State Health Plans in Fiscal Austerity: The Challenge of Improving Benefits While Moderating Costs


State and local governments have found it increasingly difficult to finance their employee health plans while maintaining the quality of health insurance. The steady rise in the cost of health care, in conjunction with declining revenues associated with the adverse economic environment, has caused most public employers to consider ways to amend the health insurance plans they offer employees.

This brief provides a detailed summary of a symposium that examined these important issues. The symposium featured representatives of eight state health plans, two prominent academic health economists, and a senior vice president of a large consulting firm. The program featured presentations of innovative policies that have been adopted by individual states, an assessment of the national landscape of public sector health plans, and a discussion of how national economic and health care policies are affecting public employers. Key takeaways include:

  • Expenditures on health insurance for public employees are rising as a proportion of state budget.
  • Despite various differences across states, they can learn from each other by reviewing and evaluating innovative policies that are adopted by other governments.
  • Wellness programs have taken on a new level of importance in combatting health care costs and have proven successful in some states.
  • Managing prescription drug costs is a key element of controlling the rising cost of providing health insurance.
  • Incremental rollout of new policies is often more effective than all-in-one changes.

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