State Government Employee Health Benefits in the United States

• Date: 01 March 2007
• Author: Christopher G. Reddick,Jerrell D. Coggburn
• DOI: 10.1177/0734371X06291427
• Published date: 01 March 2007
• Subject Matter: Articles

5

Review of Public Personnel

Administration

Volume 27 Number 1

March 2007 5-20

© 2007 Sage Publications

10.1177/0734371X06291427

http://roppa.sagepub.com

hosted at

http://online.sagepub.com

State Government Employee

Health Benefits in the

United States

Choices and Effectiveness

Christopher G. Reddick

Jerrell D. Coggburn

University of Texas at San Antonio

Employer-sponsored health benefits are an important but relatively understudied area

in public sector human resource management. This study examines the choices that

state governments make in the United States and the views of state human resource

directors (HRD) on health benefits. Survey data, gathered from state HRDs in fall 2005,

reveal several important findings: In terms of choices, the most common plan offered

is the preferred provider organization (PPO); less than one third of states offer health

benefits to nontraditional partners; health benefits improve employee satisfaction and

the performance of the state government; and cost to the state government is the most

important factor that affects choice of plan. There is not a high level of agreement on

what strategies state government should pursue to reduce costs of health benefits; how-

ever, there is some agreement that premiums will be increasing in the near future.

Keywords: employee benefits; health plans; employee satisfaction; state government;

survey research

Health benefits in the United States have been increasingly focused on by the

media because of the high costs to employer and employee. In 2005, premiums

for family coverage increased 9.2%, an increase that exceeds the overall rate of infla-

tion by nearly 6% and the increase in workers’ earnings by more than 6%. Since 2000,

the cost of health insurance has increased by 73% (Gabel et al., 2005). Even as their

costs escalate, benefits are being recognized as a critical component of the total com-

pensation package for employees and have been said to attract and retain employees.

The importance of benefits to compensation is pronounced in the public sector

because of the politics of public employment, with benefits increases being less vis-

ible, hence more acceptable, than wage increases (Moore, 1991). Competitive

employee benefits are integral to public organizations’ human resource (HR) goals

and, ultimately, to organizational performance (Coggburn & Daley, 2005).

Despite the importance attached to health benefits, it is surprising that there is little

recent literature on the subject in the public HR literature (Daley, 1993; Perry & Cayer,

1997, 1998, 1999; Reddick, 2005; Streib, 1996a, 1996b). The current study attempts

6 Review of Public Personnel Administration

to help address this deficiency by focusing on employee health benefits in state gov-

ernments in the United States. Using a survey of state HR directors’ (HRD) opinions,

it provides a descriptive survey analysis of state government choices of health benefits.

The article focuses on state government to provide an analysis of employee health

benefits because of their wide diversity in political, economic, and social conditions.

Through an examination of what health plans state governments offer, the current

study maps out some of the current trends in public employee health benefits in the

United States. The primary difference between health benefits offered by government

and the private sector is the greater likelihood that state and local governments offer

health benefits to their employees. For example, health insurance is offered by all state

governments and by 99.5% of local governments (Moulder, 2003) but by only 62% of

all firms nationally (Kaiser Family Foundation, 2002). The survey and analysis focus

on HRDs because they are key decision makers in employee health benefits. As such,

they not only influence plan choices and design but also possess informed opinions

about the states’ experiences with these plans.

To examine choices of health benefits and HRDs’views on effectiveness of benefits,

this article is divided into several sections. The first section examines the literature on

public employee health benefits. The following section examines the construction and

administration of the survey instrument, including a discussion of some of the charac-

teristics of HRDs. Next, the survey results are presented, including the types of health

plans offered, satisfaction with health benefits, factors that affect choice of plan, the

availability of health programs, use of online health information, cost-containment

strategies, and the likelihood of making changes to health benefits. The final section

identifies some significant trends in state employee health benefits, addresses limita-

tions of this article, and presents avenues for future work.

Literature On Choice and Effectiveness

In Employee Health Benefits

There are several choices of health care plans that employers offer to their

employees. This is important because increased consumer choice of health plans

may result in improved employee satisfaction, increased access to care, and,ulti-

mately, greater enrollment by employees (Steinberg-Schone & Cooper, 2001).

During the last quarter of the 20th century, most public and private employers

who offered health benefits migrated from conventional plans toward managed care

plans in an effort to contain their rising health care costs (Ford, 2002). In conven-

tional health plans, sometimes called indemnity insurance, there are no preferred

provider networks, and an employee faces the same cost sharing regardless of

which physician he or she chooses. Typically, the employee faces a deductible

and coinsurance above the deductible. Conventional insurance is the oldest form of

employer-sponsored health insurance and was introduced when cost control was not

a predominant issue for governments. With the rise in health care costs, especially