Pooling health insurance purchases could save Md. millions
By Dan K. Morhaim
May 07, 2019 at 9:10 AM
It’s a perpetual challenge: Citizens want services of all types, but nobody wants to pay for them through increased taxes or see reductions to existing benefits through cuts. That’s why identifying and implementing efficiencies is so important. Government should get its own house in order before taking other actions that could be unpopular or detrimental.
One big step in the right direction involves how state and local governments buy health insurance for their employees. Currently, the state of Maryland buys health insurance for about 75,000 people. The 24 jurisdictions (23 counties and Baltimore City) separately buy health insurance for another 70,000 or so people, and the 24 school systems separately buy health insurance for about 120,000 people. We’ve got 49 entities each buying health insurance — one of the most complicated and expensive purchases governments (or businesses or individuals) can make.
That raises the question: Why don’t they all buy health insurance together? The fact is that they can, but they don’t. At least, not yet. In 2018, I sponsored House Bill 1400 with many bipartisan co-sponsors. This legislation passed the House and Senate unanimously and was signed by Gov. Larry Hogan. That bill enables all these entities to buy health insurance together if they choose to do so. Volume purchasing saves money. This is something that over a dozen states now do with success, and the savings in Maryland could be substantial — up to $2,000 per year per employee.
Health insurance is a confusing, complex and costly world. But what if there were a way to save money and improve coverage, starting with a large group of people and then maybe expanding it to others? There is. Here’s how: pooling.
By Dan K. Morhaim
Jan 10, 2018 at 8:10 AM
For example, Baltimore County has about 9,000 employees and Baltimore County Schools have about 14,000. If maximum projected savings were achieved, that would come $18 million for the county and $28 million for the school system, accruing year after year. For Baltimore City, with about 13,000 employees and 13,000 school employees, the savings could reach $52 million annually.
When I was a state employee as a member of the House of Delegates, I got health insurance through the state. It provided excellent coverage at an affordable price because of the state’s substantial marketplace buying power. Local governments don’t do as well, especially the smaller counties and school systems. Purchasing together would give government employees better and broader coverage, as well.
Further, administrative costs would go down, from about 4-7 percent to 2-3 percent because the burden of purchasing insurance (and operating Human Resources departments in each entity) gets spread across a larger base. That’s a small percentage change, but given the hundreds of millions spent, it totals a sizable amount.
There’s another angle. Currently, under state law, two non-profit organizations — the Maryland Crime Victim Resource Center and Maryland Legal Aid — get their health insurance via the state. That helps them recruit and retain employees, and, more importantly, devote their resources to their purpose rather than buying expensive and inadequate health insurance. HB1400 put together a work group to investigate expanding this ability to Maryland’s entire non-profit community.
What needs to happen now? Local governments and school systems should immediately contact the State Department of Budget and Management to start the process of coordinating buying, analyzing benefit packages and reviewing this with employees. The governor should appoint the work group so that its tasks can be completed. Focusing on complicated details like this is tedious and often boring, but the rewards are substantial.
Sometimes taxes need to be raised, and all programs need re-evaluation. Simultaneously, government has an obligation to operate as efficiently as possible. In the end, we are one state, and funds flow from citizens to the state and local governments and back again.
This is a straightforward common-sense way to save money for taxpayers, provide better coverage for government employees and help our non-profit groups that give so much to all of us. The challenge: changing the way we’ve been doing business.