Calif. Health Insurance Costs ‘Wildly Inflated’ For Government Workers: Analysis

Sep. 15--One of the most generous health insurance plans enjoyed by a California public servant last year -- costing $80,665 -- went to a communications manager for the obscure Water Replenishment District of Southern California.

At the embattled Los Angeles Department of Water and Power -- raided by the FBI in July, and yet to produce documents detailing how a worker earned $313,865 in overtime pay -- there were 153 workers with health plans costing $57,816 each.

In Riverside County's Rubidoux Community Services District, the general manager received health benefits totaling $55,717. In San Bernardino County's Cucamonga Valley Water District, the general manager's health benefits cost $38,191 to cover his family. In Anaheim, 31 workers -- mostly in public safety -- had health plans costing more than $36,000 each.

A new analysis of public spending on employee health insurance by Transparent California -- whose findings were mirrored by the Southern California News Group's own data crunching -- found that workers toiling in California's cities, counties, special districts and state offices received health benefits costing about 50 percent more than the average in California, which is $9,476.

And, surprisingly often, benefits cost two, three, four, up to even eight times as much.

"Spending over $50,000 on a single employee's health insurance plan is an inexcusable waste of taxpayer funds," said Robert Fellner, executive director of Transparent California, in a statement.

"Medical plans this expensive simply don't exist in the broader market, which is a strong indication that providers are exploiting the fact that these governments are happy to pay inflated prices with other people's money."

California's "wildly inflated health costs" bleed some $3.3 billion from taxpayers each year, Fellner calculated.

How inflated?

The UBA Health Plan Survey -- the nation's largest such survey, gathering data across all carriers and plan types throughout the United States -- found the average health plan in California cost $9,476. (Employer's share: $4,144; worker's share: $5,333.)

"While many surveys look at only a handful of the nation's largest employers, UBA looks not only at hundreds of large employers, but it also studies thousands of small and middle market groups -- across all regions, sizes and industries," says the group's annual report.

Another data gatherer -- the U.S. Bureau of Labor Statistics -- says private employers spent an average $5,291 for single-worker medical coverage, and $12,828 for family coverage. And a recent survey from the Kaiser Family Foundation found that 92 percent of family medical plans cost less than $26,000.

Across all industries, and in all parts of the nation, governments had the most expensive health plans, UBA found.

"There are often a lot of union employees in local governments, which can drive that," said Matthew Mochel, director of business analytics for UBA. "If a large bloc is bargaining for benefits versus individual employees, that's one reason those plans tend to be more generous."

Joe Henehan of The Henehan Co. had a similar take. "Typically, governmental agencies have very, very what we call 'rich' plans -- low deductibles, low co-pays, little out-of-pocket," he said. "That's the difference."

How a plan might cost $80,866 was a bit inscrutable, even to the experts.

"If a group as a whole has an extremely poor claim history, that can cause the rates to be increased," Mochel said.

Henehan said it also could be a function of the insured's age -- older folks cost more -- and legacy plans that allow people to go to any doctor they want.

"Some of these costs are staggering. Absolutely staggering," Henehan said.

Water Replenishment District of Southern California (Courtesy WRD)

Water district mum on high costs

The Water Replenishment District of Southern California is the largest groundwater agency in the state. It manages the aquifer in southern Los Angeles County, providing comparably inexpensive water to 43 cities and 4 million people.

With only 46 employees, this special district averaged health care costs of $29,207 per worker, more than triple the state average, according to data from UBA and the State Controller's Office.

In addition to the $80,665 cost for that one manager, 18 workers had health benefits costing more than $30,000 a year, including a senior public affairs representative ($68,129) and a senior accountant ($50,509).

District spokeswoman Angelina Mancillas said she could not discuss why the costs were so high because of privacy laws. The manager with the $80,655 bill is no longer with the district, she said.

Records suggest that the district's generosity contributes to these high bills.

Nationwide, workers contribute one-third of their health care premiums, according to UBA's data. In California, government workers pay an average of 23.3 percent.

