Costs soaring for providing free insurance for Iowa state employees

Iowa is one of only six states to offer the option of free health insuranceto state government employees and their families. And the state’s cost toprovide health insurance has increased more than 300 percent — $176 million— in 10 years, a Des Moines Register analysis shows.

Iowa’s state employees also pay substantially lower out-of-pocket healthinsurance costs, such as deductibles and office co-payments, thanprivate-sector workers, according to an independent study of nearly 900businesses and government employers conducted this year by David P. Lind &Associates of Clive.

Government employees at all levels in Iowa, including those working forschools and local governments, pay maximum out-of-pocket costs that are abouthalf the amount paid by workers in private businesses, Lind’s survey found.That represents a possible annual savings of $1,000 or more for eachemployee.

The combination of higher benefit costs and lower state revenue has promptedcalls for change.

Rep. Scott Raecker of Urbandale, the top-ranking Republican on the HouseAppropriations Committee, has proposed that state employees contribute $50 amonth for health care premiums.

As of July 1, 84 percent of the 28,522 state employees enrolled in healthinsurance through their jobs participated in plans for which they paid nopremiums, according to the Iowa Department of Management. That number includesemployees in all branches of state government.

The five other states that offer at least some of their employees no-premiumhealth insurance are Arkansas, Delaware, North Dakota, Oklahoma and Oregon.

Iowa offers employees a variety of insurance plans. Generally, the 16percent of state employees who pay part of their premium costs have chosen morecomprehensive insurance, which covers more medical conditions, such as chronicillnesses, or pays a greater percentage of total claims.

“We ask indigent Iowans and those living under the poverty level tocontribute up to $40 a month for their state-sponsored health plan, yet, inmany cases, do not ask state employees to contribute anything,” Raecker said.“It’s not an easy thing to do, but I think most Iowans would appreciate thefact that state employees would contribute to their health care plan.”

The proposal is unlikely to go anywhere in the coming legislative session.Democrats occupy the governor’s office and hold majorities in both the IowaHouse and Senate.

House Majority Leader Kevin McCarthy, D-Des Moines, called Republicans’push to cut state employee benefits “a turkey.”

Benefits were negotiated with unions in legally binding contracts, andcutting them would be unfair, McCarthy said.

He agreed that medical costs are “out of control,” but said the issueneeds to be resolved through national reform.

Several other states are looking at how to rein in health insurancecosts.

Officials in Alabama, California, Hawaii, Illinois, Maine and Nevada areconsidering increasing employees’ share of premiums and co-payments,according to the National Conference of State Legislatures. At least 11 statesare considering trimming coverage.

Requiring employees to pay partial premiums would not only help offset thegovernment’s costs but also help them gain awareness of health costs, whichultimately would help hold down rates, said Fred Buie, president of KeystoneElectrical Manufacturing Co. in Des Moines.

Keystone, which has 60 full-time employees, has kept health insurance costslevel in the past four years largely by setting up health reimbursementaccounts, which reimburse employees for some medical expenses. The accountscome with a tax advantage that helps offset costs for Keystone.

Keystone employees pay an average of about 18 percent of health care coststhrough monthly premiums.

“I don’t know of any private business where employees don’t paypremiums,” Buie said. “If you’re contributing, you appreciate it more andtend to make better use of it.”

Union officials who represent state workers have long argued that goodbenefits are part of a trade-off state employees make for accepting lowerpay.

That depends on state workers’ education levels, according to a review ofsalary data conducted for the Register by Iowa State University economist DavidSwenson.

Highly educated state workers, on average, do make less than those in theprivate sector, by $15,000 or more a year, Swenson found. But state workers asa group make nearly $5,400 more a year on average in base salary and receive$4,700 more in benefits than their private-sector counterparts.

Danny Homan, president of AFSCME’s Local 61, contended last month that thesalary and benefits information obtained by the Register is “either a lie ormiscalculated.”

