Council calls for Executive to examine feasibility of giving county employees greater flexibility over health care costs

September 27, 2010

Summary

“Consumer-directed options” seen as opportunity to reduce county costs, give employees more choices

Story

The Metropolitan King County Council today gave its support to a motion asking the County Executive to study whether it would be feasible to provide County employees with consumer-directed health insurance options. Facing a $60 million deficit as it begins its 2011 County Budget deliberations, the Council motion seeks a way to reduce one of the biggest drivers of the budget, employee benefits—specifically health benefits.

“Businesses and other government agencies have used consumer-directed health insurance plans to significantly bring down health insurance costs while giving employees more control over their healthcare choices,” said Councilmember Larry Phillips, prime sponsor of the motion. “During these tough economic times, we need to explore innovative ideas for controlling costs. That this approach could lower costs while maintaining quality healthcare access for employees is a win-win.”

“Salaries and benefits are the biggest cost drivers of deficits in the County’s general fund budget. Until we are able to reduce the growth of King County government to the rate of inflation, we will face deficits almost every year despite growth in the economy,” said Councilmember Reagan Dunn. “Consumer directed health insurance options could potentially save us millions of dollars and help reduce yearly deficits.”

The county’s employee benefit costs have risen from $158 million in 2005 to a projected $222 million in 2010—an average annual increase of about eight percent. King County employees have increased their contribution in paying for health care through higher co-payments and deductibles, which took effect in 2010 and are
projected to save $37 million from 2010 through 2012. Even with that increased contribution, employee benefit costs are expected to continue to rise.

Among the cost-reduction strategies that have been adopted by some public and private employers are Consumer-Directed Health Plans (CDHPs), which include Health Savings Accounts (HSAs) and Health Reimbursement Accounts (also known as Health
Reimbursement Arrangements) (HRAs). Such accounts combine a high-deductible health plan with a tax-advantaged account that enrollees can use to pay for health care expenses. A recently published report from the Kaiser Family Foundation stated that the percentage of large-firm workers enrolled in a health plan with an annual deductible of $1,000 or more for single coverage increased from 6 percent in 2006 to 17 percent in 2010.

The adopted motion calls for the Executive to study the feasibility of offering
consumer-directed health insurance options to county employees. The motion requires the report to identify available options and include:

• Benefits and risks associated with consumer-directed health insurance options;
• Potential implications of federal healthcare reform on the feasibility of implementing a consumer-directed health insurance option;
• Analysis of potential cost savings to the county;
• Impacts to King County employees.

The motion calls on the Executive to report his recommendations to the Council by February 1, 2011.