Kentucky Personnel

Louisiana

State Civil Service

Maine

Maine Office of Employee Health and Benefits

Maryland

Maryland Department of Budget & Management

Massachusetts

Massachusetts Group Insurance Commission 

Michigan

Michigan Civil Service Commission

Minnesota

Employee Relations; Minnesota Management and Budget

Missouri

Missouri Consolidated Health Care Plan

Mississippi

State Insurance AdministratorDepartment of Finance and Administration

Montana

Health Care and Benefits Division

Nebraska

Administrative Services-Employee Wellness & Benefits; Dept of Administrative Services

Nevada

Public Employees Benefit Program

New Hampshire

Department of Administrative Services; Employee Benefits

New Jersey

Division of Pensions and Benefits; Department of Treasury

New Mexico

General Services Division

New York

Department of Civil ServiceNY SHIP

North Carolina

North Carolina State Health Plan 

North Dakota

North Dakota Public Employee Retirement System: Dakota Plan

Ohio

Ohio Benefits Administration  

Oklahoma

Oklahoma Employee Benefits Department 

Oregon

Public Employees Benefit Board; Oregon Health Authority

Pennsylvania

Pennsylvania Employees Benefit Trust Fund

Rhode Island

State of Rhode Island Office of Employee Benefits

South Carolina

South Carolina Public Employee Benefit Authority

South Dakota

Bureau of Human Resources

Tennessee

ParTNers for Health

Texas

Texas Employees Group Benefits Program (GBP), Employees Retirement System (ERS)

Utah

Public Employees Health Program

Vermont

Benefits & Wellness; Department of Human Resources

Virginia

Employee Benefits, Department of Human Resource Management

Washington

Public Employees Benefit Board; Health Care Authority

West Virginia

West Virginia PEIA Health Plan 

Wisconsin

Department of Employee Trust Funds

Wyoming

Department of Administration and Information, Human Resources Division

State

Agency Administering State Employee Health 
               

Note: Plan benefits vary widely from state to state. Numerous states offer a range of plans from basic HMO, to comprehensive HMO, plus PPO and an Indemnity plan. Some have regional pricing as well. Family size almost always affects premiums.

  • Health Insurance: Premiums and Increases- Compiled by NCSL and updated 8/1/2018.  [Link to Page
  • Reducing State Employee Health Insurance Costs: NCSL LegisBrief, October, 2014 [download report - member password may be required]
  • 2012 State Employee Health Premiums: Comparative data for 45+ states.  [download report]

Study shows a spike in state employee health benefit costs for 2017

The study shows states continue to implement new high-deductible and consumer driven health plans (HDHP/CDHPs) coupled with health savings accounts and health retirement accounts, but “there are stark geographic discrepancies to where it is offered,” authors of the study said. According to the study, 13 southern states offer HDHP/CDHPs, compared to just two in the Northeast. They are offered in eight states in the Midwest and seven in the West. Published July 2017 by Segal Consulting; Read the study at http://bit.ly/2vNb3BH.

North Carolina's Reference-Pricing Move.  "Fed up with rising medical costs and the opacity of payer-provider rate negotiations, North Carolina is shifting its health plan for state employees and teachers to a reference-pricing model that ties payments for health care services to Medicare rates. The new rates for various categories of services will average out to 177% of Medicare's fees, down from a current average of 213%, North Carolina Treasurer Dale Folwell (R) told The Wall Street Journal. Folwell expects the move to generate savings of $300 million, according to a press release. Between now and July 1, 2019, the state, through Blue Cross and Blue Shield of North Carolina, will try to enlist providers for its new network, according to North Carolina Health News.
     "North Carolina is unique in that they're trying to use reference pricing, which is not something that we have seen most payers — almost any payers in the country, really — embrace, other than Medicare," explains Caroline Pearson, a senior fellow at NORC at the University of Chicago. Jeff Dobro, M.D., U.S. clinical services and innovation strategy leader for the consulting firm Mercer, says North Carolina's strategy for its State Health Plan is both "unusual and pretty aggressive." Excerpt from Health Plan Week, Nov. 2018

2014 State Employee Health Spending Report

A groundbreaking report examines how states’ employee health plan benefits and costs compare to one another and to other large, private sector employers. The State Health Care Spending Project has worked with global actuarial firm Milliman, Inc. to examine each state’s employee health plan spending and design characteristics, as well as how states compare to one another and to health plans offered in the private sector. Released by Pew Charitable Trusts.  Download report. 
View related State Employee Health PowerPoint presentation to NCSL on Aug. 2014 by Maria Schiff from Pew.

