SALEM — Gov. Kate Brown and Democrats in the Oregon Legislature are looking at undoing one of the anticipated cost-saving initiatives they passed two years ago: ending double health insurance for couples who work for the state or a school district.
Chastened by blowback from public employees, the governor and Democratic lawmakers say it might have been a mistake to pass that and other cost-trimming health insurance changes. Those changes were predicted to save $178 million per biennium starting in 2019 and more in future budgets.
Democrats have since touted the savings in the 2017 cost containment bill, with the governor pointing to it in her January inaugural address as an example of “spending every taxpayer dollar wisely.”
But lawmakers have heard from state employees and teachers about the hardships they would face if spouses can no longer sign up for double coverage — which cuts their out-of-pocket medical costs — starting this year. And Democrats are questioning whether savings estimates were overblown when they were made two years ago.
“I had heard from a number of families that have been extremely negatively impacted by the removal of double coverage,” even though it has yet to take place, Brown said. “I think it makes sense if this is modified, that we need to find savings elsewhere.”
Brown doesn’t appear to be looking for those savings on public employee health insurance. Instead, she pointed to the state’s efforts to improve its system for buying goods and services, which she said could save “hundreds of millions of dollars.” A state audit released in December found Oregon was wasting hundreds of millions of dollars per biennium by using an outdated procurement system.
The governor wants to do away with the 2017 law’s requirement for annual checks of spouses’ and other dependents’ eligibility, instead conducting them every five years. That bill is House Bill 2039.
Since Oregon government employees pay relatively little for health insurance compared with workers in the private sector, it has been a no-brainer for many double-public-employee households to sign up for double coverage. A 2018 state compensation report found that Oregon public employees paid $17.47 per month on average for family insurance plans, compared with $470.76 a month for workers in the private sector.
Annual out-of-pocket maximum costs are lower on state employees’ plans: $4,500 on average for a family, compared with $6,782 for family insurance through a private employer, the same study showed.
This year, state employees pay 1%to 5% of the total cost of their health insurance, depending upon the plans they select. For an individual, that means $7 to $39 a month while insuring a family costs an employee $3.43 to $91 a month. Teachers’ costs vary by school district, with Portland Public Schools charging employees 7% of the total cost of premiums.
The state pays full-time employees who opt out of coverage $233 a month, and school districts pay incentives set in local labor contracts. After eliminating those incentives in the 2017 law, legislators want to bring them back.
Oregon is on track to spend $862.9 million this year on state employee health insurance and $736 million on health insurance for educators, according to the Oregon Health Authority.
If the 2017 health insurance law remains unchanged, the first time state employees and teachers would be denied double coverage and opt-out incentives for declining coverage is during open enrollment this summer and fall.
Provisions to limit annual cost increases for the health plans to 3.4% are set to take effect later this year. But Democrats’ plan to bring back double health insurance — House Bill 3075 — would repeal the cost increase cap.
Supporters of reversing the health insurance changes have cast doubt on legislative analysts’ 2017 estimate of how much it would save.
“We think we got inflated budget savings (estimates) when we did that in 2017, so we want to go back and look at it,” House Speaker Tina Kotek, D-Portland, said in a March 11 briefing with reporters. “We certainly are hearing from folks who have been individually affected that maybe … the unintended consequences don’t make up for the savings.”
On March 11, the director of the two boards that handle state employee and educators’ health insurance, Ali Hassoun, told lawmakers that the boards recently re-did the cost analysis and determined it would likely save at least $158.7 million in the next two-year budget that begins in July. That figure does not include savings from school districts ending opt-out incentives.
However, Hassoun said the savings would mostly come from the one efficiency Democrats want to leave intact: capping the charges that state and schools’ insurance plans will pay most hospitals at 200 percent of the Medicare rate.
Governments would save $6.8 million a year by ending double health insurance for employees on the educators’ health plans, state analysts say. But state employees’ insurance would cost $500,000 a year more because families with the option of choosing either plan would opt for the more generous state health insurance.
Darin Torres told lawmakers during a March hearing and he and his wife work at the state penitentiary in Salem, which allows them to have the health insurance they need for their four children. “Two of my children have conditions that just aren’t going to go away,” Torres said. “The double coverage helps us.”