HomeMy WebLinkAboutStaff Report 3502
City of Palo Alto (ID # 3502)
City Council Staff Report
Report Type: Action Items Meeting Date: 2/4/2013
City of Palo Alto Page 1
Council Priority: City Finances
Summary Title: Response to Colleague's Memo: Health Care
Title: Response to Colleague's Memo: Health Care
From: City Manager
Lead Department: Human Resources
Recommendation
Staff recommends that Council receive input and provide guidance on issues related to the
City’s strategy for options in employee health and related benefits. The Council’s direction for
this session anticipated the following purposes:
1. Educate the public and employees about City employee and retiree health plans provided
through CalPERS.
2. Explore benchmark alternatives that other California agencies are pursuing to provide
flexible health plan offerings.
3. Inform the public and employees about the recently enacted Federal health care reform
and how it affects the City of Palo Alto
DRAFT MOTION: I move that City staff review and summarize options for health benefit plans
that may be considered for negotiation with represented employees and discussion with
management employees, including flexible benefit plans. City staff should also review the
continuing viability of the California Government Code Section 22893 20-year graduated benefit
retiree health plan that is currently in place for employees who began City employment as of
2004-2006, depending on bargaining unit, returning with a recommendation to continue in the
plan, amend or eliminate the plan. I move that Council affirm that it has not intended to enact
legislation creating vested contractual rights to health benefits, including any particular type or
level of benefit.
City of Palo Alto Page 2
I further move that City staff review City benefit plans, policies and procedures for compliance
with the Patient Protection and Affordable Care Act (PPACA), bringing back recommendations
to Council for required action. Finally, I move that staff identify best wellness practices, and
health plan benefits that emphasize, teach and reward wellness.
Executive Summary
Health care costs will continue to rise at an estimated rate of 6 to 7% in 2013, for active
employees, retirees and their dependents, consuming a greater portion of the general fund
budget. Containing health care costs will be important for the financial health of the City and
all employees. Providing employees with competitive benefit choices while stabilizing costs
have been the City’s guiding principles. Options for active employees include flexible benefit
plans to manage and share costs while providing greater employee choice in how to spend
benefit dollars. Options for retirees include carefully reviewing the four retiree tiers and
determining a path forward. Implementation of these options may be subject to State law,
CalPERS regulations, and to collective bargaining with represented employee groups.
Background
This report is focused on employee health benefits and is the third and final report to address
the Colleagues’ Memo dated July 2, 2012 in which Council proposed exploring a sustainable
model of employee pension, health and other benefits. Descriptions of health and benefit
offerings are for general information only. In the event of a conflict between this report and
any ordinance, contract or other document establishing or governing benefit plans, the later
shall govern. In addition, nothing in this report or its attachments is intended to create, extend
or be evidence of a vested right to any type or level of benefit. It is the Council’s specific
intention that health and benefit plans such as those discussed in this report do not vest.
Rather, those benefits may be deleted or amended, from time to time, as the Council directs,
subject to the meet and confer procedures established in state law.
City was self-insured.
For many years, Palo Alto provided its active employees and their eligible dependents with City-
paid health care coverage through a self-funded health plan. The City also provided retirees
with City-paid medical coverage, however retirees had to purchase dependent coverage on
their own. In the late 1980s, the cost of providing coverage under this plan increased
dramatically, about 50% over a three-year period, prompting staff to seek lower cost
alternatives. During this same time frame, the health plans provided by CalPERS had only risen
by 6.2% annually. The purchasing power of the CalPERS health plan offered stable pricing and
the flexibility of 12 different plan offerings instead of just one option under the self-funded
City of Palo Alto Page 3
plan. Providing employees with choice and stabilizing cost was the driving philosophy for
choosing CalPERS in 1993.
CalPERS Era
It is important to note that CalPERS health care is governed by the Public Employees Medical
and Hospital Care Act (PEMHCA), under which state employees and retirees (called
“annuitants”) are provided access to group health insurance. The CalPERS Board administers
the program and determines the benefits design, including any co-pays, deductibles, providers,
premiums, and contracts with public agencies. The significance is that, in order to participate,
public agencies must agree to the regulations that include providing contributions to both
active employees and annuitants on an equal basis. This means that the employer is required to
make specified and equal contributions towards premium costs for active employees and
annuitants.
At the time the City joined CalPERS health, it provided fully paid medical insurance for active
employees and dependents, but fully paid retiree insurance only for the individual – not
including dependents. PEMCHA required the City to gradually increase coverage so that
retirees were covered along with dependents to be on an equal basis with active employees.
The City has currently reached an equal contribution for active + dependents and retiree +
dependents. However, as described further below, the City has been negotiating employee
contributions toward medical premiums and no longer pays 100% coverage for employees and
dependents. The retiree contribution currently varies slightly depending on bargaining unit and
hire date.
California Employers’ Retiree Benefit Trust (CERBT)
The CERBT Fund is administered by CalPERS and managed by a separately appointed board for
the purpose of receiving employer contributions that will prefund health and other post-
employment benefit costs for retirees and their beneficiaries. The City elected to participate in
this irrevocable trust by prefunding $29 million of the City’s future retiree health costs during
FY 2008. Currently, the City deposits employee contributions toward medical premiums into
the CERBT. This is currently at $54 million but it still leaves an unfunded liability of
approximately $114 million based on the last actuarial report of June 30, 2011.
CalPERS Health Benefit Program
The CalPERS Health Benefits Program covers approximately 1.3 million lives, making it the
largest employer purchaser of health benefits in California and the second largest employer
purchaser in the nation after the Federal government. Unfortunately, the choice of plans is
limited under PEMHCA. Offerings have shrunk from twelve to six plans since the City joined in
1993. It offers two Health Maintenance Organizations (HMOs), which are available to City
City of Palo Alto Page 4
employees and retirees who live in the plan’s service areas: Blue Shield of California and Kaiser.
