Why state employee health plans struggle to contain costs: 5 things to know

Health plans for state employees are often the largest commercial healthcare purchasers in their state, but these bargaining powers are not translating to lower costs, according to a report from the Center on Health Insurance Reforms at Georgetown University in Washington, D.C. 

The report, published June 28, surveyed state employee health plan administrators in every state except New Jersey. 

Just 15 states reported a return on investment for their cost containment strategies. 

Here's five more findings to note from the report: 

  1. Twenty-two states said prescription drugs were the biggest driver of increasing healthcare costs, while 20 said hospital prices were the biggest cost problem. 

  2. Three in 4 states have strategies aimed at reducing prescription drug costs, and 58 percent said they had strategies aimed at curbing inappropriate utilization. 

  3. Administrators said the biggest barrier to cost-cutting strategies was resistance from plan enrollees and providers. In interviews, state plan administrators also said hospital consolidation made it difficult to negotiate with providers once they reach a significant market share. 

  4. Few states have implemented systemic measurements for cost-cutting strategies, making it difficult to conclude if they have been effective, the report said.

  5. In interviews with researchers, several state administrators described third-party plan administrators as barriers to cost-cutting. State employee health plans rely on administrators for paying claims and creating networks, but plans often "can't rely on them to be agile partners in cost control," the report concluded. 

Read the full report here

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