Who Has Better Healthcare Coverage: Private or Municipal Employees?
Amy Gallagher, GoLocalProv Business/Health Expert
Who Has Better Healthcare Coverage: Private or Municipal Employees?
Richer Benefits…For Less
The majority of Rhode Island’s municipalities offer much richer benefits (lower copays and no deductibles) than the private sector (higher copays and an average of a $1,000 deductible), according to United Benefits Advisors Annual 2011 Benefits Survey.
But despite richer benefits, municipal employees contribute less toward premium – just 5% to 20% overall compared to 35% for individuals and 51% for families for comparable coverage in the private sector. Why?
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTLack of Competition Keeps Coverage Intact
Throughout the state, many collective bargaining agreements specify the carrier name, product type and benefit copays. In fact, most municipalities have banned together to purchase from one insurance carrier – Blue Cross Blue Shield of Rhode Island – to lower administrative costs
Many unions don’t want to change the coverage, and their collective bargaining agreements support that approach. But while these agreements protect their members, they’re not doing the municipalities any favors, making it impossible for cities and towns to seek competitive bids from other insurers.
Cost Crisis Looming
Continued rich benefits packages – and their associated costs – are predicted to be the next pension crisis in Rhode Island. And it’s likely to happen sooner rather than later.
Most municipalities renew their coverage in July, so many union collective bargaining arrangements terminate on June 30th. During the coming months, municipal management will be negotiating benefits for the next two to three years.
But healthcare costs rise every year, giving cities and towns no flexibility to negotiate new terms as increases occur. Added stress will be placed on local budgets, which will be passed on to taxpayers to contribute needed revenue.
HSAs to the Rescue?
Municipalities have not kept pace with the trend of consumer-directed healthcare. Over the past six years, many private employers adopted Health Reimbursement Arrangements, Health Savings Accounts and wellness programs to save money, avoid overinsurance and empower employees in their healthcare decisions.
Recently, under pressure to save money, many local unions have expressed an interest in high deductible healthplans with an HSA. The appeal? Significant savings on insurance premiums, tax-free benefits and portability over one’s life. However, unions who expect the cities and towns to fund the HSA to the full deductible for employees will erode any savings realized by the municipality. Funding at 100% also eliminates the consumer engagement aspect of these plans, so the approach may not result in behavior change that can slow trend in the long term.
As the July 1 renewal date nears, the time to rein in costs is now. But will municipal managers and union leaders be able to come to terms? Or will health insurance put Rhode Island back on the national scene for yet another debt crisis?
Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.
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