CalPERS offers four Preferred Provider Organizations (PPO): PERSCare, PERS Choice, PERS Select
and the Peace Officers Association of California (PORAC, only available to Public Safety dues-
paying members).
CalPERS lacks a very low cost or high-deductible plan for employees who are healthy and do not
have the need for a full-service plan, or those who have limited means and wish to spend less
on medical care. Another limitation under these plans is that the City is not able to collect or
receive aggregate information about the City’s usage or health trends. In order to create a
wellness program as described later in this report, there should be current data available to
establish baselines and measure progress.
Retirement and Medicare.
Within 60 days of retirement, a retiree or their dependent who is 65 or older or who has a
Social Security-qualified disability must contact the Social Security Administration to determine
if they are Medicare eligible and then provide proof of Medicare status to CalPERS. If the retiree
is Medicare-qualified and does not waive coverage, the retiree is responsible for enrolling in a
CalPERS supplement to Medicare plan. The supplement plans are typically lower in cost
because they are billed after Medicare coverage is used. If the retiree fails to complete this
process, CalPERS will terminate coverage. The City did not participate in Medicare prior to
1986, which leaves a small number of employees who may not be eligible to participate in
Medicare. Premiums for active and retiree medical are found in Attachment A.
New Tiers created as Cost control measures
In 2002, CalPERS rates increased by approximately 24%. During negotiations with various
bargaining groups, the City sought to contain the cost of providing health care. First, the
employee groups agreed to eliminate PERSCare – the most expensive plan - as a fully-paid
option. The City’s contribution was then set at 100% of the medical premium up to the second
highest CalPERS plan in the City’s portfolio for both actives and future retirees (employees who
had five years CalPERS service credit were eligible for retiree health care). Then in 2004, the
City began negotiating with employee groups to implement California Government Code
Section 22893, a graduated 20-year benefit schedule. This move from a five-year eligibility
period for fully paid retiree health care to a 20-year graduated eligibility period was designed to
reduce health benefit costs over time by providing a lesser benefit.
In order to receive retiree medical benefits from the City under the new 22893 plan, an
employee must have at least five (5) years of service with City of Palo Alto and more than ten
total years of CalPERS’ agency service credit. The City’s employer contribution for retirement
medical coverage is 50% of the State-set schedule, increasing by 5% for each year of credit to a
City of Palo Alto Page 5
maximum at 20 years of 100% of the weighted average of the four (4) PEMHCA plans with the
highest State enrollment. As long as the City remains enrolled in the 22893 plan, the City does
not have discretion to change this benefit level. Therefore, for employees who have five years’
service with the City and work for 20 years total in the CalPERS system, their retiree health care
is funded at no less than 100% of the average of the four largest PEMCHA plans, and their
dependents are funded at 90%. An example of the graduated eligibility benefit is shown in the
table below:
Credited Years of Service Under 22893, Percent contribution by City of the
weighted average of the four (4) PEMHCA plans with
the highest State enrollment
10 50%
15 75%
20 or more 100%
Limited Alternatives
Demographics of City of Palo Alto retirees, as reported in the actuarial report of June 30, 2011,
show that there are 377 "early retirees", employees who retire before they reach Medicare
eligibility, and 483 retirees over age 65. In all, there are 860 retirees and 844 active participants
in CalPERS Health Care Plans. The City's ratio of early retirees to actives is so high that it is a
barrier to obtaining coverage quotes from the open market, based on input from various
insurance representatives. Early retirees incur higher healthcare costs compared to active
employees, which insurers specify as a reason to charge higher insurance premiums. Medicare-
eligible retirees cost less to insure since Medicare is considered the primary insurance and the
City insurance is considered the secondary insurance coverage. The factor considered in group
underwriting is to not have more than 25% “early retirees”.
Once an agency exits PEMHCA, the agency cannot re-enter for at least five years. If the City
were able to obtain competitive pricing on the open market, a guaranteed contract would be
only one or two years. After that, renewals will be based on loss and claims experience of
current employees and all covered retirees. Therefore, if the alternate insurance carrier raised
rates and the City wished to switch back to CalPERS, it would need to wait for the balance of
the five years, potentially incurring additional costs.
Benchmarking health benefits
City of Palo Alto Page 6
According to the Kaiser Family Foundation in a November 2012 National Employer Health
Benefits Survey of premiums, cost-sharing and coverage at private, public and non-profit
employers, there are important differences in the health plans being offered by employers.
Covered workers at public employers have the smallest worker contributions, 12% for single
coverage and 23% for family coverage, compared with 20% for single coverage and 30% for
family coverage at private employers. The numbers of workers eligible and covered by health
plans varies as well. Among public employers, 75% of workers are covered compared with 59%
in private firms. The number of workers covered by health benefits is the product of how many
are eligible to enroll and how many “take up” or participate in coverage. Public employers have
both a higher eligibility rate (83% versus 75%) and 90% take up coverage (versus 78%). At the
City, 1,041 employees are eligible to enroll in health benefits and of those, 945 take up
coverage, or about 90%. The Kaiser Family Foundation report is at Attachment B.
Fewer California companies offered their workers’ health insurance last year, and the ones that
did charged employees more for their coverage. That's among the findings of an annual
California Employer Health Benefits Survey released Jan. 4, 2012 by the California HealthCare
Foundation, a research and grant-making nonprofit organization. According to the survey,
premiums for employer health insurance plans have risen 153.5% since 2002, a rate that's more
than five times the increase in California's inflation rate.
