HSAs and Public Employees

By Greg Scandlen

With more and more states and municipalities facing bankruptcy this year, they need to get serious about moving employee benefits to HSAs and other forms of Consumer Driven Care. The evidence is piling up on how these programs can help public employers balance their books, even while improving the benefits to public employees. Below we present examples of how it has worked in some locations. We would love to add to this information. If you have other examples please post them in the comments section.

Plum, Pennsylvania. Plum is a small town in western Pennsylvania that will be able to buy three new police vehicles, a mower and a skid loader for the public works department and a new vehicle for the planning department, all without raising property taxes this year. How can they do it? They are saving $250,000 by changing employees health insurance coverage to a Health Savings Account. The local paper reports that Councilman Michael Dell said, “the new plan that will take effect on Jan. 1 provides health savings accounts for employees. Dell said the health savings accounts will cover deductibles, co-pays and prescriptions – items not covered by the plan. There will be no additional cost for employees.”

Your Plum


Weston, Connecticut. Kimberly Donnelly writes, “Thanks to a larger than expected number of employees opting for a health savings account (HSA) insurance plan, the Weston school district is predicting a gross savings of more than $640,000 by the end of 2010-11, and possibly more than $1.3 million over the next two years.”

Weston Forum


Manitowoc County, Wisconsin. Emily Ann Holman writes in the Herald Times that Manitowoc County has saved $1.1 million in premiums by switching to an HSA program in 2007, while reducing out-of-pocket costs from $2,000 per employee to zero.

Herald Times


Michigan School Districts. The Mackinac Center reports,  “The (Adrian) Daily Telegram reports that custodians and maintenance workers in the Adrian school district are switching to a high-deductible health plan with a health savings account. The Blissfield, Madison and Onsted districts already provide these types of plans to some employees, as does Northwest Community Schools near Jackson. This good news for the district and for the 15 employees covered by the new plan: each employee will save more than $1,100 per year and the district will save about $17,500 annually. Additionally, since the premiums from these high-deductible, consumer-drive plans increase at a much slower rate than conventional coverage, these savings will likely increase over time.

Mackinac Center


Utah State Employees. Brad Drew writes in the Deseret News, “This year, employees of the state of Utah will be able to join millions of Americans making the switch to a consumer-driven, market-oriented plan by signing up for a high deductible health plan with a health savings account (HDHP/HSA). For the last couple of years, the Public Employee Health Plan administrators have worked with experts in HDHP/HSA plans to come up with an offering that is both fiscally sound and still highly attractive to state employees. The plan this year meets both of those goals. In fact, the plan is not only better than previous HDHP/HSA offerings from PEHP, it’s also better in many ways than PEHP’s more traditional insurance offerings. For starters, a state employee will pay $685 out of pocket per year in premiums for the traditional family plan.

Deseret News


Indiana State Employees. Indiana Governor Mitch Daniels wrote an article in the Wall Street Journal about Indiana’s experience in providing HSAs to state employees.  Five years ago he started offering HSAs to state employees. Only 4% signed up the first year. But 70% are in the program now. Why? Because the state pays the full premium and adds another $2,750 into the account. For high utilizers, the state also covers the difference between the HSA deposit and the total out-of-pocket exposure of $8,000, presumably through an HRA.

Gov. Daniels writes, “State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative.” And, “Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.”

But he adds, “Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18.”

Wall Street Journal