Local Governments Look to Health Care Costs to Balance Budgets

September 26, 2011 (PLANSPONSOR.com) - About 42% of the nations’ cities, counties, and townships expect their revenue to fall again in 2012, according to a national study of over 1,690 local governments across the country.

The Health and OPEB Funding Strategies: 2011 National Survey of Local Government reveals the number of local governments setting aside dollars to pay the long-term costs of retiree health care has fallen from 30% in 2010 to 19% in 2011. In addition, local leaders are using strategies ranging from wellness programs to higher out-of-pocket costs to bring costs under control.   

According to a press release, the report also finds that:  

  • About 6% of local governments plan to eliminate health coverage. More than 25% plan to increase premium costs, increase deductibles and copays, implement wellness programs, expand the use of generic drugs or renegotiate with insurance carriers; 
  •  Thirty percent already have implemented some of these changes; 
  •  Sixty percent have not taken advantage of design changes that could both reduce costs and improve the overall health of their active and retired employees. Examples include disease management initiatives, wellness initiatives or educating employees and retirees about how to make better health care decisions; 
  •  Seventy-two percent of local governments do not provide retiree health care, but a third of those that do believe coverage is too generous; 
  • For those who are setting aside dollars to prefund health care, 54% are placing them in a more flexible general fund account that they can access for other purposes. Only 14% did so in 2010; 
  • Uncertainty on how to address future costs rose from 16% in 2010 to 28% in 2011. 

There are many options local governments have not pursued because of labor contract constraints, lack of staff time and uncertainty the effort will pay off,” said William SaintAmour, executive director of Cobalt Community Research, in the press release. “When asked to rate the effectiveness of their efforts so far on a scale of 1-10, the average response was a 5.”   

The report is available at no cost at http://www.cobaltcommunityresearch.org/health.