Reflecting growing health care costs nationwide, in June, 2012 the CalPERS Pension and Health
Benefits Committee (PHBC) recommended a 2013 health care package that would raise overall
premiums by an average 9.6 percent for the Pension Fund’s nearly 1.3 million health program
members. The rate is higher than the 2012 increase of 4.1 percent and translates, on average,
to an additional $30 a month per CalPERS member. "We introduced a number of initiatives
over the past three years to help stabilize rates, but today’s rates reflect the overall continuing
upswing of healthcare costs," said Priya Mathur, Chair of the PHBC, as quoted on the CalPERS
website. "We tried as much as possible to keep the overall increases close to the national
health care cost inflation rate of more than 7 percent projected for next year." One of the
factors affecting the 2013 rate increases was the end of the federal Early Retiree Reinsurance
Program (ERRP) reimbursements under the Affordable Care Act. CalPERS has used more than
$200 million in ERRP funds to offset increases in premiums in past years.
Today, covered active employees in the City choose one of six different health plans available
through PEMHCA, Bay Area Region, at a cost from $9,420 per year for single coverage to
$24,480 per year for family coverage at the second highest plan.
The chart below illustrates the increased costs to the City for health premiums. The
compounded annual growth of healthcare costs from 2002-2013 is 9.6% per year.
City of Palo Alto Page 7
Discussion
2010/2011 Health Committee
In early 2009 City Council-established priorities included negotiating structural changes to
control employee benefit costs by requiring employee contributions to medical premiums for
both actives and retirees. In October 2009 the City and SEIU had reached Impasse in their
bargaining and the City imposed language requiring an employee contribution to medical
premiums as actives and future retirees. The employee contribution amount was phased in
gradually so that ultimately employees pay 10% and the City 90% of the premium cost for the
employee-selected plan amongst those offered by CalPERS, up to the second highest cost plan.
In August 2010 SEIU ratified and City Council adopted a successor Memorandum of Agreement
(MOA) including this language. The City subsequently implemented the same employee
contribution plan for management and professional employees.
After the initial agreement with SEIU to a 90/10 medical contribution by active employees and
future retirees in 2010, labor and the City convened a Health Committee including all
represented and unrepresented units, to further discuss healthcare costs, trends and possible
alternatives to the 90/10 plan. To support this process, the City Council agreed to delay the
implementation of the 90/10 employee contribution. The City Council established criteria for
any alternative to the 90/10 plan, that it provide cost Savings at least as great as 90/10 plan,
that it provide generational equity (all current employees – not just new hires - and future
City of Palo Alto Page 8
retirees must participate in any cost-sharing), and that it reduce volatility in costs of the Annual
Required Contribution.
The Committee proposed to Council that active employees contribute 5% of the medical
premium in the first year of the proposal, 10% thereafter; that employees contribute an
additional percent of their salary into the CERBT but would not contribute to health care once
retired, and that the City would provide 100% paid health care for retirees. Moreover,
employees hired after implementation of Option 12 would participate in 22893 Plan, but be
limited to a City contribution of 90% of second highest Plan. The Council decided against the
Committee’s option and moved forward with the 90/10 plan as originally bargained to insure
structural change consistent with all of their criteria, including a future retiree contribution.
90/10 Negotiation
Following the conclusion of the Health Committee, the City negotiated and reached agreement
to place the same 90/10 employee contribution plan in the firefighters’ union and the fire
managers’ association MOAs. In early 2012 the City reached agreement with the Police Officers’
Association on most contract provisions, including a 10% medical contribution by active
employees, but declared impasse regarding a contribution by future retirees. The parties are
currently in the new Fact-finding process regarding a contribution for future retirees. Once the
Fact-finder issues a non-binding decision, the City Council will consider the decision and make a
final determination on the issue. In July 2012 the City reached Impasse with the Police
Managers’ Association and imposed a 10% medical contribution by employees and future
retirees (no fact-finding was requested).
Currently the City has retirees in four benefit tiers: Tier I - City-paid 100% of all plans including
PersCARE, Tier II - City-paid 100% of the second-highest plan (Blue shield HMO), Tier III - the
22893 plan, and Tier IV - the City paid 90% contribution of the second highest plan (Blue Shield
HMO).
Retiree Medical Tiers Number of Retirees
Tier I 543
Tier II 274
Tier III 5
Tier IV 5
City of Palo Alto Page 9
Labor’s Concern about Inequity
Adopting the 22893 20-year graduated schedule was designed to reduce health benefit costs
over time by providing a lesser benefit and by requiring a longer tenure before employees are
eligible for full retiree health benefit coverage. A few active employees under the 90/10 plan
have expressed concern that in the future, the City benefit may be renegotiated to a lower
employer contribution which would flow to retiree medical as well. The concern is that an
employee who is not under the 22893 Plan could potentially, at some future point, receive a
lower retiree medical contribution than one under the 22893 plan. The retiree medical
contribution provided for under the Section 22893 Plan is set by the Statute which cannot be
changed through collective bargaining at the City of Palo Alto as long as the City remains
enrolled in the plan.
However, historically the City’s contribution toward retiree medical has been higher than the
highest benefit available through the 20-year graduated benefit schedule. Even after the City
reduced the contribution from 100% to 90% of the second highest plan, the City’s contribution
continues to be higher than the 20-year benefit in the graduated 22893 schedule.
Comparison of City Contribution for Retirees under 90/10 VS. CalPERS 22893 Plan
Calendar
Year
Monthly City Contribution to retirees
under 90/10 Plan
Monthly City Contribution to retirees
under the 22893 Plan
Single 2-Party Family Single 2-Party Family
2013 $706 $1,412 $1,836 $622 $1,183 $1,515
2012 $664 $1,329 $1,728 $566 $1,074 $1,382
2011* $647 $1,293 $1,681 $542 $1,030 $1,326
2010 $577 $1,155 $1,505 $493 $936 $1,202
2009 $561 $1,121 $1,457 $478 $909 $1,167
2008 $533 $1,066 $1,386 $471 $886 $1,129
City of Palo Alto Page 10
*Reflects reduced City contribution to non-sworn employees based on City 90/10 Plan
Staff will explore alternatives to the 22893 Plan, returning to Council with a recommendation to
stay in the plan, modify it or withdraw from the plan, subject to collective bargaining.