  • Minnesota, Employee Group Insurance ProgramPowerPoint presentation to NCSL Midwest States Fiscal Leaders Meeting, Aug. 19, 2014. Key findings from the Pew analysis include:
    • Average per employee premiums; before and after controlling for certain cost-drivers
    • Employer and employee premium contribution arrangements
    • Plan characteristics, including cost sharing arrangements (deductibles, copays, coinsurance)
    • Major cost drivers and sources of spending variation among states, and between states and large private sector employers
    • Key policy approaches available to state policymakers to influence costs

State Retiree Health Plan Spending:

Retiree Health: An examination of funding trends and plan provisions. Read the summary report and a full report by The Pew Charitable Trusts, May 2016.

  • A Look at Access to Employer-Based Retirement Plans in the Nation’s Metropolitan Areas: Who’s in, who’s out.  Read the full report by The Pew Charitable Trusts, May 24, 2016
  • A Majority of States Enroll Early Retirees in Active Employee Plans at Same Premium Rate. A 2014 multimedia report by Pew  
  • Dolores Mitchell, (former) executive director, Massachusetts Group Insurance Commission, Boston, Mass. Resource: Massachusetts: "Going Bold and Implementing Health Care Payment Reform through the Centered Care Initiative
  • How Health Reform Affects States as Employers (December 2012): In many places state government is the single largest employer. Federal health reform changes some provisions of state employee insurance – programs that affect coverage for more than 6 million enrollees nationwide, including most NCSL members. Speaker: J. Richard Johnson, Senior Vice-President, National Public Sector Health Practice Leader, Segal & Company, Washington, D.C.- PDF online 

Older Reports & Resources...: The following reports and news articles are examples of the policy discussions in individual states.  NCSL is not responsible for the content or opinions expressed in these outside linked articles.

States Implement Reform image

Health Reform News for State Employee Plans

The Affordable Care Act (ACA) creates some new requirements and new options for state and public employee health programs. 

CMS overview of  "Self-Funded Non-Federal Government Plans"  The Affordable Care Act has given Americans new rights and benefits, by helping more children get health coverage, ending lifetime and most annual limits on care, allowing young adults under 26 to stay on their parent’s health insurance, and giving patients access to recommended preventive services without cost.

Prior to enactment of the Affordable Care Act, sponsors of self-funded, non-federal governmental plans were permitted to elect to exempt those plans from, or “opt out of,” certain provisions of the Public Health Service (PHS) Act. This election was authorized under section 2722(a)(2) of the PHS Act (42 USC § 300gg-21(a)(2)).  The Affordable Care Act made a number of changes, with the result that sponsors of self-funded, non-federal governmental plans can no longer opt out of as many requirements of Title XXVII. On March 14, 2014, the Department of Health and Human Services, Centers for Medicare and Medicaid Services, published a proposed rule titled “Patient Protection and Affordable Care Act: Exchange and Insurance Market Standards," with details on "Non-Federal Governmental Plans."

This section is intended to provide information about this opt out provision.  The information in this section will be of interest to state and local governmental employers that provide self-funded group health plan coverage to their employees, administrators of those group health plans, and employees and dependents who are enrolled, or may enroll, in those plans.  Although self-funded nonfederal governmental plans may still opt out of certain provisions of the PHS Act, they are not exempt from other requirements of the law including the restrictions on annual limits and other provisions of the Patient’s Bill of Rights. 

Provisions subject to opting out included:

  • Limitations on pre-existing condition exclusion periods; requirements for special enrollment periods; prohibitions on health status discriminations;
  • Newborn and mother benefits standards; mental health and substance abuse disorder benefit parity requirements; coverage of reconstructive surgery after mastectomy requirements; and coverage of dependent students on medically necessary leave of absence.

Under the ACA, self-funded non-federal governmental plans may no longer opt out of the first three of these requirements, although they may still opt out of the later four.  Group health plans maintained pursuant to a collective bargaining agreement ratified before March 23, 2010, however, that were exempted from any of the first three requirements do not need to come into compliance with any of these provisions until the first plan year following the expiration of the last plan year governed by the collective bargaining agreement.  These changes had earlier been implemented by guidance, but the proposal would modify the existing rule to bring it into conformity with the statutory provisions.  The amendment would also require electronic submission of the opt-out.

