UNLEASHING THE GIANT:
Opportunities for
State Employee Health Plans to
Drive Improvements in Affordability
By Sabrina Corlette,
Maanasa Kona, and
Megan Houston
June 2021
The publication of this report was
supported by Arnold Ventures.
Contents
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Center on Health Insurance Reforms
June 2021
Executive Summary
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 1 -
Health care costs are squeezing workers’ wages, hindering business competitiveness, and straining government
budgets. The agencies that purchase health benets for state employees are uniquely situated to tackle health care
costs. They are often the largest employer purchaser in their state and have the potential to exert considerable pressure
on insurers and providers. Through a comprehensive survey of 47 state employee health plan (SEHP) administrators
and in-depth interviews with 11 of them, this study scans the landscape of state employee plans around the country,
assesses a range of cost containment strategies implemented by SEHPs, and shares lessons for building on those that
appear most promising.
Background
Approximately 10 percent of people with employer-
sponsored health insurance are employed by state and
local governments.
1
In general, public sector employees
earn less than their private sector peers, but receive more
generous health and pension benets. In spite of rising
health care costs, 28 of the 47 SEHPs that responded
to our survey reported that the generosity of their health
plans had either shifted higher or stayed the same over
the last 10 years. SEHPs also tend to contribute relatively
more to employee premiums than their private sector
counterparts. While private employers pay on average 70
percent of the cost of premiums, 40 states in our survey
reported paying between 80 and 100 percent, and only 6
reported contributing less than 80 percent.
SEHP Cost Containment Initiatives
Cost Containment Targets are not Aligned
with Cost Drivers
Most SEHP administrators identied hospital prices as
their largest cost driver. However, hospital spending
has not been the most common target for SEHPs’ cost
containment initiatives. States have focused more on
prescription drug costs (39 states) and utilization (32
states). In fact, among the top ve cost containment
initiatives cited by states, only one—Centers of
Excellence—has the potential to affect hospital pricing.
The SEHP administrators we interviewed cited three
primary drivers for the disconnect between the known
top cost driver—hospital prices—and the types of
cost containment initiatives they pursue: (1) Lack of
competition among hospitals, (2) Political clout of
hospitals, and (3) Employee pressure to maintain broad
provider networks.
Benefit Design Initiatives: Shifting Costs to
Constrain Utilization
SEHP administrators have introduced initiatives to change
the incentives enrollees face in their decisions to use
health care services. These include:
Thirty states with a high deductible health plan
(HDHP) option, with a slim majority of these (18) also
offering and contributing to a Health Savings Account.
Only one survey respondent reported any cost
savings associated with its HDHP.
Eighteen states have implemented some form of
value-based insurance design and two were able to
document associated cost savings.
Fifteen states have workplace wellness initiatives and
two were able to document associated cost savings.
Ten states have implemented reference pricing or
Right to Shop programs to steer enrollees to lower
cost providers. Three states were able to attribute
cost savings to these programs.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Provider Payment and Network Design
Initiatives: Challenges, but Potential for
High Rewards
A majority of SEHPs report implementing strategies to
target either high prices for hospital or physician services,
including:
Twenty-three states with a Center of Excellence
program, with four additional states reporting they
are in the process of developing one. Two states were
able to document cost savings from these programs,
although in interviews several administrators asserted
that the program’s primary goal is to improve patient
outcomes.
Nineteen states with a primary care-based initiative
such as a patient-centered medical home, direct
primary care program, or worksite clinic. While only
two states were able to document cost savings from
these programs, in interviews several administrators
argued that their primary goal was to improve care
coordination and health outcomes, not to cut costs.
Nineteen states have implemented risk-sharing payment
models in which providers agree to take on some
nancial risk for their patients’ health care costs. Three
states reported cost savings from these initiatives.
Variations in SEHPs’ Role and Structure Affect Ability to
Achieve Cost Containment Goals
Each SEHP operates within a unique environment,
with longstanding and evolving political, market, and
operational dynamics that make it challenging to identify
strategies that can be replicated across multiple states.
For example, while a dozen SEHPs have a sizable
proportion of commercial market enrollment (between
11-22 percent), 20 states have less than a 5 percent
market share. This is largely because their programs are
fragmented, with benets for teachers, local employees,
and others administered separately. Many states also
dilute their purchasing power by offering options from
more than one insurer or third-party administrator.
Only four states reported collaborating with another
state agency, such as Medicaid, to implement a cost
containment initiative. Most interviewees indicated that
such collaboration is too difcult, given the different
missions, structures, and regulatory requirements of the
relevant agencies. However, Washington ofcials report
very positive results from that state’s efforts to consolidate
the state’s purchasing power.
