State Employers Holding Health Costs Down for Employees

July 16, 2009 ( - The vast majority of states (96%) offer medical coverage through a preferred provider organization (PPO), according to a new analysis from The Segal Company.

Far fewer states (33%) offer a high-deductible health plan (HDHP), a Segal report said. The proportion of Northeast states offering HDHPs is even lower (22%).

States with the smallest populations offer the greatest choice of medical plan types.

As a group, states in the Northeast require less cost sharing with employees for both employee-only and family PPO coverage than states in other regions. Almost half of states in the West region require cost sharing of at least 40% for employee-only or family PPO coverage. One quarter of plans in the South region pay for the entire cost of employee-only coverage as do 21% of plans in the Midwest region.

The largest states as a group are the most likely to require less cost sharing for PPO employee-only or family coverage.

For state employees, most PPOs, HMOs and indemnity plans have annual per-person deductibles of under $1,000. A large portion of all plan types except for high-deductible plans have unlimited annual out-of-pocket maximums for single coverage for in-network services, often because they have fixed copayments for in-network benefits including hospital stays and surgeries as a way to protect participants from catastrophic costs, according to the report.

A majority of all plan types have no lifetime benefit coverage maximums. Many plan sponsors have dropped the lifetime benefit coverage maximum, since most participants never hit that limit, and also since the employer can purchase stop loss insurance to help cover unexpected levels of claims and very high-cost claims.

The Segal study found that most states (47) offer a dental plan, and 70% pay a portion of the cost of coverage.

States are working with a variety of initiatives to hold health care costs in line including:

  • maximizing federal program subsidies, particularly for Medicare-eligible retirees;
  • making program design changes to balance premium increases and participant out-of-pocket costs;
  • renegotiating and bidding vendor contracts to obtain the most up-to-date market pricing and discounts;
  • auditing plan administrators of self-insured programs to identify processing and overpayment issues;
  • targeting wellness and disease management programs to address the primary cost drivers; and
  • planning communications to educate participants in making wise and healthy choices.

Another recent study finds that private employers are using similar cost-containment strategies (see Aggressive Cost-Saving Strategies Keep HMO Premiums Level ).

The Segal report is here .