Additional Resources: Fact Sheets & FAQs  |  Other Resources 

  • NCSL explains public employer coverage: "ACA Requirements for Medium and Large Employers to Offer Health Coverage" - a 2015 report applicable to states, state legislatures and local governments as employers [download full report]
  • The So-Called "Cadillac Tax" on High Cost Employer Plans: POSTPONED by Congress in January 2018.:
    • The thresholds for triggering the tax will continue to be indexed until the tax goes into effect, now scheduled for 2022 (the thresholds for 2018 were slated to be $10,200 for self-only coverage and $27,500 for other than self-only coverage); 
    • Replacing a “nondeductible” definition, employers will be allowed to deduct any “Cadillac” tax payments; and
    • The comptroller general, in consultation with the National Association of Insurance Commissioners, will study suitable benchmarks to use for age and gender adjustments to the thresholds triggering the tax.
    • Other ACA-related changes include a one-year moratorium on the ACA’s annual fee on health insurers’ net premiums (for US risks) and a two-year halt to the tax on sales of medical devices. These fees and taxes were likely to be passed on to employers through increased insured plan premiums and provider costs, and thus will be welcome relief to employers.
  • FAQs about Grandfathered Health Plans in 2014: Important facts and requirements; compiled 8/26/2013 by United Benefit Advisors.
  • State Plans as Essential Health Benefits Template: The HHS bulletin issued December 2011 on Essential Health Benefits allows states to use "one of the three largest state employee health plans" as the coverage standard for all non-grandfathered health insurance plans offered in and out of exchanges. As of mid-2016, just two states selected this option -- Details online.

State and Local Employees Pooled Health Benefit Plans

More than one-half of the states allow, and in a few cases require, state employee health plans to combine with other local or regional government employee participants.

  • Cities, towns and counties: Pooling permitted in Alaska, Alabama, California, Hawaii, Illinois, Louisiana, Maine, Maryland, Massachusetts, Missouri, New Jersey, New Mexico, North Dakota, New York, Oklahoma, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia and Wisconsin.
  • Universities and colleges: (Members may request this information)
  • Public Schools: (Members may request this information)

Maryland Update: In April 2018, Maryland passed Delegate Dr. Dan Morhaim's HB1400, which promotes pooling government health insurance purchases among state employees, county employees, and school system employees. This could save taxpayers as much as $300,000,000 per year while providing employees with better health insurance. Eventually, nonprofits could participate as well.

Self-Funding Decisions for State Employee Health Programs

Forty-eight (96%) of the fifty states currently self-fund at least one of their state employee health plans. Twenty-nine (58%) of the fifty states currently self-fund all of their health plan offerings, as shown in the list below. When self-funding, an employer generally pays a third party administrator an administrative fee to process claims, but the employer is ultimately at risk for paying these claims. Self-funding has the advantages that it eliminates most premium taxes and gives the employer more control over the benefits they offer, but the employer is ultimately at risk for setting premium levels and paying claims for these plans.

As of each state’s most recent plan year, effective either July 1, 2016 or January 1, 2017, states made the following selections regarding self-funding. 1

 All Self-Funded    .      .        .     .   .

        Some Self-Funded Options

All Fully Insured

Alabama

Alaska

Arizona

Arkansas

Connecticut

Delaware

Indiana

Iowa

Kansas

Kentucky

Maine

Minnesota

Mississippi

Montana

Nebraska

New Hampshire

New Jersey

New Mexico

North Carolina

Ohio

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Utah

Vermont

West Virginia

Wyoming

California

Colorado

Florida

Georgia

Hawaii

Illinois

Louisiana

Maryland

Massachusetts

Michigan

Missouri

Nevada

New York

Oklahoma

Oregon

Texas

Virginia

Washington

Wisconsin

Idaho

North Dakota

             

Note - Results are summarized from the Milliman Atlas of Public Employer Health Plans, which is a research effort created to support and improve public-sector decision making through data-driven health plan benchmarking and analysis. More information about the Milliman Atlas and links to recent analyses can be found online at: http://us.milliman.com/Solutions/Services/Milliman-Atlas-of-Public-Employer-Health-Plans/ or by contacting atlas@milliman.comThis report is to be used for research and informational purposes only

ARCHIVE: Earlier Actions and Provisions for State Employee Health Plans (2004-2013) Restored 1/6/2017

PREMIUM SURCHARGE FOR SMOKERS (Examples of Early Adoptors)

  • West Virginia first included such a feature in part more than a decade ago..
  • Kentucky in late 2004, (in H 1a) created a smoker surcharge of $15/month for individuals and $30/month for family coverage. [2008 article]
  • Alabama in December 2004 (in HB 2) authorized smoker rates during special legislative sessions.  For 2010 the smoker surcharge increased from $25 to $30 per month.  In August 2008, Alabama added a premium for obesity [see description below]
  • Georgia initiated a smoker surcharge.  Beginning July 2005, more than 54,000 people covered by the insurance plan for state employees are paying an extra $40 per month because they smoke or use tobacco. For 2013, an additional $80 will be added to the monthly premium if you or your covered dependents use Tobacco products.
  • Indiana added a non-smoker rate incentive in 2006.  For 2007, enrollees save up to $500 /year on annual deductibles when the Tobacco Incentive is applied.
  • Kansas has a smoker surcharge authorized in 2008.
  • Missouri law generally provides that public and private employers may provide health insurance at a reduced premium rate and reduced deductible level for employees who do not smoke or use tobacco products.
  • North Carolina has taken a parallel approach. Beginning July 1, 2010, state employees will be defaulted into the state’s PPO Basic plan. Those who don’t smoke have the option of enrolling in the Standard plan—which has an 80/20 enrollee payment split compared with 70/30 enrollee payment split  under the Basic plan—by attesting that they and their dependents do not use tobacco products.
  • South Carolina's Budget and Control Board voted in August 2008 to impose a $25 monthly surcharge for state public employees and their family members who smoke or chew tobacco, effective 2010.  According to the Augusta Chronicle, an estimated 58,600 people, or roughly 20 percent of the state's more than 400,000 insurance participants, will pay the surcharge.
  • South Dakota has a smoker surcharge authorized in 2008.