Resistance from Stakeholders is a Top Barrier
Several SEHP administrators we interviewed noted that it
takes constant, diligent effort to educate their governing
boards, legislature, and other policymakers about cost
trends and the evidence supporting the effectiveness of
proposed initiatives. Employees themselves are also often
resistant to any perceived erosion in the generosity of their
benets. Indeed, SEHP administrators face a potentially
more challenging set of stakeholders than private
employers. While private employers need to educate their
boards and employees, SEHP administrators also must
confront the perspectives of state legislators and the
providers that are often the largest employers in those
legislators’ districts.
Fourteen states have engaged in direct negotiations
with providers. Of these, four reported that they had
generated cost savings from removing the middleman
(often called the third-party administrator) from the
process.
Twelve states offer employees a narrow or tiered
network plan, and four of these report measurable cost
savings from these plans.
Seven states have or are pursuing initiatives to set
provider rates or peg them to a reference price, such
as the Medicare rate. Three additional states report the
intent to implement similar programs. Montana reports
$47.8 million in savings over three years, and Oregon’s
program is projected to save the state $81 million.
Other Cost Containment Efforts:
Utilization Management, Fraud Prevention,
and Global Budgets
States reported engaging in numerous additional cost
containment strategies, including the management of chronic
and high cost diseases and behavioral health services, prior
authorization or referral requirements, an annual spending
growth target or cap, non-traditional procurement strategies,
and fraud prevention and detection.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 3 -
The Role of Labor: Antagonist and Advocate for
Cost Containment
Approximately 36 percent of state and local government
workers are union members. Unions are well aware of
the burden of rising health care costs on total employee
compensation, but they generally advocate to maintain
or expand health benets for state employees. The 21
SEHPs reporting a collective bargaining agreement in
place are more likely to report offering generous plan
benets than their 26 less unionized peers. However,
unions have also proven to be helpful allies in SEHPs’
efforts to tackle high provider prices. For example, union
representatives in North Carolina, Montana, and Oregon
have been key supporters of their SEHPs’ efforts to use a
Medicare reference price for hospital services.
The Role of SEHP Vendors in Cost Containment Efforts
Almost all our responding states contract with third-party
administrators (TPAs) and other vendors to perform a
range of functions. Of the 44 states that self-fund their
health plans, 26 rely exclusively on the TPA to negotiate
provider contracts. Some SEHP administrators we
interviewed reported that they contractually incentivize
their TPA to implement cost containment initiatives,
including nancial penalties if it fails to meet a savings
target. Several interviewees also indicate that it can be
challenging to wrest their claims data from their TPAs,
and for those that do they may have limited in-house
capacity to analyze and act on it. Fourteen of the 47
survey respondents report that they use procurement
strategies to achieve certain cost containment goals,
such as “reverse auctions” or an “invitation to negotiate”
program.
A Work in Progress: Future Cost Containment Strategies
Eight states report that they intend to implement
provider risk-sharing, direct contracting, or reference
pricing initiatives that tie provider reimbursement to
a benchmark, such as the Medicare rate. Meanwhile,
although only one state identied excess utilization as its
primary cost driver, ten states plan to expand programs
that attempt to lower or optimize utilization, such as
HDHPs, value-based insurance design, workplace
wellness, Right to Shop, and price transparency.
Lessons Learned from SEHP Cost Containment Initiatives
In the survey and interviews, we heard several recurring
themes from SEHP administrators:
Education and communication. SEHPs must
build buy-in among both government and external
stakeholders for initiatives that target the actual drivers
of SEHP cost growth.
Leveraging data. Access to claims data and the
capacity to analyze it, without relying on the TPA,
are critical to implementing and evaluating cost
containment initiatives.
The “Lesser of Evils” option. Sometimes threatening
providers with a relatively draconian cost containment
initiative can make them more amenable to another
one that doesn’t cut so deeply, but still generates
meaningful savings or meets other key goals.
Vendors are not your friend. SEHP administrators
report that TPAs are often too complacent or actually
resistant to cost containment initiatives. Several
report promising returns, however, from using the
vendor procurement process and accountability
clauses in TPA contracts to push TPAs to do more.
Tailoring to local conditions. SEHP administrators
frequently identied reasons why a cost
containment initiative successful in another state
would not be replicated in their state. Any effort to
constrain health system cost growth needs to be
designed for the health care system and culture that
the state actually has.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 4 -
Conclusion
In general, SEHP administrators are fully aware that hospital prices are the primary driver of the steady increase in the
cost of employee health benets. Yet they remain focused on secondary drivers such as excessive or inappropriate
utilization. That said, some SEHPs are demonstrating that it is possible to rein in hospital prices through a mixture of
political will, creative thinking, and simple hard work. It will be important to document the long-term impact of these
efforts and share successful outcomes, including state savings and lower enrollee premiums and cost sharing, so that
other SEHPs as well as other government and private purchasers can learn from and implement similar programs.
