Debate over state employee health coverage extends beyond Del.

• Gov. Jack Markell wants state employees to pay more for their health care.
• The governor also wants new employees to be required to enroll in a health savings account.
• The proposal has sparked opposition from worker groups and some lawmakers.

As health care costs have skyrocketed in the last decade, employees have had to pick up an ever-growing share of what it costs to stay healthy, making greater contributions to plans that often cover a smaller portion of their bills.

Now state governments, long a refuge of generous employee health care benefits that were once common across America, may soon follow the private sector in passing more costs on to its workers.

The cost of Delaware state employees' health care is projected to balloon to more than $1 billion by 2020, and the debate – already growing loudly – over how to rein in those costs will be one of the top battles of the legislative session.

Gov. Jack Markell wants state employees to pay more for their health care and wants to create a new, less-generous plan for new state hires. The current system, he says, is simply unsustainable.

In the days after making the proposal at his annual budget address, the governor has outraged many state workers and the unions who represent them. They say good health benefits are one of the few reasons left to take a state job.

"We've already got guys who are leaving as soon as they get the training, because they can get paid so much better outside the state," said Charles Purnell, who has worked for the Delaware Department of Transportation for 10 years. "We're literally the people that keep the state running, but they just keep saving money off the skin of our backs."

Ann Visalli, director of Markell's Office of Management and Budget, stressed: "We don't want to be doing this. But If we continue to have to pay this health care bill while making improvements in just the way we pay providers, it is going to crowd out everything else we need to do in state government."

Some lawmakers hope they can curb expenses without asking more of employees by working out better prices with health care providers and doing things like encouraging healthier behavior and smarter medical decisions.

Markell's administration say those changes are necessary, but are not enough to put the state on solid financial footing. These new policies take time to implement and produce savings, and the deficit for the state's health care system is huge and urgent.

It's a complex dilemma that many local health care experts say businesses outside of government have been grappling with for decades.

"The private sector is probably three to five years ahead on this issue," said Rep. Danny Short, R-Seaford, who in his day job runs an insurance agency that helps companies build health care plans. "If you work for an employer who pays the full boat, you're in a very good place. It's very rare these days."

Rising costs, shifting burden

The nation's health care system is as complicated as it is immense. Experts say the biggest fundamental problem is that costs have annually grown faster than the economy.

There are two big reasons for this, according to Nick Moriello, president of Newark-based Health Insurance Associates.

First, medical treatments, prescription drugs and the other goods and services that make up the health care industry keep getting pricier. 
Second, more people are getting health insurance and seeking care for more things, thanks largely in part to the Affordable Care Act, or "Obamacare."

"That's probably a good thing, but it's also a costly thing," said Moriello, who also sits on the National Legislative Council for the National Association of Health Underwriters.

Faced with bigger and bigger price tags, employers, especially smaller companies, have taken steps to save. In some cases, they've tried to do things like encourage employees to stay healthier or use generic drugs, but in most cases they've resorted to requiring employees to pick up a bigger share of the cost of health care.

"That's definitely an unpopular trend, but it's a necessary one for businesses," Moriello said.

Marc Wooten hurt his ankle over the weekend and had to go to an urgent care clinic. Wooten is an inventory manager for a local warehousing firm and pays into an insurance plan provided by his employer.

His wife also works and has her own health insurance. He said what they pay toward their premiums isn't breaking their budget, but it is noticeable.

"I would say it's a big concern for me. I'm only 33, so it's not like I'm old, but even I feel like I've seen things get worse," he said. "We want to have kids, but all our friends who have kids are letting us know how expensive they are and, like, how often they have to go to the doctor. It worries me."

Anthony Grand, 28, also says he worries about rising costs. Grand is a sales associate (neither he nor Wooten would name their employer).

"I know my dad talks about what he used to get (in employee benefits) and when I tell him what I get he thinks I'm getting ripped off," Grand said. "But I'm like, no Dad, that's how it is now."

In 2015, the average health insurance premium for a single person nationally was $521 a month, or $1,462 for family coverage, according to the Kaiser Family Foundation's annual report. That includes both the employee and worker contribution.

Premiums have leaped by 27 percent since 2010 and exploded by 61 percent since 2005. The average worker with a family plan has gone from paying $2,713 a year in 2010 to $4,955 in 2015.

From a broad economic perspective, many health care experts say it's a good thing that employees have "more skin in the game" when it comes to health care costs. They say it makes consumers more selective about going to the doctor or emergency room.

If the health insurance company or employer pays for all or most of the care, people have no reason to be smart consumers. They say that means people get extra, unnecessary treatments, procedures, doctors' visits, etc., which increases the costs to the system.