SMOKING CESSATION  PROGRAMS (2010 article)

A large majority of states, totaling 39 as of mid-2010, have operational tobacco cessation programs and policies, primarily using positive incentives.  The following are just a few examples.

50-state map of State programs

  • Tobacco Cessation: State and Federal Efforts to Help - NCSL report features 50-state map, laws and program information.
  • Alabama's Tobacco Cessation Program is now provided by the SIB for its covered members; for 2009 the state will reimburse each member 80% of the cost of the program, with no deductible. There is a lifetime maximum benefit of $150. Tobacco cessation seminars and all forms of nicotine replacement are covered services.  Prescription medications for tobacco cessation are covered and are not subject to the $150 lifetime maximum benefit. [2/09]
  • Idaho’s Wellness Program: First Phase -Tobacco Cessation. For 2008 there will be a $10 co-payment for every thirty-day supply of quit aids.  Pharmacists will require a state Blue Cross of Idaho identification card to dispense the quit aids.
  • North Carolina, "37 percent of all preventable deaths are attributed to tobacco. Each smoker represents approximately $1, 623 in excess medical expenditures. By making nicotine replacement therapy patches free with counseling, the State Health Plan anticipates improved member health and significant long-term savings for the plan and for taxpayers".
  • North Dakota's Public Employees Retirement System recently received a grant to help state employees and their dependents age 18 and older quit smoking or chewing tobacco. The grant will help pay for participating in one of more than 20 approved smoking cessation programs. Most of these programs are available through public health departments across the state of North Dakota. This project is administered by Blue Cross Blue Shield of North Dakota. The program will pay 100 percent of your out-of-pocket expenses for your office visit and prescription and over-the-counter medication up to $500, for a total benefit of $700. The program will end April 30, 2009.  Program description.

Examples of state statutes for Public Employee Wellness, (Includes laws from 2006-2010)

  • Worksite Wellness in State Public Health Agencies. "ASTHO encourages all state health agencies to consider the emotional and physical well-being of their employees and to consider how worksite wellness programs can help support this effort."  Online ASTHO report posted 2014.