Federal Health Care Reform
The Patient Protection and Affordable Care Act (PPACA) provides for sweeping changes to
health care in the United States. Among important features, the Act provides:
Coverage of dependents up to age 26
Access to insurance for individuals with pre-existing condition
No lifetime maximum limits
Enhanced annual dollar benefit limits until 2014 and none thereafter
Patient protections such as choice of health care professional and no cost-sharing for
preventive services like immunizations and preventive care screenings
Claims appeals and external review process
Precludes executive-only cave out plans
Early retiree reinsurance program
Tax on excessively rich coverage beginning in 2018 (for coverage that exceeds a
threshold amount)
The individual and employer mandate starting in 2014 is a keystone of the new law. Individuals
are required to maintain minimum coverage or face a tax penalty, coverage being supplied
through insurance exchanges, government sponsored programs, grandfathered health plans or
eligible employer sponsored plans. “Large” employers (defined as more than 50 full time
employees) share accountability in that they must offer “affordable” health care coverage for
95% of full time employees or pay penalties to the IRS, which the City meets. Affordable plans
are defined as coverage valued at less than 60% of plan costs or requires employee to
contribute not more than 9.5% of their income.
Applicability to City Employees
The PPACA will apply to public employers and the City will be required to report health
insurance coverage to the IRS beginning in 2014. Information must be provided regarding
individuals covered, the amount of coverage and the cost-sharing amount. Full time employees
are defined under the law as those working 30 hours or more over a defined period of time.
Palo Alto employs full- and part-time regular employees who have coverage under the CalPERS
health plans. The City also employs hourly workers who are not qualified to enroll in CalPERS
medical, but earn a health care stipend in lieu of insurance coverage. This includes PERS
exempt employees. The City also employs Limited Hourly workers who are typically not
City of Palo Alto Page 11
covered by PERS or other benefits. Limited Hourly are on-call employees without regular
schedules and who are hired to work occasionally for special projects or seasonal work. At
present, the City has 173 Limited Hourly and 121 SEIU Hourly workers available in our system.
Staff will engage in a detailed impact analysis to define the ways in which the City must comply
with the law’s provisions and to ensure that requirements of the law are met. Regulations are
expected concerning how to count the 30-hour employees. It is possible that the City may be
required to offer affordable care to some workers who are not offered health benefits
currently.
Wellness Programs
The City has a newly formed Wellness Committee to encourage health living, stress reduction
and work-life balance. The Committee conducted a survey to define the interests of employees
and their anticipated levels of participation. The survey was initiated at the October 2, 2012
Employee Health & Life Expo, generating over 200 responses, with 80% indicating a desire to
participate in a wellness initiative. The topics which generated the most support are: weight
management, stress reduction, starting physical activity, running and walking groups, healthy
cooking and work/life balance. The committee will continue its work in mapping out best
practices and gathering employee wellness program resources, some of which include Kaiser
Permanente, Healthy Eating Active Living CITIES campaign (HEAL), League of California Cities,
Wells Fargo Insurance Services, ICMA, Strategic Alliance and the American Institute for
Preventive Medicine.
Questions posed in the Colleagues Memo concerning health care
I. Should any part of health benefits vest on retirement?
Absent legislative action to create vested contractual rights, employee benefit programs,
including health benefits for active employees and retirees, are subject to amendment and
change. Under state law governing the CalPERS PEMHCA system, employers may make
changes to benefits for both active employees and retirees, within statutory limits and subject
to collective bargaining where required.
Staff recommends that the Council affirm that it has not intended to enact legislation creating
vested contractual rights to health benefits, including any particular type or level of benefit.
Staff further recommends that the Council continue to structure its health benefits program for
active employees and retirees in a manner that does not create vested contractual rights. This
approach preserves the Council’s legislative discretion to make policy decisions about the type
and level of benefits that the City provides to employees and retirees.
City of Palo Alto Page 12
II. What retirement age would make for a proper transition to Medicare coverage for retiree
healthcare? Should the City encourage changes in state law to give cities the option of setting a
later retirement age?
Generally, an employee is eligible for Medicare if the employee or spouse worked for at least
40 quarters in Medicare-covered employment and is 65 years or older and a citizen or
permanent resident of the United States. Therefore, a retirement age of 65 would ensure that
retirees are eligible for Medicare if they meet the criteria above.
The current City pensions are provided through CalPERS and these schedules allow for
retirement from age 50 to age 63 or later. The City is not able to unilaterally change the
retirement ages of these plans to 65.
III. How do we establish fair criteria for retirees’ contributions to health benefits?
Factors that could be considered include benchmarking similarly situated public and private
agencies, recruitment/retention needs, the City’s budget environment, potential tools to allow
employees to plan and save funds for retiree medical costs during their working years, and
consider a more flexible benefits plan that would allow an employee to opt out of retiree
medical coverage and prioritize other benefit needs.
IV. Should the city move toward fixed health benefit contributions?
The City should consider alternatives such as a flexible health plan, that provide good value and
choice to employees and that help to contain cost inflation. Staff has engaged its benefit
broker, Wells Fargo Insurance Services, to assist in developing options for various flexible plans
that may be discussed with employee groups in the collective bargaining process.
V. Should the city provide greater employee choice in health benefits?
Yes, greater employee choice may be provided by utilizing a flexible health benefit plan, which
could include additional options for employees based on their own needs. As long as the City
provides health benefits through PEMHCA, however, the City is limited to the health plans
offered by CalPERS.
VI. Can and should the city structure and finance an optional program to buy out existing post-
employment obligations?
City of Palo Alto Page 13
A small number of jurisdictions have adopted programs to “buy out” post-employment
obligations. These programs are substantial undertakings involving complex financial and legal
considerations, extensive negotiations with labor, individuals and other stakeholders, and
significant financial investment. In the short and mid-term, staff recommends focusing on
other cost-containment and modernization strategies discussed in this report. Staff can return
to Council following these efforts for further direction whether to invest significant resources to
explore options for a “buy out” program.
