Local Governments Shift Policy as Healthcare Costs Increase

Although health care costs have slowed recently, rising costs over the last decade have prompted many local governments to make changes to their plans and strategies, according to a new MissionSquare Research Institute released today by the Center for State and Local Government Excellence.

Top cost drivers of local government health care increases cited by respondents were:

• increased claim costs (64 percent)
• prescription drugs (57 percent)
• an aging workforce (46 percent)
• insurance company price increases (45 percent)
• federal health care policy (45 percent).

Fifty-seven (57) percent of respondents increased cost sharing of premiums paid by employees and nearly half of respondents reported that their local governments changed the way health insurance is provided. Nineteen (19) percent of those reporting changes shifted employees to a high-deductible plan with a health savings account and 14 percent established a health reimbursement arrangement.

The report includes six case studies describing how local governments have produced savings in their health benefit costs. For example, disease management programs, on-site clinics, dependent eligibility audits, and regular review and rebidding of health care vendor contracts have achieved significant savings. Asheville, North Carolina, reports it has saved $4 for every $1 invested in chronic disease management.

Greater access to comprehensive medical care and related support services for offenders resulted in lower reincarceration rates and total inmate population in Hampden County, Massachusetts.

Local governments report that providing easy access to health services at work sites not only supports employee wellness, but also reduces employee absenteeism and health care costs. With the percentage of employee compensation that goes to health benefits rising over the past 10 years, many local governments have made significant changes to their health benefits.

“Local government programs that contain costs and improve employee health are among the most important strategies,” noted Elizabeth Kellar, president/CEO, MissionSquare Research Institute. “Wellness and disease management programs are offered by a majority of local governments and are valued by employees.”