  • (50-state survey) State Employee Health Benefits: Coverage for Weight Loss Interventions – published by George Washington University [Feb. 2012]
  • Alabama was the first state to seek to charge overweight state workers who don't work on slimming down.  The State Employees' Insurance Board in August 2008 approved a plan to charge state workers starting in January 2010 if they don't have free health screenings. If the screenings turn up serious problems with blood pressure, cholesterol, glucose or obesity, employees will have a year to see a doctor at no cost, enroll in a wellness program, or take steps on their own to improve their health. If they show progress in a follow-up screening, they won't be charged. But if they don't, they must pay starting in January 2011. The State Employees' Insurance Board implementation plan also includes a discount for participation in Wellness Screenings, with a $30 per month wellness premium discount off the single coverage provided the employee has submitted baseline readings for the following health risk factors: Blood pressure, Cholesterol, Glucose and Body mass index.
  • Arkansas Incentives for Wellness.  Arkansas provides health care benefits through plans offered to state and public school employees and their families, covering approximately 120,000 people. In this role, the state has a financial interest in improving the health status of this population. In 2004, it began a long-term strategy to avoid preventable diseases and encourage healthy behaviors. It introduced Health Risk Assessments (HRA) to gage member behaviors in five areas: smoking, alcohol consumption, seat belt usage, body mass index, and weekly physical activity.  Members who complete an HRA receive a $10 monthly discount to their health insurance premium; those who are found to be at low risk receive an additional $10 discount. In 2005, more than half of members completed the HRA. Arkansas has introduced enhanced tobacco cessation and obesity management (including nutrition counseling) benefits, and has proposed a further expansion of coverage for clinically directed weight-loss programs and surgical obesity interventions. State employees who assist in management of their health risks are also eligible for three days of vacation, known as “health days.”  This is complementary to the state’s effort, through the Healthy Arkansas initiative, to advance the idea of “worksite wellness.”  Arkansas also has an expanded Healthy Lifestyle program, whereby state employees can earn up to three days per year for participating in a voluntary program that focuses on increasing physical activity, increasing consumption of fruits and vegetables and decreasing or eliminating the use of tobacco products.  See savings examples in the 2009 premium rate chart.
    Arkansas Wellness Benefits.  [Sources: Arkansas Governor’s Office SHAPES survey response, presentation by Rhonda Jaster, presentation by Joseph Thompson.]
  • Connecticut: State Plan Offers Employees Incentives To Access Needed Services and Health Enhancement Activities, Leading to High Participation, More Appropriate Utilization, and Slower Cost Growth. Read the full report January 2014. by AHRQ.
  • Delaware officially launched DelaWELL on April 1, 2007, as a comprehensive wellness program for state employees. This statewide initiative is available free to all full-time State employees, school district, charter school and higher education employees and pre-65 retirees currently enrolled in group health insurance programs. The program assesses employee health risks and provide confidential, personalized feedback, and coaching interventional strategies that target lifestyle topics such as back care, blood pressure management, exercise, nutrition, and stress management through various modes of communication and health-related events.
    >  Starting Oct. 1, 2010, eligible members earned Wellness Credits for participating in program activities; credits can translate into DelaWELL Rewards of $100-$200.
  • Indiana: The state personnel health plan has a cutting edge “Upgrade your health plan” that lowers premiums for documented healthy actions. For 2014-15 they describe it this way: "To qualify for the Wellness CDHP plan, employees currently enrolled in state medical benefits qualify for the Wellness CDHP plan by completing three easy steps before Aug. 31, 2014. These steps help you to take control of your health and improve your overall well-being. By upgrading your health, you have the opportunity to upgrade your plan."
  • Kansas, in September 2007, launched a program so that state workers will be able to volunteer for personal health-risk assessments.
  • Minnesota highlights various health improvement services offered through the Minnesota Advantage Health Plan for insurance-eligible state employees and their covered family members. An online wellness chart provides details for 2010.
  • Massachusetts: For 2014 most active state employees have an opportunity to improve their health with the GIC’s pilot WellMASS program; it "provides helpful tools to improve participant’s health and wellbeing including Health Assessments, Online Resources and Health Coaching for eligible participants."
  • Mississippi2010 "Healthy You!" Health/Wellness Initiative, administered by BC/BS of Mississippi.
  • Missouri has incentive rates for employees, saving up to $25 /mo, who take the PHA and participate in Lifestyle Ladder or Smart Steps® to be eligible for the incentive rate.
  • Montana announced Wellness Programs including, new for 2007, all State employees and their adult dependents have access to free health coaching, intended to "help individuals make permanent changes in their lives."  The wellness program also offers options such as health screenings, spring fitness, and lunch and learn programs, which are designed to maintain and promote healthy lifestyles for members.  New features for 2010.
  • New Hampshire's wellness program includes a risk assessment, run by Anthem. (2008)
  • North Carolina - explanation of 2016 Wellness Premium Credits (2015)
  • North Dakota wellness services are included in the state BC/BS managed plan.
  • Ohio: The Healthy Ohioans initiative, which includes wellness activities and resources, is sponsored by the State Employee Health and Fitness Task force. The task force was charged with: (1) developing guidelines for state agency health and fitness programs; (2) identifying tools to annually measure the effectiveness of such programs; (3) identifying models for on-site wellness programs; and (4) identifying community partnerships or resources that might be utilized to further wellness programming for state employees. For 2010 Ohio's "Take Charge! Live Well!" program can earn employees a $25-$200 incentive payment.
  • Oklahoma in 2006 launched "OK Health wellness program," providing "All active state employees the opportunity to participate in the state's wellness mentoring program offered by the Employees Benefits Council State Wellness Program.  The goal of OK Health is to give you the right tools to help you feel better and improve your health."  Enrollment in the OK Health Program,  involves completing an online health risk assessment (HRA). An OK Health representative will call and arrange an initial visit with your Primary Care Physician for some basic measurements and labs.  They say, "As a program participant, the initial cost to visit your physician and receive lab work (specific to OK Health) will be waived by your health care provider.  Following your initial PCP visit, you will receive your first orientation call from a professional health mentor."
  • South Dakota: For 2010, members who attend a free Health Screening will receive a $50 non-tax Health Screening incentive.
  • Utah Public Employee Health Plan Wellness Works is an interactive PEHP Wellness Works website for diet, nutrition, and fitness support exclusively for PEHP members. For 2011, it offers an array of customizable tools and wellness information.  PEHP Waist Aweigh is for PEHP members with a BMI of 30 or higher. It provides support, education, and financial incentives.  Healthy Utah  is a free program for eligible PEHP members and their spouses. It offers a variety of programs, services, and resources to help you get and stay well. Among its many tools and services is a rebate program that offers cash rewards for good health and health improvements.  Enrolled employees may submit results to Healthy Utah and receive rebates for making the health improvements in the following areas:  BMI Improvement ($50 each drop of 5 BMI points); Blood Pressure Improvement ($50); Diabetes Management ($300); Lipid Improvement ($50); Tobacco Cessation Program ($100).
  • Virginia: (2007-08):  Routine wellness care is covered for children through age 6 and for children and adults age 7 and over. There is no deductible, copayment or coinsurance for the member to pay before the plan pays for routine wellness coverage.  Routine well child care through age 6 covers at no cost office visits at specified intervals, immunizations, routine lab tests and x-rays at facilities and doctors’ offices. Routine well adult care age 7 and older includes a routine annual wellness check-up at no cost, as well as routine lab tests, immunizations and x-rays at facilities and doctors’ offices.  Preventive care benefits include for specified ages at no cost an annual gynecological exam or prostate exam, and the following services once per calendar year: a Pap test, mammography screening, prostate specific antigen (PSA) test and colorectal cancer screening.
  • Washington: Washington Wellness, 4 Steps to Better Health, 2010
    • Wellness Initiative, 2006: King County, which comprises the greater Seattle area and is the 12th largest county in the nation, is projecting a reduction in rising healthcare costs by as much as $40 million over the 2007-2009 period due to wellness initiatives. (10/17/06)
  • West Virginia created the Pathways to Wellness program by law (W. Va. Code § 5-16-8). It requires the Public Employee Insurance Plan to provide wellness programs and activities which include benefit plan incentives to discourage tobacco, alcohol and chemical abuse and an educational program to encourage proper diet and exercise.

