States consider raising health premiums for their employees
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Tiffany Herring/Axios
Rising health costs are squeezing states' budgets to the point where some are considering raising premiums for hundreds of thousands of teachers and public employees for the first time in more than a decade.
Why it matters: The potential hikes show that even state workers with generous benefits aren't immune from the cost growth that's been facing commercial insurers and federal health programs.
- Better benefits have often made up for lower salaries in public sector jobs — and kept some workers from moving to the private sector.
- But those benefits rely on state dollars, making them an attractive place to cut when states have to balance their budgets, Georgetown researchers noted in a 2023 report.
Driving the news: North Carolina State Treasurer Brad Briner said he'll have no choice but to raise premiums for the nearly 750,000 people insured by the state health plan, which faces a deficit of more than $500 million, Axios Raleigh's Zachery Eanes reported last week.
- It would be the first time North Carolina raised premiums for all its state health plan enrollees in nearly a decade. The state is considering setting premiums differently for employees based on salary.
- South Carolina legislators are also discussing a state budget that would hike premiums for teachers and state employees by about $441 a year. South Carolina hasn't raised premiums for its state health plan in 12 years.
- Florida TaxWatch, a think tank, put out a report last month that suggests increasing state employee health insurance premiums to save the state $446 million annually.
- Other states have already increased premiums for this year: Delaware's 27% increase in premiums for state health plan enrollees kicked in last July.
State of play: Both public and private sector employers are facing increased costs for hospital care and prescription drugs, as well as higher utilization following the COVID-19 pandemic.
- But states — which cover benefits for teachers, public university workers, municipal employees and others — have the added pressure of a particularly tough budget environment this year, said Sabrina Corlette, research professor and co-director of the Georgetown Center on Health Insurance Reforms.
- Congress is contemplating significant cuts to federal Medicaid spending that could put even more pressure on state finances.
- Higher spending on health could require cuts elsewhere, like schools or transportation.
Zoom out: States are also looking at ways to control costs for their employee health plans.
- North Carolina already stopped covering GLP-1 drugs for weight loss last year due to cost concerns. Colorado is seeking to save $17 million by limiting GLP-1 coverage for its 40,000 state employees, the Colorado Sun reported.
- Washington is considering legislation that would set a maximum price for hospital services for state employee plan enrollees at a percentage of Medicare's rate. Oregon previously implemented hospital price caps for its state employee plan.
- Capping state employee health plan payments to hospitals at 200% of Medicare could save an average of $150.2 million per state with little effect on hospital margins, a Brown University study published in December found.
What they're saying: "Many state government plans are not taking advantage of their purchasing power and not getting the best deal that they can in the marketplace. ... They're going to be under more pressure to change as budgets get tighter and as costs rise," Corlette said.
Yes, but: At least one state is sweetening health benefits as a recruitment and retention strategy. Pennsylvania strengthened its health benefits to compete with the private sector, state officials said last year.
