Increasing insurance costs and the growing burden of public workers' health benefits are placing pressure on states to find innovative ways to make health care more affordable for both public employers and public workers.

The trends are troubling: The gap between what states have pledged to pay for retiree health care and what they can afford to pay was $627 billion in fiscal year 2010, according to the Pew Center on the States. The average cost of insurance per employee for state governments was $496.25 per month in 2012 -- up from $467.25 the year before, according to the National Conference of State Legislatures.

So, what are states doing to rein in these costs? They’re attacking the issue from several angles, according to a new report by the Center for State and Local Government Excellence and North Carolina State University. The report profiles reform efforts in eight states.

Rhode Island

Like most public health advocates, states are recognizing that the best way to keep costs down is to have a healthier population. “As a health plan, and a nation, we need to focus on behavioral change,” said Susan Rodriguez, deputy personnel administrator and director of employee benefits at the Rhode Island Department of Administration, at a panel discussion that served as a basis for the report.

Rhode Island’s basic profile mirrors most other states, but on a smaller scale. It has 14,500 state employees in 42 locations -- 87 percent of whom belong to unions (and thus work under bargaining contracts), and whose average age is approaching 50.

In 2008, the state negotiated with its public employee unions to increase employees’ share of premium costs from 8 percent to 20 percent. But if employees participated in wellness classes or other healthy activities, they could lower what they owed (roughly $1,325) by $500. The state coordinated with United HealthCare and Weight Watchers to provide low-cost programs, and those who attend at least 75 percent of their Weight Watchers classes are reimbursed 50 percent of the cost.

Early indicators are encouraging, Rodriguez said. Sixty-five percent of employees have chosen to work to reduce their health insurance costs, and they're costing the state less than half of what those who chose not to participate have.


Virginia, on the other hand, targeted a very specific problem. In 2008, public workers had more than 500 weight-loss surgeries, such as waist banding or gastric bypass, costing the state $10 million. And, according to state officials, some people were regaining all the weight they lost. So, Virginia implemented a program to promote lifestyle changes that would help workers sustain their weight loss. The cornerstone of the effort was a 24-month coaching program, available on the phone or online, to help post-surgery patients keep the weight off.

So far, 70 percent of patients have reportedly taken advantage of the program and patients who stay with it for at least 75 days have begun to lose weight, according to state assessments. If employees stick with the program for at least a year, the state will refund their co-payments.


Indiana offers no programs for helping its employees live healthier lives, but it does give them financial incentives to do so on their own. For example, by instituting a high-deductible health plan in 2006, employees are given more incentive to stay healthy because they would pay more for any needed health care, said Don Heckler, director of the Indiana State Personnel Department. The state now contributes about 45 percent to the plan’s $5,000 deductible (down from 60 percent, as first conceived).

Only four percent of the state's public workers opted for a high-deductible health plan in 2006, but 91 percent have today. And the reformed plan seems to be having the desired fiscal effort. According to Heckler, costs for the high-deductible plan have risen at nearly half of the rate for traditional plans -- by 3.6 percent annually. The plan may eventually give financial discounts to employees who don't smoke, join a gym, or complete a biometric screening.

The full report from the Center for State and Local Government Excellence is below.