VII. Are there alternative considerations that merit discussion on how to accomplish a healthy
workplace and foster job satisfaction and cost savings through non-economic benefits?
Establishing a healthy workplace is a viable program to explore through the new Wellness
Committee. For example, through its Healthy Workforce initiative, Kaiser Permanente supports
the health and well-being of employees by promoting healthy lifestyles with a focus on healthy
eating and physical activity — especially walking.
Resource Impact
There is no immediate resource impact from this report. It is expected, however, that as the
City explores the impacts from PPACA and flexible health plans, staff will have more concrete
financial information to share with Council.
Attachments:
Attachment A Health Premiums From CalPERS (PDF)
Attachment B Kaiser Family Foundation Article (PDF)
7/10/12
Monthly Premiums for Contracting Agencies
Bay Area Region
Alameda, Amadoft Contra Costa, Marin, Napa. Nevada, San FntDCisco, Sun Joaquin,
San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Sutter; Yolo,)'uba
3
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I(youam "*' Employee in SM Plan Employee In 8M Pian
1 e Code 2+ In e Code
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•
< Back '0 8n"pollol Index
premiums, Cost-Sharing and Coverage at Public, Private and Non .. Profit Employers:
A View from the 2012 Emplover Health Benefit Survey
November 2012
There are Important differences in the legal organization and mission of different employers in the United States. Tn addition
to collectlng information about premiums and employee cOst Sharing, the 2012 Employer Health BerJefits Survey asked
respondents to characterize their ownership structure. Respondents were asked to describe their organization as either a
"private firm, Indudlng pubHcally traded compan.es and privately owned bUs;nesses," "a public firm, such as a state or local
government agercy," or as a "non-profit, 5l:c.n as a 501(c)(3). "'[lJ Sixty-one perce:>t of workers covered by a health plan are
employed by a private ((rm, 17% ar'e employed by a public employer, ana 22% are employed by a non-~rofjt employer.[2]
Since public and non-proht employers tend to have more workers on average, a larger portion of the tOtal number of
employers is comprisea of private firms.
There are important differences in the heaith plans being offered by employers in each of the t,lJree ownership categories. On
average, '1-lOrkers covered by health plars at privately owned firms are "equired to pay higher premium contributions for both
single and family coverage. At the same time, these workers face higher cost-sharing requirements when they access
services,
Premiums and Worker Contributions
For both sing'e a'1d family coverage, covered workers at private firms are enrolled Ip plans wi:h less expensive premiums ($5/297 and $15,199, annually) than covered workerS in the two other ownership categorle!L The average premium 15 made
up of bott' a worker contribution and an employer contribution. While, on average, covered worl,(ers are covered by plans with
less expensive premIums at private fi;'ms, they are responsib;e for a larger share of the total premium than their counterparts
at pubUc and non-profit employers, On average, the emp!oyer con~rib:..ltlon for covered workers enro,led in family coverage at
private emp!oyers is $10,704, less than the average public employer contribution ($12,381) a'lc non-profit emp!oyer
contribution ($12,697). Covered workers at public empioyers have the smallest worker contribut:ons; $3,368 for family
coverage and $698 for single coverage.
http://www.kff.org/insurance/snapshotlchcm112012oth.cfm 1/24/2013
•
Snapshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Firm ... Page 2 of II •
Worker and Employer Premium Contributions for Family
Coverage, by Firm Ownership .Category, 2012
$-IS,roo .
S10,000 • .,000
PrivDte Employers
• E"stJm3t~ is o;'Idti$balty dtfe~ent from r:rms not in the indiCated O\\'rJf!l'ihfp tMe;;)Ol"y (p<.05).
SiOlJrte: ¥,aiser/HRET Surveyor Emp.\oyj;!f-Sponsored Health [Ielwrlt .. , 2012.
All EtnptoVers
• Work.er Contrfbution
"Employer Contribullon
Worker and Employer Premium Contributions for Single
Coverage, by Firm OWnership Catego.ry, 2012
$7,UOO
S5,9"!J1. $6~103"
;~(JOO -$5,615 $5,297"'
SSJoJii
$",,000
$),000
$4000
11.000
$0
Private I:'rnployers pubUc Employers Non-PtOfit EIn~IOYers AJI Employers
_'t E"stmate,iS S.tati!.tl:.dUy dffE'rer.t fro!'fl firms: not in ttle indicated O\\'rH~r..hI? category (p<.05).
Source: 1C;~rfl'lRET SOrveyofempbyef-Spor\soredHea~h 8eneilts, -2012,
http://www.kff.org/insurance/snapshotlchcmI12012oth.cfm
_Worker Conbibution
8En.ployerContributlDn
1124/2013
Snapshots: Premiums, Cost-Sharing and Coverage at Public. Private and Non-Profit Firm ... Page 3 of 11 . .
There are important djfFerences In premium contributions when comparing types of employers within size categories. Covered
workers at private employers are covered by less expensive family premiums both when the worker is at a small employer
($14,595) (3-199 workers) or a large employer ($15,544) (200 or more workers) when compared to employers in other
ownership categories. In addition, covered workers at private employers receive smaller employer premium contributions then
covered workers in the other ownership types at both small and large employers. Workers at public employers contribute the
smallest amount to their premium at both small ($2,894) and large employers ($3,462).
Worker and Employer Premium Contributions for Family
Coverag.e, by Firm OWn.ership Category and Firm Size, 2012
Small Firms {3-199 Workers}
Prlvirte
Enlptoyers
Pubf1c:
EJnplovetS
Noo:Profit
EmployerB
OJ: f51.11nOl'te IS rotatblxaty t1!fferei'lt trOln nrms not in the lflo[aC£d ownership category Ip<.05). .