Use of HSAs in State Employee Programs - The Early Examples

  • Arkansas: (2004) The first formal program, for teachers, first-year open enrollment in 2004 results were reported as "disappointing."
  • Florida: (2005) The state contributed $500 for an individual, $1,000 for a family account and paired that with a $1,250 (individual) $2,500 (family) deductible plan.
  • Georgia offers a health reimbursement account (HRA) plan and a high deductible health plan (HDHP) that are very similar in design to the PPO with higher employee costs through deductibles, co-pays, and co-insurance. Public employees hired after January 1, 2009 in Georgia are only given the option of enrolling in the HRA/HDHP plans.
  • Indiana: (2007) The state offered two HDHP/HSA choices.  Plan 1 has a $2,000 individual/$5,000 family deductible; the state's annual contribution includes up to $1,375 for single or $2,750 annually for family to the HSA for active employees; the out-of-pocket annual maximum is $8,000.  Plan 2 has a $3,400 family deductible.
  • Kansas: (2006) added an HSA/HDHP choice with a $1,500/$3,000 deductible if network providers are used and a $2,000/$4,000 deductible if non network providers are used.
  • Nebraska: (2007) offered a PPO Consumer Driven Health Plan. The CDHP has a $1,000 per calendar year deductible for in-network expenses with a $2,000 per calendar year maximum out of pocket. In addition, the new CDHP implements a four-tier formulary prescription plan with higher co-pays and/or co-insurance.
  • Pennsylvania: (2009) Offered a United HealthCare CDHP option as of 2006. In 2009 it features 100 percent coverage for preventive care services (PEBTF members have up to $500 maximum for single members/$1,000 for family per year).
  • South Carolina: (2004) The plan conducts state employee open enrollment at the end of each October.
  • South Dakota offered a $2000 deductible HSA-compatible plan for 2007; employees selecting this options receive $300 per plan year in Flex Credits in a Medical Expense Spending Account.  An offered $1000 deductible plan is not HSA compatible.
  • Utah: (2006) HB 76 requires a High Deductible Health Plan and HSA option for Public Employees Benefit and Insurance Program (PEHP).
  • Virginia: For benefit years 2007-10, the state paid 100 percent of the premium cost for a high-deductible health plan (individual or family), with other plans requiring modest employee contribution (HDHP is $40/mo less expensive than the full HMO option for an individual, as of 7/09.)
  • Wyoming: (2006) implemented a federally-qualified high deductible health plan.  Employees may select a state HSA vendor or their own. HSA contributions are 100% from employees.

