Cobalt Releases Municipal Health Cost Survey

Business Wire, August 18, 2008

LANSING, Mich. -- Local governments have work ahead on retiree health care costs, amid new requirements to disclose them, but are making progress, according to a study that examines trends in municipality health care costs. All state and local governments must comply with a new standard imposed by the Governmental Accounting Standards Board (GASB) by the end of 2009.

The nonprofit Cobalt Community Research conducted the study in response to the GASB requirements. Seventy-four percent of local governments that provide retiree health care are aware of the GASB 45 requirements, and 47 percent report that they have already calculated the liability or the calculation is in process, the study found. While awareness of the liability is solid, decisions about funding and effective tools to reduce future liability have yet to be widely determined.

"Nationally, local governments have been struggling with soaring health care costs for many years," says William SaintAmour, Cobalt executive director. "The awareness of the new liability and the requirement to disclose it has created heightened concerns regarding the affordability of public sector health care."

Health care coverage at larger local governments approaches 90 percent for active employees and 50 percent for retirees, the study found. Only half of local governments with fewer than 5,000 residents provide health care to their employees, and only 16 percent provide health care to retirees. The nationwide study of more than 1,500 city, county, township and special district governments, conducted from February to May, also found most municipalities are not employing strategies that could help control expenses.

"Fewer than 30 percent of the respondents have made changes to co-pays or deductibles in the last two years," says SaintAmour. "Fewer than 20 percent have implemented options such as joining purchasing coalitions or educating employees and retirees on making smart health purchasing decisions."

In addition to health care costs, the study reveals adjustments local governments are making to benefit levels and ways to offset liability with investment earnings.

Cobalt Community Research is a non-profit coalition headquartered in Lansing, Michigan, created to help governmental and non-profit organizations measure, benchmark and manage their efforts through high-quality affordable surveys, focus groups and facilitated meetings. A copy of the report is available at www.CobaltCommunityResearch.org.