National Study: More Costly Health Benefits for Public Workers

by Kristina Rasmussen Josh Barro of the Manhattan Institute has a new study out examining the high cost of public employee health care benefits, and he finds that “public-employee health benefits are more expensive than those in the private sector.” In the last quarter of 2010, government employees eared $4.66/hour in health benefits, compared to just $2.08/hour in...

by Kristina Rasmussen

Josh Barro of the Manhattan Institute has a new study out examining the high cost of public employee health care benefits, and he finds that “public-employee health benefits are more expensive than those in the private sector.” In the last quarter of 2010, government employees eared $4.66/hour in health benefits, compared to just $2.08/hour in the private sector. That’s a difference of 124 percent.

Our recent study on public employee compensation in Illinois reached a similar conclusion:

Compensation per state government employee averaged $69,500, which is 23 percent more than the private sector worker average of $56,500. Much of the difference was in employer- paid benefits, which were more than 1.5 times that of private employees.[emphasis added]

According to Barro, “several factors are driving the costs, including lower co-payments and deductibles, more plans with no deductible at all, and shorter waiting periods required before receiving benefits.”

So what’s the solution? Barro highlights Indiana’s success with consumer-directed insurance plans centered around Health Savings Accounts.

Illinois Governor Pat Quinn recently signed HSAs into law for state workers. Implemented correctly, it can be a win-win for taxpayers (who will benefit from budget savings) and state employees (who will benefit from a choice to pay lower premiums and save for health care expenses through tax-advantaged accounts).