1
Bureau of Labor Statistics, Current Employment Statistics survey: In March 2020, there were 5.24 million state government workers
(series ID CES9092000001) and 14.65 million local government workers (series ID CES9093000001). Bureau of Labor Statistics.
National Compensation Survey: In March 2020, 78 percent of state and local workers participated in health care benets (series ID
NBU39400000000000026172). On le with authors.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SEHP Cost Containment Initiatives. . . . . . . . . . . . . . . . . . . . . . . . 9
Cost Containment Targets are Not Aligned with Cost Drivers . . . . . . . . . . . . . . 9
Benet Design Initiatives: Shifting Costs to Constrain Utilization . . . . . . . . . . . . . 10
High Deductible Health Plans: The Most Popular Unpopular Benet Strategy . . . . . . . . 10
Value-based Insurance Design: Savings Hard to Find . . . . . . . . . . . . . . . . 11
Workplace Wellness Programs: Limited Evidence of Effectiveness . . . . . . . . . . . . 11
Reference Pricing or “Right to Shop”: Potential for System-wide Savings? . . . . . . . . . 12
Provider Payment and Network Design Initiatives: Challenges, but Potential for High Rewards. . . . 12
Centers of Excellence: A Lower Price is Not the Primary Goal . . . . . . . . . . . . . 13
Primary Care-based Initiatives: Better Health Outcomes, Less Evidence of Cost Savings . . . . 13
Risk-sharing Arrangements: Easier Said than Done . . . . . . . . . . . . . . . . 14
Direct Contracting: Cutting out the Middleman . . . . . . . . . . . . . . . . . . 16
Narrow and Tiered Provider Networks: Where Feasible, Positive Returns . . . . . . . . . 16
Rate Setting, Reference Pricing: Exercising Market Power to Improve Affordability . . . . . . 17
Other Cost Containment Efforts: Utilization Management, Fraud Prevention, Global . . . . . . . . 18
Budgets and More
Variations in SEHPs’ Role and Structure Affect Ability to Achieve Cost Containment Goals . . . . . . 19
Cross-Agency Collaboration is the Exception, not the Norm. . . . . . . . . . . . . . . 19
Resistance from Internal and External Stakeholders is a Top Barrier to Cost Containment . . . . . 20
The Role of Labor: Antagonist and Advocate for Cost Containment . . . . . . . . . . . . . 21
The Role of SEHP Vendors in Cost Containment Efforts . . . . . . . . . . . . . . . . . 22
Setting Performance Targets . . . . . . . . . . . . . . . . . . . . . . . . . 22
Leveraging the Procurement Process . . . . . . . . . . . . . . . . . . . . . . 22
Access to and Use of Claims Data . . . . . . . . . . . . . . . . . . . . . . . 23
Maintaining a Level Playing Field: Risk Mitigation Strategies. . . . . . . . . . . . . . . 23
A Work in Progress: Future Cost Containment Strategies. . . . . . . . . . . . . . . . . 24
Lessons Learned from SEHP Cost Containment Initiatives . . . . . . . . . . . . . . . . 25
Education and Communication . . . . . . . . . . . . . . . . . . . . . . . . 25
Leveraging Data to Achieve Cost Containment Goals . . . . . . . . . . . . . . . . . 25
The “Lesser of Evils” Option: Getting Provider Stakeholders on Board . . . . . . . . . . . 25
Vendors are Not Your Friend: Breaking Down Complacency and Inertia to Reach Cost Savings Goals . 26
No Cookie Cutters: Programs Must be Tailored to Unique State Conditions . . . . . . . . . . 26
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Unleashing the Giant:
Table of
Contents
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Opportunities for State Employee Health Plans to
Drive Improvements in Affordability
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 6 -
Introduction
By 2028, U.S. health spending is projected to comprise
19.7 percent of the economy, up from 17.7 percent in
2018.
1
In 2020, average annual family premiums for
employer-sponsored health insurance reached $21,342,
equaling almost one-third of median household
income.
2, 3
The average annual deductible now exceeds
$1,600 for single coverage, an increase of 25 percent
over the last ve years.
4
These high and rising costs
are squeezing workers’ wages, hindering business
competitiveness, and straining state and federal budgets.
The agencies that purchase health benets for state
employees are uniquely situated to tackle health care
costs. They are often the largest employer purchaser in
their state and have the potential to exert considerable
pressure on insurers and providers, if they choose to
do so. Most pay for health care services at the relatively
high commercial rates that private insurers pay, even
though they are government-run plans. Given their
size, efforts they undertake to shift provider incentives
and encourage greater efciencies can, in some cases,
result in system-wide changes. This may be why some
lawmakers have used the state employee health plan
(SEHP) as a testing ground for health policy innovation.
For example, lawmakers in Utah often require the SEHP
to pilot state benet mandates before they will consider
extending them to the commercial insurance market.
Lawmakers in Wisconsin interested in giving consumers
more “skin in the game” with respect to health care costs
required the SEHP to offer a high deductible health plan.