The Register, in response, shared much of its data with Homan and spokesmanCharlie Wishman and requested they provide information or studies that disputethe newspaper’s findings. They declined to do so, although Wishman, in ane-mail, questioned Lind’s methodology because it did not break out educationlevels.

Lind’s study focused upon health insurance costs, which, unlike salaries,do not correlate closely with education levels. Lind said the survey has anaccuracy rate of plus or minus 3.3 percent.

Union officials say members have accepted smaller raises in recent years tohelp preserve good benefits. Across-the-board wage increases have been 3percent or less for the past 10 years, with no raises in 2006 and the currentfiscal year. Some employees are eligible each year for step increases beyondthe across-the-board raise.

Susan Shields, a pharmacist with the state’s corrections department, fallsin the category of highly educated state workers who are paid less thanprivate-sector counterparts. Eleven years ago, she left a pharmacist job with alarge retailer to join the state work force. Last year, her pay remainedroughly $4,000 less than that of the average pharmacist in Iowa.

Shields said she was working nearly 80 hours a week in the private sectorand now works closer to a normal workweek. While pay is less with the state,the benefits are better, she acknowledged.

“I don’t think of myself as being any better off or worse off (than)most pharmacists,” Shields said. “No, I don’t make the same amount ofmoney as someone who works for a big-box retail chain. They make a lot ofmoney, but they also work a lot of hours and have a lot of stress. I’ve beenthere. It’s not worth the money.”

The state has taken steps in recent years to rein in its increased costs foremployee health benefits. Those efforts have created tension.

Beginning in January of this year, for example, Iowa eliminated UnitedHealthCare as a health insurance option for state employees, a move estimatedto save $10.8 million this year, according to a memo sent in September to stateofficials by Ed Holland, division administrator for the Iowa Department ofAdministrative Services.

Iowa’s five-member Executive Council, headed by Gov. Chet Culver, made thedecision. Opponents, including members of his own party, said thousands ofworkers would have to choose among plans that offer less flexibility,particularly to see specialists in other states. They also cast doubt on thesavings.

Holland said last week that the decision has led to few problems todate.

The state also expanded education on wellness and prevention, whichofficials think will help lower long-term costs.

State leaders, including Culver, have also set up a working group of unionsand government representatives to identify ways to reduce health care costs.The next time union contracts are up for negotiations is 2011.

The negotiation process that leads to union agreements on salaries andbenefits is conducted almost entirely in private. Typically, the governor, ahandful of other state employees and union representatives participate.Although authorities make final union agreements public, union leaders, statenegotiators and lawmakers usually do not discuss how negotiators arrived at theagreements.

The Department of Administrative Services denied a request for an interviewwith any employee of that department involved in the collective bargainingprocess.

Senate Majority Leader Michael Gronstal, D-Council Bluffs, said thenegotiation process takes much of the decision-making about employee benefitcosts out of the hands of lawmakers.

Questioned about the premium-free health insurance offered to stateemployees, Gronstal said: “I don’t want to characterize it as good or badbecause that is unfairly biasing the collective bargaining process. This is ajob for the executive branch to negotiate with the employee unions, and I amnot going to jawbone the unions down or state government up in this equation. Ithink it’s inappropriate for us to comment on subjects relative to collectivebargaining.”

Senate Republican Leader Paul McKinley said the union negotiation processshould be more transparent to allow more citizen input as negotiating takesplace.

“One of the things we know is that the total compensation package of stateemployees has exceeded that of private employees, and it has gotten to thepoint where we’re seeing billion-dollar deficits,” McKinley said. “Thebargaining process just isn’t working to protect the taxpayers.”

If a governor wanted to require employees to pay part of insurance premiumsor take other steps to control costs, such changes are often years in themaking, said Richard Cauch, health program director for the National Conferenceof State Legislatures.

“Changes for public employees generally move at a slower pace,” Cauchsaid, noting the complex union agreements that bind most states. “It’sunlike the private sector, where a company can announce, ‘In 60 days,here’s what we’re doing to you.’”