The Unintended Consequences of High-Cost Health Plans for Public Employees

One of the more alarming data points I have come across while compiling the necessary records for the TransparentCalifornia website has been the large sums of money spent on health insurance for public employees. As our site does not provide individual breakdowns of benefits in an effort to present the information in a uniform and comprehensible manner, the cost of individual health plans was not something we were particularly focusing on.

However, in the course of formatting and uploading the necessary records to TransparentCalifornia.com, several agencies jumped out at me as a result of their alarmingly expensive health insurance plans. First it was the $20k+ plans in Corte Madera, CA and the Contra Costa Community College District. Then I saw the $30k+ plans in Beverly Hills. Finally, I came across what remains the most expensive plan I have seen to date – a $37,815 health insurance plan for the Water Superintendent of Sierra Madre, CA.

I suspected this was not a problem isolated to the handful of agencies whose numbers happened to catch my attention but, rather, indicative of a systemic problem likely to be found in many other public agencies. Operating on this assumption, I wrote about the way in which taxpayers would effectively be taxed twice for these plans – initially, to fund the public employee’s compensation itself and, again, when they find themselves paying an artificially inflated premium for their own health insurance.

Unfortunately, Pew Research has confirmed my suspicions. In 2012, State and Local government spending on health care increased by 8%; double the amount total U.S. healthcare spending grew during that same time period. The larger trend is terrifying – state and local government spending on health insurance premiums has increased an inflation-adjusted 444% from 1987 to 2012. It would appear that the agencies above are merely symptoms of a much larger problem.

The farther the distance between consumer and provider, the less reason either has to economize, which results in the out of control prices we see nationwide in the health care sector. Where an insurance plan can cost $37,815, the costs being insured against must be staggering. While there are a plethora of factors responsible for the current health care crisis in this country, the third party payer system, especially when that third party is using other people’s money (government agencies), is one of the core issues that demand immediate attention.

Robert Fellner is a researcher at the Nevada Policy Research Institute (NPRI), currently working on the largest privately funded state and local government payroll and pensions records project in California history, TransparentCalifornia.com, a joint venture of the California Public Policy Center and NPRI.