Government is perhaps the last employer segment that provides benefits that liken to those retiring baby boomers remember: A strong pension plan and paternalistic health care benefits.
According to the Kaiser Family Foundation, private-sector employees pay about 28% of premium cost. The average public-sector employee contributes between 15 to 20%.
According to the Bureau of Labor Statistics, local governments employed 14.7 million workers, with 57% employed in education.
Local government is now looking to the private sector, which has long implemented more consumer-driven benefit offerings like high-deductible health plans and defined contribution retirement plans, for ways to contain costs. Tuesday, Colonial Life & Accident Insurance Company announced a partnership with the U.S. Conference of Mayors to potentially save almost $1 billion dollars on benefits costs.
“In today’s economy, most people recognize changes in benefits programs are inevitable,” said Pat McCullough, assistant vice president and public sector practice leader for Colonial Life. “But many city governments aren’t taking advantage of the opportunities available to them. They’re more likely to be able to continue offering high-quality benefits if they find ways to make them more cost-effective.”
The partnership brings together mayors and other key leaders in cities of population 30,000 or more with specially trained Colonial Life benefits counselors to offer and help implement a cost-containment insurance benefits program centered around value-added services and supplemental insurance benefits. The program focuses on effective cost-saving strategies while preserving the value of employee benefits.
“That’s the beauty of this program,” said Tom Cochran, chief executive officer and executive director of the U.S. Conference of Mayors. “We’re focusing on cost-saving measures that could have a significant impact on the bottom line while minimizing the impact on employees. Mayors and their cities need a strong benefits program to obtain and retain the best employees.”
Cities and their communities could see significant funds funneled back into underfunded programs. City governments nationwide collectively spend an estimated $30 billion each year on employee health benefits. A recent survey of government financial officers showed more than half saved at least 6% on their benefits during a two-year period by implementing cost-control strategies, and 40% saved more than 10% during that time period. Even a modest 3% annual savings on benefits costs would represent $900 million that could be redirected to prevent reductions in staffing and service levels.
“Those who work in local government realize that the economy has us operating in a new-normal and some components of their current benefits package may have to change in order to remain sustainable,” McCullough said. “The dilemma persists as to how to trim costs without materially diminishing the benefits being offered to employees now and into the future,” also a challenge for the private sector.
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