But the Water Replenishment District of Southern California -- like many public agencies here -- doesn't ask workers to pay anything.

The district not only picks up 100 percent of premiums for workers and their dependents, but also gives them an "IRS qualified health reimbursement account" for out-of-pocket expenses of $8,196 per worker and $4,928 per dependent. Each year.

Unused funds roll over for three years, then revert to the district.

"With less than 50 employees, WRD contracts with the Association of California Water Agencies (ACWA) Joint Powers Insurance Authority, which pools together other small agencies throughout CA, to purchase our health insurance plans," Mancillas said by email. "The JPIA negotiates our insurance rates."

The Los Angeles DWP -- where the average health care bill was $19,589, and 153 workers had health plans costing $57,816 apiece -- did not respond to repeated requests for comment.

Anaheim spokesman Mike Lyster said his city, like employers across the nation, is seeing the impacts of high health-care costs.

"We seek to provide quality health care as efficiently as possible and regularly look at the best way to do that," he said by email. "Employees are essential to what we do for our residents, visitors and businesses, and providing health care to them and their families helps make that happen."

Lowering costs

In the midst of all this big spending, many public agencies managed to keep costs close to, and even below, the California average, data show. According to SCNG's data crunch:

* In Los Angeles County, the city of Glendale spent $10,114; Torrance, $9,389; Montebello, $9,697; South Pasadena, $9,008; Pomona, $8,199; Monrovia, $7,749; Covina, $7,513.

* In Orange County, Rancho Santa Margarita spent $10,912; Buena Park, $10,517; Costa Mesa, $10,237; Dana Point, $9,384; Fullerton, $9,068; La Palma, $7,535;. Laguna Woods, $6,328.

* Riverside County spent $9,041; the city of Temecula spent $9,355; the Murrieta Valley Cemetery District, $9,492;

* San Bernardino County spent $8,144; the city of San Bernardino, $10,584; Chino, $10,193; Rancho Cucamonga, $9,172.

Fullerton City Manager Ken Domer cautions that the numbers depend on many moving parts -- how many employees have spouses and children to insure, what types of plans are offered, how much of the load workers are asked to shoulder.

Like the Water Replenishment District, many agencies pick up the entire cost of health care for their workers. Fullerton asks workers to kick in a percentage.

In Fullerton's Kaiser HMO plan, for example, a single worker's coverage costs $592 per month ($460 paid by the city, $132 by the worker). For a worker and one dependent, it's $1,184 ($920 paid by the city, $264 by the worker); and for a family, it's $1,676 ($1,300 paid by the city, $376 paid by the worker).

While that keeps city costs down, there's a risk, Domer said: Workers are regularly lured to agencies that pick up more of the tab.

When Domer left an assistant city manager post in Placentia for one in Huntington Beach, his salary went up, but his take-home pay went down because Surf City required workers to kick in more.

"It's a balancing act," Domer said.

The data

The numbers in the Transparent California calculations include health care spending for all positions where agencies spent $1,000 or more -- a conservative cut-off that understates the average, because it includes spending on people who worked less than a full year, and thus had less than a full year's health insurance payments.

Transparent California also tried to narrow the window to employees who worked most of the year by including only positions where a worker's annual wages were 90 percent of the minimum for that position.

In these parameters, Transparent California's health care cost averages were $16,554 for special districts, $14,749 for cities, $13,956 for counties and $13,466 for state workers.

SCNG crunched the data more conservatively, using that $1,000 cut-off only. SCNG's averages were $14,845 for special districts, $13,383 for cities, $12,849 for counties and $12,743 for state workers.

For Transparent California's list of averages by city, click here; for special districts, click here.

For a complete list of SCNG's average health care costs per city -- including a breakdown by city departments -- click here and search for your city. For your county, click here. For special districts listed by county, click here. For state workers listed by department, click here.

What now?

"These agencies should do what every employer would do when costs get embarrassingly high -- spend the time to shop around and get the best price," Fellner said. "And, because the public sector has a weakened incentive to control costs, the employee has to have some skin in the game."

Staff Writer Jason Henry contributed to this report.

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