The Oregon legislature has tapped the state employee
plan to be the centerpiece for broader cost containment
initiatives by capping how much its SEHP pays hospitals
at a Medicare “reference price.”
5
SEHP administrators are often under considerable
pressure to generate savings, as the cost of health
care strains state budgets. In 2019, state and local
governments spent $187.9 billion on premiums for
employee health plans, up from $123 billion in 2009.
6
At the same time, they can be under pressure from
employees to maintain generous benets. This can mean
difcult choices between the two main drivers of the
cost of insurance coverage: utilization and unit prices.
To depress health care utilization, plans may need to
increase enrollee costs at the point of care, such as
through deductibles and other cost sharing. To depress
unit prices (the price charged for each service), plans
often must be willing to tell a major local hospital or
physician group that they will be dropped from the plan
network unless they lower their charges. Neither are
popular with employees or their families.
Many SEHP administrators are, understandingly,
cautious in their approaches to cost containment. State
employees tend to place a high value on generous health
benets. Indeed, many have traded the high salaries they
might command in the private sector for more generous
benets in the public sector.
7
This makes any effort to
trim those benets, or the choice of providers, a perilous
one. Nevertheless, rising prices paid to providers in the
commercial insurance market, coupled with a challenging
budget environment in most states, have prompted some
SEHPs to initiate cost containment strategies that could
have a far-reaching impact. Not all of these are replicated
in every state, but several initiatives hold considerable
promise, and there is much to be learned from the
states’ experiences designing and implementing these
programs.
Through a comprehensive survey of SEHP administrators
and in-depth interviews, this study details the landscape
of state employee plans across the country. We assess
a range of cost containment strategies implemented
by SEHPs, and share lessons for building on those that
appear most promising.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Methodology
To better understand the structure and governance of
each state’s SEHP and the cost containment initiatives
it has undertaken, we rst conducted an environmental
scan of relevant scholarly publications and major media
coverage about SEHPs and cost containment from the
past ve years. We also identied the agency in each of
the 50 states and the District of Columbia responsible for
administering its SEHP. Because many states have more
than one entity that administers benets for state and
local government employees, we focused on identifying
the agency or entity responsible for administering
benets for state executive branch employees. Further,
because there are often different priorities, structures,
and nancing mechanisms for the administration of
retiree health plans, we excluded from our analysis
agencies that administer benets solely for retirees.
Once we identied the SEHP administrator in each
state, we elded a survey between September 15 and
December 7, 2020 to collect data on SEHP organizational
structure and benets. We also asked SEHP
administrators to identify the primary cost drivers for their
plans, any cost containment initiatives implemented in
the last three years, barriers to implementation of those
initiatives, and any documented cost savings resulting
from those initiatives. For the survey questions, see
Appendix I.
SEHP administrators were asked to select cost
containment initiatives implemented within the last three
years from a list of 17 initiatives (Appendix II) that were
categorized as follows: (1) benet design initiatives, (2)
provider payment and network design initiatives, (3)
utilization management initiatives, and (4) a catch-all
category that included annual spending or growth caps,
procurement strategies, and fraud prevention.
We then used the survey responses to select 11 SEHP
administrators for in-depth, structured interviews about
the challenges and opportunities they have faced
in implementing their cost containment initiatives.
These administrators represent SEHPs in California,
Connecticut, Kansas, New Jersey, New Mexico,
Oregon, South Carolina, Tennessee, Utah, Washington,
and Wisconsin. They were selected based on the
number and types of cost containment initiatives
they have undertaken. We also sought diversity of
geographic region, union presence, membership size,
and commercial prices for hospital services relative to
Medicare rates, as determined in a 2020 RAND study.
8
Limitations
Forty-seven states responded to our survey. We did
not receive responses from Arkansas, the District of
Columbia, Maryland, or South Dakota. Additionally,
several survey questions included qualitative responses,
requiring us to make subjective interpretations to allow
comparisons across states.
While cost containment with respect to pharmaceutical
benets is a major concern for SEHP agencies, for this
project we focused on initiatives that target enrollee
utilization of, and the prices for, hospital and ambulatory
services. State efforts to reduce the costs of SEHP
pharmacy benets merit separate study.
Additionally, we queried SEHP administrators about
their cost containment initiatives and documented
cost savings from those initiatives over the past three
years. However, states have varying capabilities and
metrics with respect to evaluating their programs. Some
states lack the capacity to conduct any assessments.
Additionally, it was not always clear from survey
responses if the savings reported were net of any costs
to design and implement the relevant initiative.
Finally, the COVID-19 pandemic made 2020 an atypical
year for health plans across the country, due to a
signicant decline in the utilization of elective and primary
care services. State employees also shifted to telework
in large numbers. This led administrators to report
challenges evaluating the effectiveness of certain recently
implemented initiatives, such as risk-based contracting
and worksite-based health clinics.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Background
About half the American population, or 158 million
people, receive health insurance through their employer.