Value-Based Purchasing Examples

  • Oregon's Experience With Value-Based Insurance Design: In 2010 two Oregon public employee benefit boards adopted a value-based insurance design system that is showing results, writes Joan Kapowich, who administers Oregon's Public Employees' Benefit Board and Educators Benefit Board. This article presents lessons learned from offering value-based tier benefit plans for 128,000 state and university employees and dependents and 155,000 public education employees and dependents. The plans increased copayments for overused or preference-sensitive services of low relative value and they covered preventive and high-value services at low or no cost. Kapowich says one lesson is that many purchasers will choose the path of least resistance and increase traditional cost sharing, rather than add copay disincentives to their value-based benefit programs, to avoid employee pushback. Source: Health Affairs November 2010.
  • The idea of "value driven purchasing" through pooled negotiation, common contracts and purchases is often discussed but less commonly implemented.  Four states have initiated or joined such efforts, and now have handy reports written and published through the Commonwealth Fund in 2006 and 2007.
    • In California, CalPERS offers lower health premiums in 2009 if members enroll in one of the "newer plan options – Blue Shield of California NetValue (HMO) and PERS Select (PPO). These “high performance network” plans provide the same level of benefit ts and quality of care as Blue Shield Access+ HMO and PERS Choice, respectively. The difference is that enrollees pay a lower premium in exchange for choosing from a smaller panel of physicians.  A CA example" "To illustrate the value of a high performance network plan, let’s use the example of a State member who currently has health coverage for herself and her family (husband, 4-year old child, and a baby on the way) through Blue Shield. If this member transfers from the standard Blue Shield Access+ HMO family plan to Blue Shield NetValue, she would save more than $1,800 in premiums in 2009. She could use this savings to pay for additional health care services for her family, such as co-payments for 20 office visits for non-preventive care, 20 retail generic drug prescriptions, 20 retail brand prescriptions, 4 mail-order brand prescriptions, 4 mail-order nonformulary prescriptions, 12 urgent care visits, and 4 emergency room visits (without being admitted) – and still keep an extra $348 in her pocket.
    • The Massachusetts Group Insurance Commission (GIC), a state entity that provides and administers health insurance and other benefits to the commonwealth's employees, retirees, and their dependents and survivors, is trying to improve provider performance through "tiering." GIC assigns its health plan members to a particular tier, based on quality and efficiency, and requires these plans to offer their members different levels of cost sharing, depending on which tier their chosen hospital or provider is designate  8/07.
    • The Minnesota Smart Buy Alliance is a group of public and private health care purchasers, including the state agencies overseeing Medicaid and public employee health benefits, along with coalitions of businesses and labor unions. The alliance is developing common value-driven principles, and its members are sharing VBP strategies.  8/07
    • Washington State's Puget Sound Health Alliance, a broad group of public and private health care purchasers, providers, payers (health plans), and consumers, is working to develop public performance reports on health care providers and evidence-based clinical guidelines.
    • The Wisconsin Department of Employee Trust Funds (ETF), the state agency that administers health benefits for state and local government employees, is pursuing value through a variety of purchasing strategies. EFT is also becoming involved in public-private collaboratives such as a statewide health data repository.  ETF is the largest employer purchaser in the state, covering more than 250,000 active state and local employees and 115,000 retirees and their dependents.**  The state also has a "high performance tiered" network structure - see description under Wisconsin, below.

State Employees Pooled with Local and School Government Units

More than half the states allow, and in a few cases require, state employee health plans to combine with other government employee participants. 

States include:

  • Cities, towns and counties.  Permitted in AK, AL, CA, HI, IL, LA, ME, MD, MA, MO, NJ, ND, NM, NY, OK, SC, TN, UT, VA, WA, WV and WI.
    * California's CalPERS agency provides the largest combined health program, serving 1.6 million members; as of 2009, 30% of their enrollees were state employees, 38% were school employees and 32% were local public agency employees. [CA report.] 
    * Massachusetts in 2008 expanded eligibility to all cities and towns.
    * New Jersey includes 31% public school employees, 18% cities and towns and 15% universities and colleges.
    * In North Carolina, the program has 58% public school employees and 11% universities and colleges. 
    * Washington enrollment includes 40% universities and colleges, 2% public schools and 3% cities and towns.
  • Universities and colleges. Permitted in at least 16 states: CA, HI, IL, LA, MA, NV, NJ, NC, ND, OK, OR TX, WV, MO, UT and WA.  13 other states classify state college employees as state employees and do not list them separately.
  • Public Schools. Permitted to be included in about 19 states including AR, DE, FL, GA, HI, KY, LA, MS, MO, NV, NJ, NY, NC, OK, SC, TN, UT, VA, WA and WV. Actual practices vary considerably since no state directly runs its public schools.
  • Other local districts or units, such as fire districts, recreation districts may be included in some states. Local statistics are not available .

  • There are several additional states that prohibit discrimination against public employees based on sexual orientation/gender identity.  These states do not necessarily cover health care costs for a same-sex partner.  The states are: Indiana, Louisiana, Michigan and Virginia.  Some states with domestic partner benefits also prohibit discrimination, for example, Alaska, Arizona, Colorado and Pennsylvania.