SoIJ~-E; ~r/HRET Survevof Errlpbyer·Sponsored Hel'It,,, ~oellts, 20l2.
Large Firms
(200 or More Workers)
Private
Employers
Public Emptoyers NOn~Prant E"cnplOyets
IIWQr1<er ConbibuHon
8 Employel"ContrlbuUolJ
On average covered workers at public emplovers are responsible for a smaller portion of the premium than covered workers
employed in the other ownership categories. Covered workers at public employers contribute 12% of the cost of single
coverage and 23% of the cost of family coverage. Conversely, covered workers at private employers contribute a larger
percentage of the premium than covered workers In the other ownerships types; workers at private em plovers contribute 20%
of the premium for single coverage and 30% of the premium for family coverage.
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Snapshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Firm ... Page 4 of 11
Average Percentage of Premium Paid by Covered Workers for
Single and Family Coverage by Firm Ownership Category, 2012
3SO{Q • I',i.$ Employe ...
• PubUc Employers
250/0
20%
15%
10"10
SOlo
0% i
[J Non-Profit I'n,ploye1'5
.1\11 Employers
"[.$I]n'late is' statistr.ay different fr'Ofn firms not Ii"! theindl::ated Q\YT\e~hfJ ClltegOf'{{P<.OS) •
.sotJ~; K<nsei/HRET SliNey of Empbyer-Sponsored He;t!(h Beneflt:s, 2012',
FBf'nlly Covemge
There is significant variation in workers' premium contributions within employer QWr'lershiD type. A majority of covered
workers at private employers are responsible for more than a quarter of the Family premium (57%). Conversely, over half of
covered workers at public and non~profit employers are enrolled in plans in which they contribute a quarter or less of the
family premium.
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~nap5hots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Firm ... Page 5 of II
Distribution of Percentage of Premium Paid by Covered Workers for Familvand Single Coverage, bV Firm OWnership Category, 2012
iU
7&
«""P!lllils empIOl"'"
·::0~S 1% ,
i. il 'r .••• J .... l!~tf~r-? , ..
, 1 j
An ~IS .~I! 1~,lj.~ •....•..•.• liIiAill., • .: .•.• ~.~ .•.. I!i.~~llI'\il'~'?3"·$r--!lI ... I ... Il .... i!Il .• ~!!!.~~~i~,: •.•.. I ....... ,:,
0% '0"" 10"'"'
Employee Cost: Sharing
_"rcatElrl'ban
1)OJb, k>~ ttl ~n
or ell-U31 to
~% t3Greatertf\an
25Ofol less thi!lfl or equal to 50% I Grnahlr Ib ... 50%
In addition to being respO;)sible for a targer proport,on of premium costs, workers at private employers face hlgner cost
sharing requirements when the" access services,
A genera! annual deductible is an amount that must be pilla by the enrollee before all or most services are covered by their
health plan. On average, workers at private employers face higher deductlbles before services are covered: 41% of covered
workers at private employers face a deductIble of a $1 /000 or more compared to 15% at pubUc emplo'r'crs ard 26% at non
proflts, Seventeen percent of coverEd v.orkers at private employers are required to meet a deductible of $2,000 dollars or
more.
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;;;napshot~: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Firm ... Page 6 of 11
Percentage of Covered Workers Enrolled in a Plan with a High General Annual Deductible for Single Coverbge, by Firm OWnership Category, !012
"p_ &""10,.",, ...... j
500/°1
40% . 41%-
B""flIic 1:i.J>~
"'Noo'PmfltEmployers:
_Ali Employq:rs
3fJ% -I
20% ..
11l%
6%
Percentage·of COvered Workers with FI
Deductible ot $1,000 or Moro
P.,.",ntil!)O of C:01l1!1'ed Worlcers Willi • Deductible of p.OOO.r MO'E!
:.;; E'-'S1I'r'I'wte is ~~ ::fIktent from ftrm .. y,. 3 tlirer'ertt oWn«'Si-~ ~ (.p<..05).
flt\te: .1Oe3e'estmat-o..s iOCRJde ,;,.'Orb!rs'f.flroied in HDHPJ50 dnd otllef pi:m ~ 6ecau~ we. dOflot c~ 1nformatbn on ttle atlribubls of' l)J1l\leli~ pan$. to be conservative, Wi!' assumed thatv.'O~!i in cnnyt;nfnnaol p\lt~ 00 not havca dedu<~ ofUiJOO or morc. S«zluit,()f the
bw ~f\fol'rneflt i¥ aJn'ltent:onat ~lS, :tp~ltTlp;;ct of~. ';fImlmf,lUO/"l1S Ji1/l1lma:. AV~ ger,eral eni]~ ~1U'l j:Mn d.ed~ for PPO$. PO$ ptmS, and HOHP'/SOs-:<ire for irt-fietwOfk ,~.
source:,KM,;&r/HRtr survey-of Employer~s;pon:rored Health lkl1l'!HI>. 2012.
In addition to the general annual deductible, workers are often required to pay a coinsurance or copay for visits with health
care professionals. Covered workers at private employers are more likely to be required to pay a coinsurance rate and less
likely to pay a copay for primary and specialist office visits than workers at other types of employers, Depending on the
COinsurance rate and whether the cost~5haring formula includes minimums and maximums, coinsurance rates often place a
greater financial burden on workers for high cost services than a capay,
In Addition to Any General Annual Pfon Deductible, Percentage of Covered Workars with the
Following Types. of Cost Sharing for Physician Office Visits am.I Emergency Room Visits, by Firm Ownership Cot.gory, 21)12
C::Jpay Coinsurance No Cost Olher Type of
iPrimar'/ Carn
Shs7'ing Coat Sharing
Pr~ia~e Employers 69%"' 21%"' 9% 1%
P .Jtdc Employers 79% 12%' 5% 4%
Non-Profit Employers 8'0%11 10%' 5% 2%
All Employers 7:1'li, 17% S% 2'11
Soecia/ist Ca ...
