Oregon Jurisdictions Could Save Significant Costs in Public Employee Health Insurance

Adjustments to health insurance benefits for public employees in state government and local jurisdictions offer an opportunity for cost savings that would make additional funds available for public services — or for more competitive pay to attract and keep talented public employees. Public leaders are in a position to act on this opportunity because many public employees in Oregon have health coverage through either of two main providers. The Public Employee Benefit Board (PEBB) covers state agency staff and university employees. Most Oregon school districts (except some large districts) and a number of local governments are members of the Oregon Educators Benefit Board (OEBB).

A new study by actuarial firm Milliman notes that Oregon state employees have rich benefits and pay less for their coverage than employees in the four states adjoining Oregon. While cost comparisons are more difficult to make for teachers, the study found a slightly different story there: coverage costs relatively less, but as with state employee coverage, public employers, i.e. taxpayers, bear more of the cost.

The potential for cost savings is greater for coverage provided through the PEBB, but there are also potential cost improvements that could be made for school districts and some local government employees covered through the OEBB system.

Potential Reforms

The study presents comparative data only and offers no policy conclusions or recommendations. However, its upshot is that Oregon has room to achieve better benefit design and savings for public employee health care coverage, and there are things we can learn from neighboring states. Here’s a summary of potential reforms. These are described with more context in a white paper developed by the Oregon Business Council and presented at the December 2018 Leadership Summit of the Oregon Business Plan.

Controlling the Cost of Payments to Health Care Providers

• Continue to hold the PEBB and OEBB boards accountable for limiting growth in per member health care costs to 3.4 percent.
  Hold school districts outside of OEBB to the same target.
• Have the boards and school districts establish contracting requirements of their carriers for hospitals and providers to move from billing fee-for-service to value-based, global payments for the overall care of patients by 2023.
• Increase efforts to manage complex, high-cost patients; provide customized service to help them get the right care they need.

Reforming Employer/Employee Contributions

• Over time, move to a fixed dollar contribution for health benefits that increases by CPI. This creates incentives for employees to select a lower cost plan that meets their needs.
• Set a target for the fixed dollar contribution that brings Oregon’s costs closer in line with other public-sector and large Oregon purchasers, with more room for salary increases.
• Increase in 5 percent increments the percentage paid by employees until it is comparable to other public and large Oregon employers.
• Create shared savings models with employees.

Offering More Choice in Plans and Options

• For PEBB, offer additional benefit plans, with different price points including a Consumer Directed Health Plan, that allow employees to select the right amount of coverage they need while not over insuring.

Potential Reforms Specific to OEBB

• Require districts to offer plans on a 4-tiered premiumrating structure, like PEBB and other school districts.This could allow more savings to apply to salary adjustments for starting teachers.
• Create a labor, management team including OEBB staff to help districts optimize the elements of the OEBBmodel to offer choice of plans, control district costs,create shared savings models with employees, and helpemployees make better decisions.
• Encourage more cities and counties to move to OEBB or the same model.