9
Of these, approximately 15.5 million, or almost 10
percent, are employed by state and local governments.
10
Generally speaking, public sector employees earn less
than their peers in the private sector, but receive more
generous health and pension benets.
11
One metric
to measure the richness of a plan is actuarial value,
which is “the percentage of total average costs for
covered benets that a plan will cover.”
12
The enrollee
is responsible for the remaining costs. Of the 36 states
that responded to our survey question about the
weighted average actuarial value for their SEHP, 19 had
an actuarial value that fell between 80 and 90 percent,
while 14 had actuarial values over 90 percent. Only three
states reported actuarial values below 80 percent. Over
the last ve years, 28 survey respondents reported that
their plans’ actuarial value had either shifted higher or
stayed the same. Only nine reported reducing their plans’
actuarial value over the same period. See Appendix III.
Between 2005 and 2019, private employers paid on
average 70 percent of the cost of employee health
insurance premiums, whereas state and local government
employers picked up closer to 80 percent of the cost.
13
Of the 42 states that responded to our survey question
on how much they contributed to individual employee
premiums, 37 states said they paid between 80 and 100
percent, while 5 contributed less than 80 percent. Of the
41 states that responded to our survey question on how
much they contributed to premiums for the employee’s
family, 28 states reported paying between 80 and 100
percent of premiums, while 13 contributed less than that.
Although at least one SEHP administrator suggested
that the recession of 2008-2009 caused some states
to modestly reduce their contributions to employee
premiums, the majority of survey respondents said
that the state’s share of employee premiums had either
stayed the same or increased over the last ve years. See
Appendix IV.
These relatively generous contributions continue even
though health insurance premiums are generally higher
in the public sector. In the early 2000s, health insurance
premiums in the public and private sector were similar
but since then public sector premiums have risen faster
than private sector premiums. This is likely because
public sector coverage tends to be more generous than
in the private sector, with lower deductibles and cost
sharing. The public sector workforce also tends to be
older, female, have a high level of education, and more
likely to be in a union, factors that can contribute to
higher health care utilization.
14
For state employees, a state government agency
typically administers its health plan and makes
purchasing decisions with respect to plan benet and
network design. SEHP agencies are inuenced by the
same forces affecting private employers, such as rising
health care costs and the need to recruit and retain
skilled employees. However, they also are inuenced by
complex political forces and bureaucratic limitations,
such as restrictive government procurement laws or laws
that limit how much benets can be altered. There can
also often be tensions among the various government
entities responsible for managing state budgets and
employees and their union representatives, who generally
want to maintain their current level of benets.
The structure, authorities, and culture of SEHP
purchasing vary widely from state to state. For example,
our survey found that most SEHPs are available to active
state agency employees, retirees, legislators, and state
university system employees (faculty and staff), but
only half of SEHP plans are available to school district
employees (teachers and staff) and local, municipal,
or county employees. In these states, local school
districts and municipalities either have their own pooled
purchasing structure or independently purchase health
coverage for employees. See Appendix V.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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SEHP Cost Containment Initiatives
Cost Driver Number of States
Prices of hospital services
23
Prices of prescription drugs
21
Excessive or inappropriate
utilization
1
Prices of physician or other
ambulatory services
1
Table 1. Single Highest Plan Cost-driver,
Identified by SEHP Administrators
Source: Authors’ analysis of survey responses. Respondents were
permitted to select only one of the above cost drivers. This question
received 46 responses.
Cost Driver Number of States
Prices of prescription drugs
40
Excessive or inappropriate
utilization
32
Prices of hospital services 27
Prices of physician or other
ambulatory services
21
Table 2. Primary Targets for Cost Containment
Initiatives
Source: Authors’ analysis of survey responses. Respondents were
permitted to select multiple potential cost drivers. This question
received 47 responses.
Initiative Number of States
Disease management for
chronic disease
41
Case management for high-cost
enrollees
37
Prior authorization
33
Auditing of claims 30
Centers of Excellence 23
Table 3. Top Five Cost Containment Initiatives
Implemented in the Past Three Years
Source: Authors’ analysis of survey responses. Respondents were
permitted to select multiple cost containment initiatives out of a list
of 17 initiatives. This question received 47 responses. For detailed
information on cost containment initiatives implemented in the past
three years by each state, see Appendix VI.
Cost Containment Targets are Not
Aligned with Cost Drivers
In their survey responses and interviews, SEHP
administrators identied hospital prices as their largest
cost driver. This is consistent with the commercial
insurance market generally, where payments for inpatient
and outpatient hospital services is the single largest
category of spending.
15
However, hospital spending
has not been the most common target for SEHPs’ cost
containment initiatives. Instead, states have focused
more on prescription drug costs and utilization (see
Tables 1 and 2).