Private Employers 69%' 22%" 9%' 1%
P~lbljc Empoyers :"6% 15% 4% 4%
Non-Profit Empl·oyers &i%A 13%' 5% 2%
AI! Employers 13% !ll''> 711 1%
IEmemonev Room Visi ..
Private Empk.l}'Bfs 5,% 25%~ 9% 11%
PublJc Employers 54% 21% 5% 19%
Nor-Profit Employers 67"'" .~ 13%" 10% 10%
All Employers 58% 22% 9% 12'11
I
* Estimate is statistically different from firms not in the indicated owner1inip category (p<JJ5j
Source: KaiseriHRET Surv?y of Emplo}'er~pansOl'~ Health Benefits. 2012
Among covered workers who face copays for office visits or emergency room VISIts In addItion to the genera! annual
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~napshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Firm ... Page 7 of 11
deductible, workers at private employers face higher average copays than their counterparts at non-profit and public
employers. On average, covered workers at private employers have copays of $24 for primary care office visits, $35 for
specialist visits, and $124 for emergency room visits.
Among Cove-red Workers with Copayme-nts andJor CoinsUrHnce for In-
Ne-twork Physician Office and Emergency Room Visits, Ave-rage
Copoyments nnd Coinsurance, by Firm Ownership Cote-gory, 2012
Average Average Copay C-oinsurance
Clfflce Visits
Private Firms S24' 19%
Public Firms 21-17
Non-Profit Firms 21' 18
All Firms $23 1B%
Specialist Office Visits
Private Firms $35* 19%*
Public Firms 30 17
Non-Profit Firms 31' 17 All Firms $33 19%
Emeraencv Room Vls/ts
Private Firms $1.24' 18%
Public Firms 108 1£ . Non-Profit Firms 108' 1a All Firms $118 11111
" Estimate is statistically different from firms not in the indicated ownership
category (p<.05}.
Source: KaiserJHRET Survey of Employer-Sponsored Health Benefits, 2012.
Coverage and Enrollment
The number of workers eligible and covered by an employer's health benefits varies by ownership category. Among public
employers offering health benefits, 75% of workers are covered by their firm's health beneFits plan, more than the 59% at
private employers and 63% at non-profit employers. The number of workers covered by health benefits is the product of how
many workers are eligible to enroll and how many "take-up" or participate in that coverage. Public employers have both a
higher eligibility rate and a higher take-up rate. Eighty-three percent of workers at public employers that offer coverage are
eligible to enroll. Among workers eligible to participate in health benefits, 90% of cov~red workers at public employers take-up
coverage, signiFicantly more than the 78% that take-up at private employers and the 83% that take-up at non-profit?
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Snapshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Firm ... Page 8 of II
EligibiUlY, Take~UpRate, and Coverage in Firms Offering
Health Benefits, bV Firm Ownership Category, 2012
QPrflJate Empbye'l''S
8J%*
III P\lbllt-En\plf7YCr.i
.Non~ltmfft -Empfoyen;
Take-up Rale '0%'
0 .. 20% '0% 00%
1; E5t/male is st!ustc<Jly afferent from Inns '"' a dUe-rent OWl)er~l1'p CiltegOry (p<))5).
HDte: The take'up rate is wi:1Jhtrd lyY thO' r.umber of workers-eiJib1e for the: r!fm'& heath Ix!neft3. The elQtMfV rate and ('O\'I'r,,!)e' rare ale ~ed
by tl1e number or woiXers atthe,j?rm.
SOurre: l(OOer{HRET ,SlJfVeyof Empbyer·Sponsorect Hf.alfth Benefil:s:, 2012
Covered workers at private employers are more likely to be enrolled in a high-deductible health plan with either a health
reimbursement arrar.gement (HRA) or a health savings account (HSA) compared to covered workers in other ownership
categories. Similarly, covered workers at public employers are more likely to be enrolled in a PPO plan.
Distribution of Health Plan Enrollment for Covered Workers, by Firm Ownership Category, 2012
Publ1c EmploVl'.r,:I: I!I Coo\l~I\Uooal
.IIMO
Non·proflt-Bn}Jl~ers
All Employers
0% 1(1% 20% 30% 40% 50% 60% 10% 90% 90% 100%
iii E~te-if statl\ik.aiy dnelEnt tromJ!fl11$ tfl a afferent 1JW1leffll"p ,:a'te!iory(p.o;_O~)..
"pro
.P05
GHDHP/SO
Note; HMO is-h&llh rriahtenllnce onja.t\iZ<'!lbn, pPQ'i<;j pre4eut\f ~r(J"ije[ or.g~lilialiorl. POS s pC>t'lt-()f-s.erlllc:r pl;Jn. HDHPfSO Is" h~deductible hei!lh ptI!'l wlh a -5aVirlt!5 tJPC',On,
Source: KalW"lHRE:r surveyor €mpbyer-Sponsor€o Heath ~oo:(s, Z012,
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:;lnapshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Finn ... Page 9 of II
Other Notes
There are other Important differences In the health plan~ being offered at private, public and non-profit employers. Among
large firms offering health benefits, a significantly greater percentage of public employers (63%) offer retiree benefits
compared to private (18%) or non-profit employers (23%).
Among All Large Firms (100 or More Workers) Offering Health
Benefits to Active Workers, Percentage of Firms Offering
Retiree Health Benefits, by Firm Ownership Category, 2012
700/0
63%*
50%
50%
4IJ%
300iIJ
10% .18%*
100..11
0%
Prfvate Employers Public: fmploycrs Non~Proflt EmploY~15
.j Estimate i$ sta~[tqJy dtreW1{ from fu'ms in " ditfetent ownersf'fp ategO!y {p..-:.OS).
Source: Kalser!HRET SUrvey of EmJ)loyer-Sponsored ~Iea!i:h 13ener.ts, 2012.