    • State Retiree benefit programs now extend retirement benefits to domestic partners in about a dozen states, with descriptions of policies and debates in other states. See Domestic Partner Retirement Benefits: NCSL Survey of legislative staff (03/06)
    • Expedited Partner Therapy (EPT) - State Information - Legal status and barriers by state to providing medications to persons infected with certain STDs to be administered to their sexual partners. For 2017, 40 states permit EPT; 8 states are classified as "potentially allowable" and only two states prohibit EPT.  The information applies generally, not just to public employees. (compiled by CDC, updated July 2017)
      • Map of Expedited Partner Therapy, July 2017
        Expedited Partner Therapy - CDC 2015
  • Illinois - Contractor employees must be paid prevailing wages and benefits and work under "conditions prevalent in the location where the work is to be performed." This applies to contracting in the areas of public works, printing, janitorial services, window washing and security guard services. 44 Ill. Adm. Code 1.2560.
  • Massachusetts - Contractors are required to provide their employees wages and benefits comparable to those paid to state employees performing similar services. The wages and benefits must be included in the bid and must be reported to the contracting agency on a quarterly basis. M.G.L.A. Ch. 7 Sec. 54.
  • California, Rhode Island and Washington require prevailing rates or wages for state contractors, but do not specify health coverage in statute.  The District of Columbia, Maryland and San Francisco, CA require paying a living wage.
  • 2011 Pension Legislation  - Pension plans have a major impact on state budget planning and lawmakers continue to address pension fund shortfalls. Read the details in our most recent summary of 2011 proposed legislation. Also check out this NCSL report that summarizes selected state pension and retirement legislation enacted from January to April 30 this year.
  • Illinois: State ends free state retiree health careMore than 80,000 retired government employees will have to start paying for health insurance under legislation Gov. Pat Quinn signed Thursday, ending a major benefit that Illinois had promised to employees.  Future state retirees will also have to pay under the legislation, part of a push to curb state spending on retirement benefits. That applies to roughly 200,000 people who already took government jobs with the understanding that they would not pay insurance premiums after retirement.  St. Louis Today/AP, June 22, 2012.
  • Connecticut: Connecticut Coverage Mandate Bill Could Affect Employers with ERISA Plans - The Connecticut Retirement Security Board has taken another step forward with its implementation plan by introducing legislation creating the Connecticut Retirement Security Program. The mandatory provision was deleted in committee in mid-March after receiving national attention. March 2016.
  • Illinois ends free state retiree health care- St. Louis Today/AP, June 22, 2012
  • Texas's Employees Retirement System has published a 2014 report to the Texas Legislature entitled “The Impact of Offering Alternative Health Insurance Options to State Employees Enrolled in the Texas Employees Group Benefits Program,” noting that “many state employees in low-wage, high-stress, high-turnover jobs do not sign up for dependent coverage because they can’t afford it.” September 2014.
         Sustainability of the State of Texas Group Insurance Program: Report to the 82nd Texas Legislature - Employees Retirement System of Texas, September 2012
  • North Carolina: Senate pushes to eliminate health retirement benefits for teachers and state employees - June 2015
  • Wisconsin: Group Insurance Board Approves Exploring Self-Insurance - no change for 2017 but plans for 2018.- Agency bulletin 2016
  • NASPE. National Association of State Personnel Executives (NASPE), a non-profit organization, was established in 1977 to enhance communication and the exchange of information among personnel executives. NASPE is an affiliate organization of The Council of State Governments. Contact: Leslie Scott, director; (859) 244-8182; lscott@csg.org
  • Transforming Government from the Inside Out: report by the Alliance to Transform Government Operations - 2014
  • National Association of State Retirement Administrators (NASRA) - online resources.
  • 2010 Study of State Employee Health Benefits - Segal & Co. report, Winter 2011.
  • Challenges and Current Practices in State Employee Healthcare - White paper presented by NASPE, July 2010
  • Value-Based Purchasing and Consumer Engagement Strategies in State Employee Health Plans: A Purchaser Guide -published by Academy Health, April 22, 2010
  • NCSL Legislative Summit 2009, Philadelphia Pa.  Panel on "Innovations in Health Insurance: State Employee Programs"  Presenters: Mary Habel, Director - Office of Health Benefits VA Dept. of Human Resource Management; Richard Johnson, Senior Vice President, Public Sector Health Practice Leader, Segal, Washington D.C.
  • State Employee Health In the News: 2009 Proposals; Changes - New NCSL Report with links to state articles. Sept. 2009.
  • 2009 Study of State Employee Health Benefits, SEGAL. - up-to-date comparison of state health insurance plans.
  • Actions and trends by state employee programs for January 2011 plan years, by Milliman.
  • Wisconsin Just the Start in Public Union Fight - FY2012 budget would bar collective bargaining for health benefits, increase employee shares. -NY Times  February 19, 2011
  • Public Pension Plans: The Facts - NCSL, along with other state and local governmental organizations, has released a fact sheet on state and local government pensions. February, 2011
  • "What Public Employee Health Plans Can Do to Improve Health Care Quality: Examples from the States" is a report designed to help state and public employee health plans and other large purchasers make strategic decisions about developing or coordinating quality improvement initiatives. NCSL provided advice to this survey published by The Commonwealth Fund. 2/4/08.