In fact, among the top ve cost containment initiatives
cited by states in their survey responses, only one—
Centers of Excellence—has the potential to affect hospital
pricing (see Table 3). For detailed information on cost
containment initiatives implemented in the past three years
by each state, see Appendix VI.
SEHP administrators cited three primary reasons for the
disconnect between a known top cost-driver—hospital
prices—and the types of cost containment initiatives they
pursue:
Lack of competition. Hospital providers have
considerable leverage in price negotiations, as plans
must keep hospitals “in network” to maintain adequate
access for enrollees. For example, one state respondent
noted that only one city in their state had any hospital
competition at all. Another noted that in rural areas of
his state, “having preferred providers or [network] tiers”
would not be viable. In another state, a large integrated
health system leverages its “must have” status as an
in-network provider to keep prices high, leaving SEHP
administrators with utilization management and benet
design changes as their primary tools to contain costs.
Political clout. SEHP administrators are acutely
aware of the political power of hospitals within their
communities, which often results in signicant pressure
from local legislators to keep them “well-fed and
happy.” For example, North Carolina’s hospital lobby
has used its political muscle to stall the state’s plan to
cap prices at a percentage of the Medicare rate.
16
Employee pressure. Several administrators felt that
they would experience signicant backlash from
enrollees if they attempted to cut a high-priced hospital
from their network, or signicantly increased their cost
sharing for obtaining services there.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 10 -
These challenges have led many SEHP administrators
to focus instead on constraining enrollees’ use of health
care services through deductibles and other benet
design strategies. These strategies also engender
opposition from employees and union stakeholders
because they involve shifting plan costs to enrollees
through higher cost-sharing. However, benet design
strategies can often be calibrated so that enrollees feel
the impact only gradually over time (such as an annual
increase in the plan deductible). Or they may affect a
minority of enrollees (such as those who do not achieve
a desired health outcome or who use a particular type
of health care service), thus blunting the potential for
blowback from employees.
Benefit Design Initiatives: Shifting
Costs to Constrain Utilization
SEHPs have initiated a range of cost containment initiatives
that target enrollee utilization of health care services by
adjusting deductibles and point-of-service cost sharing.
The idea is to change the incentives enrollees face in their
decisions to use health care services. These include:
Introducing high deductible plan options;
Lowering cost sharing for “high value” health care
services and increasing it for “low value” health care
services (known as “Value-based Insurance Design”);
Adjusting cost sharing for enrollees who participate in
wellness programs or meet health targets; and
Charging enrollees high cost sharing if they receive
health care services from high-priced providers (often
called reference pricing or “Right to Shop”). See Table 4.
Initiative Number of States
High deductible health plan(s)
30
Value-based Insurance Design
plan(s)
18
Workplace Wellness program 15
Reference Pricing* or Right to
Shop
10
Table 4. SEHPs that Implemented Benefit Design
Initiatives to Constrain Costs in the Past Three Years
Source: Authors’ analysis of survey responses. Respondents were
permitted to select more than one initiative. This question received 47
responses. For detailed information on cost containment initiatives
implemented in the past three years by each state, see Appendix VI.
* Reference pricing in this context refers to a benet design program
that exposes plan enrollees to higher point-of-service cost sharing if
they use a provider who charges more than a reference price.
Public sector employers are often more constrained in
their ability to adjust cost sharing than their private sector
counterparts. Some SEHPs cannot materially alter the
cost-sharing structure of their plans without legislative
approval or a burdensome regulatory process. Others
may have the requisite authority but must get approval
from union representatives or a governing board. In
states with collectively bargained plans, increasing
enrollee cost sharing is often seen as a “non-starter,”
with one administrator calling it a “third rail” issue. While
states with less union presence appear to have more
latitude to modify employee cost sharing, administrators
in those states report feeling constrained by employees’
expectations that they maintain generous benets. As a
result, most SEHPs we interviewed said that they have
made few changes over the years with respect to the
overall generosity of their plans.
High Deductible Health Plans: The Most Popular
Unpopular Benefit Strategy
Thirty of the 47 responding states offer their active
employees a high deductible health plan (HDHP) option,
with 23 of them offering it in conjunction with a Health
Savings Account (HSA), and 18 of those contributing
money to the HSAs. See Appendix VII. However, only one
survey respondent reported documented cost savings
from increased enrollment in HDHPs.
State administrators report that employee take up
of HDHPs has been low where the SEHP does not
contribute to an HSA. This is also borne out by our
survey responses. Twenty of the thirty states that offer
HDHP options to their employees had less than 10
HIGH DEDUCTIBLE HEALTH PLAN AND
HEALTH SAVINGS ACCOUNT
A HDHP is a health plan with a higher deductible
than a typical health plan. The monthly premium
is usually lower, but the enrollee will pay more
out-of-pocket for health services until the plan
coverage begins (once the deductible is met). A
qualifying HDHP can be combined with a health
savings account (HSA), allowing the enrollee to
pay for certain medical expenses with money
free from federal taxes.
