How Can States and Cities Create a Healthy Public Workforce?

As states and localities strive to rein in employee health-care costs, innovations might become the norm.
by | September 19, 2012

In Chattanooga, Tenn., city employees can go to a government-sponsored clinic, get an exam and prescription from a government-sponsored doctor and pick up their prescription from a government-sponsored pharmacy -- all right next to the building where they work.

As states and localities strive to rein in employee health-care costs, that kind of innovation might become the norm. Those costs account for 5 percent of state spending and up to 15 percent of local spending. In recent years, the cost of insuring public employees increased 52 percent, and employees have been picking up the tab, according to Governing health correspondent John Buntin.

Those realities forced Chattanooga to take drastic action, said Mayor Ron Littlefield during Governing's Cost of Government summit in Washington, D.C., Tuesday.

The city is self-insured with 2,500 employees on its rolls and 7,000 people enrolled in its plan. Its spending on health care was increasing by 10 percent annually in 2007, according to Littlefield.

“People tend to select working for government for the benefits," Littlefield said. "I can’t tell you how many times people have told me: 'I come to the government because I was sick and I needed your insurance.”

With costs increasing, something needed to be done. Chattanooga officials looked around and saw private companies setting up on-site clinics for their employees, but the idea hadn't caught on in the public sector. Though initially skeptical, Littlefield decided to give it a try. "It was a radical idea that I quite frankly had my doubts about."

But five years ago, the plan was underway. The city put out requests for primary-care providers to run their clinic. It purchased prescriptions wholesale from pharmaceutical companies, pushing down the price of drugs. It built a gym to encourage employees to engage in physical activity. And it incentivized employees to get or stay healthy by giving them financial breaks for healthy decisions like not smoking.

So far, the results are promising. According to Littlefield, year-to-year health-care spending increases have flatlined for five years, settling at 8.7 percent of the city's $200 million budget (almost half the rate that localities spend on employee health care, on average). "We’ve saved money, and we’ve saved lives, and our employees are happier,” he said.

While cities can build a clinic, states don't have such tangible tools at their disposal. But they can change their policies to encourage a healthier workforce, said Rodriguez. Much like Chattanooga, Rhode Island officials realized a few years ago that they needed to make a change. Employee and retiree health-care costs were swallowing nearly 30 percent of the state budget in 2008 -- on par with well-known high-ticket items like education and Medicaid.

As union contracts expired in 2008, policymakers instituted a new normal that would help stem that trend. For starters, they increased the age that retiree health benefits kick in from 50 to 59 for future retirees. They also asked employees to pay more of their health insurance premiums -- from 8 percent to 20 percent. Like Chattanooga, Rhode Island also sought to promote healthy behavior. The state offered employees credits for participating in wellness activities. For example, workers could earn a $50 credit for getting their blood pressure tested. Obese employees who wanted to go to a nutritionist could have their co-payment waived. Employees could earn up to $500 in credits toward their premiums (which average about $1,325), according to Rodriguez.

The key, Rodriguez said, was bringing all parties to the table and making sure they understood what was at stake.

“People need to understand how expensive things are," she said. "It really needs to all be laid on the table if you’re going to make changes that are difficult for people to accept.”


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