White Paper Offers Public Sector Cost Strategies for Health Plans

March 27, 2012 (PLANSPONSOR.com) – A white paper from the Colonial Life & Accident Insurance Company uses case studies to explain reasons for the growing cost pressures of employee health benefits. 

According to the paper, “Preserve and Protect: How Public Sector Employees Can Provide Excellent Benefits While Controlling Costs,” the cost of family healthcare coverage doubled in the last decade, increasing 9% in 2011 over the previous year. At the same time, state and local governments are facing significant financial stress from the most recent recession: Their revenues declined 22% from 2008 to 2009.

The white paper examines five strategies research shows to be effective in controlling costs:

•  Wellness initiatives—Wellness initiatives were among the top cost-control strategies implemented by employers in a recent survey of government financial officers. Nearly 80% of survey respondents have added wellness initiatives to their benefits program, and 90% of those recommend them to others; nearly two-thirds recommend them strongly.

•  Pretaxing benefits/Section 125 participation—Equaling wellness programs as a highly implemented and recommended cost-control strategy is establishing Section 125 plans and maximizing employees’ participation in pre-tax benefits programs. More than three quarters (77%) of employers in the government financial officers survey say they offer pre-tax benefit plans, and 86% of those recommend this option. At 73% highly recommended, it was the most enthusiastically endorsed strategy of the survey options, and only 3% were unlikely to recommend it.

•  Benefits communication and education—Employers can transfer the cost of benefits plan communication to their benefits suppliers and can outsource an enrollment system and open enrollment management rather than maintaining these responsibilities in-house. Although this shift in benefits communication and enrollment responsibilities is well-recommended by those using it, it’s not yet widely implemented. In the government financial officers survey, only 31% of employers were using an external service provider for benefits enrollment and 52% had shifted benefits education and communication expense to suppliers. However, 78% of those who outsourced enrollment would recommend it, and 84% recommended using a benefits carrier to handle benefits education and communication.

•  Voluntary benefits—One underutilized solution to the benefits cost problem is to move noncore benefits to employee-paid voluntary benefits. This strategy is another example of a change that fewer public sector employers have yet to implement, but those who do give it very high marks. Only about one-third of employers in the government financial officers study said they have moved noncore benefits to employee-paid voluntary coverage. However, 87% of those employers recommended this strategy, and 70% recommended it strongly.

•  Dependent verification—Providing insurance coverage for dependents who are no longer eligible drives up benefits costs for employers. Health plan audits can reveal a significant number of ineligible participants, including dependents who are over age or who aren't a blood relative or a spouse, or former employees who haven't been removed from the plan. The potential cost savings offered by dependent verification can be considerable, and the service is sometimes available at no cost to the employer.


Government employers who implemented strategies such as these report significant savings in their employee healthcare benefits. More than half (55%) of participants in the government financial officers study saved at least 6%, and 40% of them saved more than 10%. Other studies show employer return on investment for wellness initiatives ranging from $3 to $6 for every dollar spent.

The complete white paper is available in Colonial Life's online newsroom at ColonialLife.com.