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CCH® BENEFITS — 11/13/09

Cost Of Providing Health Care Coverage Is Much Higher For State And Local Governments Than For Private Industry

from Spencer’s Benefits Reports: The cost of providing health care coverage is much higher for state and local governments than it is for employers in private industry, according to research from the Bureau of Labor Statistics (BLS). The survey, New Health Participation and Access Data from the National Compensation Survey, found that in state and local governments, the average per-employee health care cost was $6,430 in 2008, compared with $3,527 for the private industry.

The BLS provided two reasons for this. First, state and local government employers have higher participation in health care as compared to private industry (78% versus 57%). Second, state and local government employers pay a higher percentage of premiums (89% versus 78%). If these two factors were the only factors, the BLS noted that health care costs would be 56% higher in state and local government than in private industry. However, as these are not the only factors, the BLS found that the actual difference between the annual health care costs of the government and private sectors is about 80%.

The BLS also discussed the differences in its surveys between what the bureau calls “health care plans” and “medical plans.” Health care plans include plans that cover doctor’s visits and hospitalization, as well as plans that only cover dental or vision or prescription drug benefits. The BLS defines a medical plan as one that includes core medical coverage such as doctor’s visits and hospitalization, but does not include dental, vision, or prescription drug benefits. The BLS noted that an employee’s access to health and medical care benefits are virtually identical for all kinds of workers. According to the BLS, this is because when employers offer a health care package, they also normally offer a medical plan. Although they could only offer dental, vision, or prescription drug coverage without offering a medical plan, employers rarely do so.

The BLS found that 60% of all workers participated in at least one health care plan in 2008, but only 56% participated in a medical care plan. The survey found that this difference was even more pronounced among employers with 500 or more employees: 79% of employees participated in a health care plan, while 72% participated in a medical care plan.

The BLS noted that this difference indicates that some employees choose not to enroll in the medical care plan offered by their employer, but do enroll in stand-alone dental and vision plans. A common reason for this, according to the BLS, is that an employee has access to their spouse’s medical care plan, but does not have access to their spouse’s dental or vision plan. Forty-two percent of employees in large firms (more than 500 employees) participated in a stand-alone dental plan, and 16% participated in a stand-alone vision plan. In firms with fewer than 50 employees, 14% of employees participated in a stand-alone dental plan, and only 3% participated in a stand-alone vision plan.

For more information, visit http://www.bls.gov/opub/cwc/cm20091022ar01p1.htm.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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