All [,"ploye",
In order to reduce health costs and improve employees' health, many employers offer wellness programs. The survey asks
employers who offer health benefits if they offer one of eight specified health programs or another unspecified program. A
significantly higher proportion of public employers offer at least one of the specified wellness programs or an unspecified
program (96%). Public employers are more likely to offer weight loss programs (62%) or web~based resources for healthy
living (72%) than employers in other ownership categories.
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Snapshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Fir... Page lO,of II
Among Finns Offering Health Benefits, Percentage Offering a Palti~ular WeI/ness Progtam to Their Employees, by Finn Ownership Clltegory,lOi2
lltMtyre (I' Oeha'llOl'.ll
(.ru(hlnlj'
wel.I1II!6!o flewslcttllr
w~·b~ R~IXU!!f for Hooltf:lylMlIg
Sm<*lng ~<loon PrcorMl
OfferaUilitSl: One $mc~dw~rn~
P10Q""'I1, tnckidlng cttt@F
"EW'lut-e i:l $t.lt~i dffEI~nt from f(rrll '" li dft~e.,t QW~E';l\", (~~.~r; (c< .. O~i
.Non-Profit t:mp,byen
u:Public EmpIDYQ~
erepiiv",te Eillpklyen;
"'1.~
. Now: 61% I}f:rwat~tiI/l'3$]$j ~hl!\' oifHl!cI;H iI:sIS'. ')I'e ~elifilod '..,~e,!lo!o~r"Qrl:!1 ~IOJl'I~r;lOU';~·. 9~ cfp\~lkfl~'S aMI 69% c! 1i(J!1.~I'CIiu;, i1\}~T~(\(!(fi1erf"1Jlj1! hll<lith Ifxa~~tlon tha;tmflASlJfi!!J ~Il emp~ ... ec·s rISk ~rtor! !;\.Ida <I~ (h~~~t,)rct b:Oed ~r~sw'c, ltrm, ~nd r.,"lJ~n. ,·"""er(eI'lt 0' rr'll~ -:,ojO;:;ri;.IO 'o)tooi" $<I'oj thil1:·ti!3)' bad ,m ~fIl'e as~"ti!tu:" Df')9!iim~EAr;iY1ti 5% sw tll~t t!t~~ cflB!"~Q fu W'!Crt~.
5001':~: 1(;a~f/HR:fT 5utw·ya(E"I"Pb~r-.iflMiO~d tI·~l)'-loj tI~ ... cf"~, ZOl2.
Conclusion
It is important to recognize that there Is significant variation in the types of health plans being offered by employers within
each of the ownership categories, On average, workers at private employers face higher employee premium contributions and
cost sharing than their counterparts at publiC and non-profit employers, Even when comparing employers within large and
small size categories, covered workers at public employers are responsible for a smaller portion of their coverage than workers
at private employers,
Methods
The Employer Health Benefits Survey is a national probability survey of over 2,100 private and non-federal public employers
with three or more employees, Non-federal firms are sampled from the 2007 U,S, Census of Governments and private sector
firms are sampled by Survey Sampling Incorporated (ssI) which obtains information from Dun and Bradstreet, Employer
industry classifications used in sampling are based on a firm's primary SIC code. Employer ownership categories are defined
by a survey question asking respondents to characterize their organization as a public, private, or non-profit
employer, Weights are post stratified to industrYi Size and regional counts provided by the Census Bureau's Statistics of U,S,
Businesses and the Census of Governments, Interviews are conducted with HR directors and office managers about the firm's
HMO, PPO, POs, and HDHPjsO plan with the largest enrollment. For more information on the survey design and sampling
methodology of the Employer Health Benefits Survey, see the Survey Design and Methods Section of the 2012 report [3]
Statistical testing in thiS snapshot compares firms in one ownership category against all firms not in the indicated category at
an alpha level of 0,05,
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Snapshots: Premiums, Cost-Sharing and Coverage at Public, Private and Non-Profit Fir... Page II of II
Distribution of Employers and Workers Covered by Health
Benefits, by Firm Ownership Category, 2012
100%
80%
600/,
20%
Co'ltered Workers EmpJol'Qr-5
Gl Nor>-Prolit Employ ....
• Public Employern
III Private, Employers
N9te: Oat., 1I~ ba:sed 00 a ,S.peCla! rota request to the u.s. CenSlJ'5 8ure-_)u for their most recent (2009) Stllr~;t:'\':s or U.s., Bi.lsli1es~$ d<lta OIl prtYate
~ttor t~ S't:lte ;,hd btal -government data-are from the CenSUs 6Ur~au>s 2007 CenSlJS of' GO'/eIYl[J'!ellts. ThE ~1i\¢rt9 frame mdodes prrJ3(t> and
non·rfodff.,1f f,rm~ Worn OlOl't-than t~ fmpby,~e.o;. ('".overed workers. rerNS to the proporton of'WOIkNS lit a I'm 'Hho,;.,re coWlred t)y mw frm~ Iw.a'th pia".
SUur~:~/HRET .slJ(veyot'Employer·~~redHe-.C!fth 6enefrtl>, 2012,
Notes:
This sI"!apshot was prepared by Matthew Rae, Nirmita Panchal, a"d Gary Claxton of the Kaiser Family Foundation's
Health Care Marketplace Project.
1. Less than 0,05% of respondents selected "don't kr'!Ow" and were imputed using a hotdeck approach.
2, Data are based on a special data request to the U.S. Census Bureau for their most recent (2009) StatistiCS of U.S.
Businesses data on private sector firms. State and local government data are from the Census Bureau's 2007 Census
of Governments.
3. The full report of the 2012 Kaiser/HRET Survey of Employer-Sponsored Health Benefits IS available at
http://wwwkrf.orq/insurance/B345.am
< aack 10 Snapshot Index
Information provided by the Health Care Marketplace Project
Publish Date: 2012-11-28
Keywolds
;;~m """"-,,
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