If people have to pay a bigger share of the cost, they will be more likely to choose only really necessary services, which would drive costs down, those experts argue.

New coverage for new workers

State government is Delaware's largest employer. There are 31,000 active employees and 22,900 retirees covered through the state's health-care program.

There also are 17,000 people on Medicare who receive a supplement through the state.

Counting dependents, more than 122,000 are covered through the state's health insurance.

About 95 percent of the 53,900 state workers who receive full state health care are on either the state's HMO or PPO plans.

The worker's contributions to those plans are much smaller than the average HMO or PPO plan. For state workers, neither plan has deductibles.

State workers plans are significantly better than virtually any private-sector plan and are better than even the most-expensive plan offered under the insurance marketplaces created by Obamacare.

In his proposed budget for next year, Markell asked for state employees' contributions to rise by between $2 and $19.50, depending on the plan. Employer contributions would go up between $47 and $127.

Markell also budgeted for $14 million in savings from existing employee health care costs, though exactly how those savings would be made was not explained.

There would be bigger changes for new state employees. Markell wants to put them on a new Health Savings Account plan.

Employees would get savings accounts into which both they and the state would put in money to pay costs.

For a single employee, the state would put in $1,000 toward a $2,000 deductible, while for families the state would contribute $2,000 towards a $4,000 deductible.

These changes infuriate many state employees who say the state government during Markell's tenure has already been stingy with raises. Markell has asked the Legislature to give employees a raise of 1 percent or $500, whichever is more, but Paul Lee, who works for DelDOT, says that doesn't make up for a lack of previous pay bumps or the proposed health care changes.

"I've been working here for 18 years, and there are guys coming in making the same money as me," said Lee. "That's just not fair. I used to love coming to work, but now I've got to work other jobs just to make ends meet."

Many DelDOT workers were especially upset about Markell's proposal because he announced the changes less than a week after they worked through the weekend clearing snow during last month's blizzard.

"For the people who say I make too much, come work three days with not a lot of sleep and not a lot of eating clearing snow from the roads," Purnell said. "Spend all day working on the side of I-95 with 18-wheelers coming by you so fast you can't read what's on them. Do that for a little bit and get paid what I'm paid and then you can talk to me."

Other solutions

Many members of the General Assembly hope they can stem the rampantly swelling price of health care without passing much of the burden on to employees.

"We value what our state employees give to all of us," said Melanie George Smith, chair of the budget-writing Joint Finance Committee. "One of the ways we value them is through health benefits, especially because the salaries by and large aren't what they could be getting in the private sector. We know that's big for us in terms of retaining qualified people."

A key tool lawmakers will use is a report from the State Employee Health Task Force that lawmakers created at the end of last budget year.

One of that task force's suggestions is that the state work with providers to come up with more cost-effective ways to pay for medical treatments. That report points out that the sheer size of the state's health care program gives it some leverage to press for better prices.

Some lawmakers have more pointedly argued that hospitals and other providers are overcharging the state, and have called for tougher negotiations to bring down costs.

The report also says the state could do more to promote wellness in state employees, offering incentives to do things like eat healthier, exercise more frequently and get more screenings and tests to prevent illnesses that require expensive treatments.

The task force recommended that the state find ways to encourage employees to make financially smarter decisions, like buying generic drugs instead of name-brand versions.

And it said the state could select "centers of excellence," providing financial incentives for employees to get major procedures and treatments done at a narrower list of providers who have a good track record of good outcomes and price-effectiveness.

Visalli emphasizes that Markell and the administration are keen on finding as many of these savings as possible, not just simply charging employees more.

"We hope that we can work with everyone, including organized labor, to help us think about creative solutions," she said.

But the pressures on the state budget is so huge that those changes, at the moment at least, aren't enough, Visalli said.

There are some lawmakers who agree with Markell on this point. That includes many Republicans, who traditionally disagree with Markell, is a Democrat.

"I think we need to be fair to our employees, and we have to do everything we possibly can not to put all the burden on them," said Short, the ranking Republican in the House. "But the numbers are just so big. Right now, I'm not sure how we get there without some increases."

Contact Matthew Albright at malbright@delawareonline.com, (302) 324-2428 or on Twitter @TNJ_malbright. 

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Annual employee contributions to health care plans

National average compared to Delaware state workers' plans

Average HMO: $1,179/$5,447

State HMO: $525/$1387

Average PPO: $$1,145/$5,216

Average of State PPOS: $627/$1,632

Figures are for single coverage/family coverage.