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VALUE-BASED INSURANCE DESIGN
The plan incentivizes enrollees to use health
care services it deems “high value,” such as
primary care, generic drugs, and chronic disease
management, by lowering enrollee cost sharing
for those services. It may also try to reduce
enrollee utilization of services deemed “low value”
by increasing associated cost sharing.
percent of their insured population enrolled in them,
even though over half (11) contribute to their employees’
HSAs. During our interviews, SEHP administrators noted
that employees may not fully understand the nancial
risk they adopt when they sign up for a HDHP, noting low
health insurance literacy among employees. “There were
many in the agency who felt people would be getting
into something they didn’t quite understand,” observed
one. Another state reported that it has launched an online
education program to walk employees through the risks
and benets of HDHPs, which they say has “helped a lot”
of employees better assess their options. The agency is
planning to implement a benets warehouse system to
help enrollees review their personal claims histories to
enable a more informed plan choice.
Administrators also identied the potential for HDHPs to
lead to adverse selection. Indeed, one administrator told
us that they had signicant migration of healthy enrollees
when they rst offered a HDHP, requiring them to risk-
adjust premiums across their plans so that the premiums
reect only the richness of the plan and not the expected
health care usage of the plan’s enrollees.
Three of the states we interviewed do not offer HDHPs
at all. One administrator informed us that agency staff
are “opposed to cost-shifting as a strategy,” while also
noting a general “hatred” of HDHPs among enrollees and
union stakeholders. Another observed that stakeholder
resistance even to “moderate deductibles” made the
issue moot for their plans.
Value-based Insurance Design:
Savings Hard to Find
Eighteen states reported that they have implemented a
value-based insurance design (VBID) initiative in the last
three years. Two of these reported that VBID has been a
source of documented cost-savings.
In interviews, SEHP administrators noted that developing
VBID programs can require considerable resources. They
also can be “spotty,” as described by one administrator,
who noted that they have rolled out a range of initiatives,
such as reducing cost sharing for osteoporosis medication
and diabetes management and waiving cost sharing for
physical therapy to help combat the overuse of opioids.
“We haven’t been able to measure the impact of a lot of
these,” she said. “They’re not widespread and many of
them are still very new.” Another state noted that its board
wanted to pursue VBID “because everyone said that saves
money.” Ultimately, however, she described their VBID
initiative as a “hodgepodge” of ideas to incentivize enrollee
behavior through cost sharing, suggesting there had been
little in the way of an overarching vision or strategy for the
program. “In terms of result,” this administrator reported,
“it’s been in effect for two years now, and we haven’t seen
any clear dollar savings.”
Workplace Wellness Programs:
Limited Evidence of Effectiveness
Fifteen responding states reported that they have
implemented workplace wellness initiatives within the last
three years. Only two of these attributed any cost savings
to these initiatives.
WORKPLACE WELLNESS INCENTIVES
A program that attempts to encourage enrollees to
adopt healthy behaviors or achieve a pre-determined
health outcome (such as body mass index or
cholesterol level) by tying health plan premiums or
cost sharing to participation in a wellness program or
achievement of the health outcome.
Among the states we interviewed, most indicated
that their wellness programs were limited to offering
employees a modest amount of money or reducing
their plan cost sharing if they took an annual health risk
assessment* or agreed to undertake certain healthy
actions during the year. However, these administrators
had little to report in terms of these programs’ ability to
produce better health outcomes or savings for the plan.
*
A health risk assessment or HRA is a questionnaire that evaluates
lifestyle factors and risks that can affect an individual’s health. Questions
in an HRA often cover nutrition, tness, stress, sleep, and mental health
status. Many also collect biometric information such as blood pressure
and cholesterol.
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One SEHP administrator noted that they had found their
program, which offered employees a gift card to complete a
health risk assessment and biometric screening,*
“remarkably unsuccessful.” They are now shifting their
focus to programs that are not incentive-based. For
example, she touted a recently implemented program that
offers enrollees tools and informational videos on how to
lose weight. “Within eight weeks our members had lost over
20,000 pounds. People are really eager to do the right thing
if you give them the right tools.”
However, another state was able to report strong results
from what they described as their “quite elaborate” wellness
program, which offers employees the ability to earn
“wellness credits” towards their premiums or deductibles.
Within the last three years, they have reported declines
in spending on nine of their top ten chronic conditions,
representing approximately one percent of their total spend.
* A biometric screening is a brief health exam that includes bloodwork
and measurements like height, weight, and waist circumference.
Reference Pricing or “Right to Shop”: Potential
for System-wide Savings?
Ten states in our survey reported implementing a
reference pricing or “Right to Shop” initiative to steer
enrollees to lower cost providers in the last three years.
