Increases in states' health benefit costs on the decline.

• Author: Harris, Jennifer D.
• Position: Pension and benefits report

Increases in state costs for employee health benefit indemnity plans slowed during the year ended January 1995, posting the smallest increase since 1987. Costs for employee coverage increased 1.7 percent, and costs for employee and family coverage increased 2.0 percent, while the consumer price index (CPI) increased 4.9 percent. Even costs for retirees age 65 and over increased less than the CPI at 3.5 percent. The only category where costs increased more than the CPI was for retirees and their spouses; the increase for this group averaged 5.5 percent. These figures and the data reported in the remainder of this article are excerpted from The Segal Company's 1995 Survey of State Employee Health Benefit Plans.

Per capita amounts budgeted for all health plans, not just indemnity, also have remained fairly steady. The survey asked states to identify current fiscal year budget dollars earmarked for state government employee participation in indemnity plans, preferred provider organizations, health maintenance organizations, and any other medical-related benefits to which states contribute. States were asked to exclude their contributions for retiree coverage, if possible. According to the report of the survey the budgeted amount per capita ranges from less than $2,000 in six states to $4,000 or more in 12 states. Exhibit 1 shows that 10 states had a per capita budget of less than $2,000 in 1993; however, these data are in current dollars which may account for some of the increase in per capita amounts.

The states' health benefit plans covered more than 3.8 million active employees and more than 1.3 million retirees, including state plans available to state college and university, municipal, public school, and/or other groups of public employees. In response to concerns about health care costs, some states have initiated cost management efforts and increased their use of managed care plans.

Cost of Indemnity Plans

The percentage of health care coverage costs being paid by the state changed little from January 1994 to January 1995. As of January 1995, 24 states paid the full cost for employee-only coverage under the most popular indemnity plan, a decline from 25 states in 1994; the number paying 80 percent or more decreased from 43 to 42 states (Exhibit 2). A similar trend can be seen for employee and family coverage.

Exhibit 1 PER CAPITA BUDGET FOR EMPLOYEE HEALTH BENEFIT PLANS Number of states Budgeted amount per capital 1993 1994 1995 Less...