2024 Benchmark Report for Public Sector Employers
For many employers, 2023 was a year of finding a path forward while managing the ramifications of a difficult labor market and trying to meet their strategic goals. Although inflationary pressures appeared to slow during the year, public sector employers still had tough decisions to make while balancing budget constraints and offering their employees an attractive benefit package.
This report, the M3 Benchmark Report for Public Sector Employers, focuses on health insurance offered by public sector employers in the M3 footprint. In this publication, we dive into overall costs and trends, as well as the unique features of health insurance plans offered by public sector employers in 2023.
In 2023, public sector employers experienced a 4.8 percent increase in health plan premiums. This rate of change is in line with historical norms. This is a slight decrease from the trend for public sector employers last year (5.0 percent) and lower than the overall employer rate of 7.1 percent reported in the 2023 M3 Health Care Trend Report for employers in all industries.
This report focuses on the trends and costs for both school districts and local units of government in 2023. Over the past year, school districts experienced a 9 percent trend increase, whereas local government entities saw a 4.8 percent rate of change. This represents a slight increase for schools over the past year (they experienced a 4.7 percent increase in 2022) while local governments saw a lower increase (6.4 percent in 2022).
When looking at the average cost of health insurance per employee in 2023, the public sector averages $20,519 per employee, with educational entities averaging $20,638 and local governments coming in at $19,610.
While overall costs and trends for educational entities and local governments are similar, this report explores key differences in the segments as well as nuances in geographic regions, group size, and plan structures.
Geographic regions are an important factor when discussing the cost of health plans. For this report’s purpose, we break the state into five regions with distinct market factors which have ramifications for health plan costs, as network availability and carrier/health plan competition are vital to understanding cost.
Southcentral Wisconsin continues to experience the lowest overall cost per employee at $19,538. HMO providers largely define this market while providing employers with health plans which leverage tightly managed care models. The following chart shows the overall cost by region.
In 2023, we saw a wide spread of benchmarked change rates for public sector employers based on region. While the overall rate of change declined slightly from 2022, regional differences varied from 1.1 percent to 8.6 percent. This spread is much more varied than the prior year in which the trends were largely similar, with the range defined from 3.2 percent and 5.7 percent. The following chart exhibits the rate of change for each regional market.
An employer will typically share a portion of the expense of a health insurance premium with an employee. Data shows a similar approach when it comes to employee contributions to premiums in the public sector. The differences are minor but are important to understand.
As a whole, public sector employers increased the percentage they asked employees to contribute to their health coverage from 12.0 to 12.3 percent for single enrollees and from 12.2 percent for family enrollees to 12.6 percent this past year. That shift coupled with increased costs meant employee contributions experienced a bump in health insurance premiums in pure dollar amounts.
This would seem to indicate that employers have reverted to historic strategies for cost sharing, after a clear effort to stabilize employee costs during the pandemic.
Plan Design- High Deductibles and Savings Plans
Traditionally, the perception has been that public sector employers offer rich health insurance plans to employees. However, the data is clear that public sector employers (79 percent) continue to expand their offers of health plans that leverage deductibles that reach the current “high deductible plan” threshold ($1,500) as set by the Internal Revenue Service (IRS).
This couples with data showing that employers are following market trends and leveraging employer-sponsored health savings accounts (44 percent) and health reimbursement arrangements (35 percent). The usage of these health savings mechanisms is an indicator of how employers are finding creative ways to make their health plans more desirable for employees and help their cost structure.
To help make these plans more desirable and cost effective for employees, employers can contribute dollars to health savings accounts (HSAs) and/or health reimbursement arrangements (HRAs) for their enrolled members. Of public sector employers offering a health plan that meets the IRS qualification as a high deductible health plan (HDHP), 75 percent are actively contributing to a tax-advantaged savings plan for their employees.
The average employer contribution to an HSA by the employer in the public sector was $1,064, with school districts on average offering approximately double the dollar amount ($1,110) than that in local governments ($513).
When it comes to HRAs, the average for all public sector employers did so with an average of $1,697 per enrolled member.
Plan Design – Cost Sharing
Cost sharing for health plans comes in two forms: a deductible, which is the amount that a plan member pays before the insurance contributes to medical expenses or pays in whole; and the co-payments, which are amounts the plan members pay for accessing specific types of service.
When looking at deductibles and out-of-pocket maximums, we see the differences between educational entities and local governments come into focus. In one case, deductibles are higher for school districts, the other has local governments with a larger average max out-of-pocket requirement.
The differences are minimal for co-payments when accessing specific types of medical services. When visiting a physician’s office, an urgent care facility, or visiting a specialist, the average co-payment is very similar regardless of where an employee works in the public sector. However, there is a large difference when visiting the emergency room, employees of local governments pay markedly more ($270) than employees of school districts ($184).
While educational and government entities are often lumped together from a data perspective, the data in this report demonstrates the nuance differences between the two. Overall costs and approaches appear to be similar, but the cost and plan design structure of their respective employer-sponsored health plans demonstrate the approach is slightly different.
The 2023 M3 Benchmark Report for Public Sector Employers is based on data available as of December 1, 2023. The data represents 437 health insurance plans from 205 distinct public sectors employers, mostly located in Wisconsin and all of which are M3 clients.