State health insurance costs to jump $40 million in 2015

DES MOINES - Rising health insurance premiums for state employees will cost taxpayers an extra $40 million under a two-tiered program approved Monday by the Iowa Executive Council that again will have some workers paying more than others covered by union contracts for similar coverage in 2015.

Under a plan negotiated with Wellmark Blue Cross-Blue Shield effective Jan. 1, premium rates for state employees covered by the preferred provider organization (PPO) will increase by about 6.5 percent while coverage for the managed care organization (MCO) option will jump by about 21.5 percent.

Total premiums charged for state health insurance coverage will increase from $369.1 million this year to $409.4 million in 2015, with the state cost jumping from $344.5 million to $384.2 million and employee contributions for premiums rising from $24.6 million this year to $25.3 million in 2015, according to state Department of Administrative Services.

'This is a $20 million shock to this year's budget that we weren't anticipating,” said Gov. Terry Branstad, noting that half of the $40 million calendar year increase will hit state agencies in the current fiscal budget year that runs from July 1 through June 30, 2015.

Along with the higher costs, Branstad and State Treasurer Michael Fitzgerald raised equity concerns about the current arrangement whereby noncontract state employees and State Police Officers Council (SPOC) members pay 20 percent of their health insurance premium, while other state union workers successfully won an arbitration battle in their contract negotiations which stipulates they pay no premium for single coverage as part of their collective bargaining agreement.

Branstad tried unsuccessfully in the last contract talks with American Federation of State, County and Municipal Employees (AFSCME) Council 61 and Iowa United Professionals (IUP) to spread the 20 percent insurance share to all state workers, but union officials argued the health benefit was bargained in lieu of wage increases and Fitzgerald expected the state would have to offer higher pay if it hoped to change the current arrangement in the next round of talks on a new two-year labor agreement beginning next month.

'Obviously, we're going to go back and try to do it this time,” Branstad told council members and DAS officials.

Branstad said it was not fair that the state pays 100 percent of the health insurance premiums for a large share but not all of state employees. Executive Council members voted 5-0 to increase the current incentive to offset rate hikes for state workers who participate in a wellness program aimed at promoting better health and controlling medical costs before approving the new premium rate schedule for 2015.

'My concerns is that we have this platinum plan which we have most of our people paying nothing for it and it's not right and it's not fair,” the governor said.

'If you don't have skin in the game, then you don't care if the taxpayers are getting stuck with $40 million,” Branstad said. 'If it increases your premium by $20, then you're concerned.”

The new rate schedule likely will cost state employees who pay a share of their premium between $10 and $21 a month for single coverage or between $21 and $49 a month for a family depending on the plan in which they enroll, DAS officials said.

The premium increases were being driven by higher use rates for specialty prescription drugs, large claims submitted by employees who shifted to lower cost insurance options, and more high-cost health problems being encountered by the state's workforce, according to a Wellmark official.

Branstad said he would like to explore the possibility of all governmental units in Iowa – the state, counties, cities and schools – combining under an insurance umbrella to get a better deal, possibly saving from $200 million to $300 million. Executive Council members also said they wanted an insurance review every six months so they weren't hit with an expected spike in premium rates in the future.

DAS officials said about $5 million of the overall cost increase was associated with fees caused by the Affordable Care Act and the excise taxes could spike to 40 percent over federally established thresholds in 2018.