Of these, three states attributed plan cost savings to
these programs.
REFERENCE PRICING
A program in which the health plan surveys provider
prices for a specic service within a dened
geographic area and determines a cap or “reference
price” as the maximum it will pay for that service.
If the enrollee chooses to receive services from a
provider that charges a higher price than the reference
price, the enrollee must pay the difference. This
type of reference pricing should not be confused
with initiatives that peg provider reimbursement to
a percentile of the Medicare rate. This is also often
called reference pricing.
RIGHT TO SHOP
Similar to the reference pricing strategy, when an
enrollee chooses a lower price provider, the health
plan will share the savings with the enrollee in the
form of reduced cost sharing.
In interviews, SEHP administrators touted these
programs’ potential for cost savings, not just for their
plan, but for other purchasers as well. For example, when
one SEHP implemented a reference pricing program for
joint replacement procedures, it prompted the hospitals
where those services were being performed to implement
cost savings measures for all joint replacements, not
just those provided to SEHP enrollees. Although it is not
possible to know whether these hospitals passed the
savings onto other commercial purchasers, “We’ve seen
dramatic savings [for the SEHP],” which the administrator
estimated at approximately $10 million annually.
Administrators did ag factors that can serve as barriers
to implementing Right to Shop programs. First, two states
noted that it can take a lot of clinical work and a big data
team to identify the list of “shoppable” services and the
high value providers for those services. Another state
observed that the lack of these resources within their
agency made it hard to measure provider performance.
Second, states reported challenges educating enrollees
about these programs at the point in time when enrollees
are making decisions about needed services. To address
this, administrators are developing web tools for price
comparisons, sending letters to enrollees when they
schedule a shoppable service, and informing participating
surgeons about the relative costs of facilities within the
reference pricing program. However, states note that
these programs are largely non-viable in areas facing
provider shortages or a single dominant health system.
Provider Payment and Network
Design Initiatives: Challenges, but
Potential for High Rewards
A majority (57 percent) of SEHPs report that, in the last
three years, they have pursued strategies that target
rising prices for hospital services, and 46 percent say they
have implemented initiatives to reduce their spending for
physician or ambulatory services. They are largely doing
so through network design strategies, including:
Establishing Centers of Excellence for selected
medical procedures;
Creating incentives for improved primary care access
and care coordination;
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Entering into nancial risk-sharing arrangements with
physician groups and health systems;
Directly contracting with selected providers;
Offering narrow or tiered provider network plans;
Establishing a maximum or standard reimbursement
rate for provider services, in some cases by reference
to the price Medicare pays. See Table 5.
Initiative Number of States
Centers of Excellence
23
Primary Care-based strategies
19
Risk-sharing arrangements
19
Direct contracting
14
Narrow or tiered provider
networks
Narrow: 7
Tiered: 4
Both: 5
Rate-setting or reference pricing 7
Table 5. SEHPs that Implemented Network
Design Initiatives to Constrain Costs in the Past
Three Years
Source: Authors’ analysis of survey responses. Respondents were
permitted to select more than one initiative. This question received
47 responses. For detailed information on cost containment
initiatives implemented in the past three years by each state, see
Appendix VI.
Centers of Excellence
When health plans incentivize the use of integrated
medical systems that have demonstrated their
ability to deliver better patient outcomes at a lower
cost for certain (or specic) groups of conditions
such as heart, cancer, spine and transplants.
Centers of Excellence:
A Lower Price is not the Primary Goal
Although the Center of Excellence is the most popular
network-based cost containment initiative cited in
our survey, it has been implemented in only 23 of the
responding states in the last three years.
While four additional states reported that they are
considering Centers of Excellence as a future cost
containment tactic, only two of the 23 states with
Centers of Excellence reported any documented cost
savings from these programs. Of the eleven states we
interviewed, seven have pursued Centers of Excellence to
varying degrees. They are all limited in scope, and none
* States use different terms to refer to the entities that help administer
their health plans. States with self-funded plans use third-party
administrators (TPAs), managed care organizations (MCOs), and
administrative services only (ASO) entities to conduct a range of
administrative functions while the plan itself bears the nancial risk of
paying claims. States with fully insured plans purchase insurance from
health insurance issuers that both bear nancial risk of paying claims
and perform critical plan functions such as benet and network design,
utilization management, and claims processing.
offer Centers of Excellence for the full range of potential
procedures. Several states have established a Center
of Excellence for only one procedure to date, and there
were mixed responses to whether they would expand the
program to include more.
Other states with multiple insurers or third-party
administrators (TPAs)* may have established a Center of
Excellence with just one insurer or TPA, limiting the amount
of enrollee trafc they can drive to the Center of Excellence,
and thus limiting the potential discounts they can extract.
Other states consider the primary goal of their Center of
Excellence programs to be improving clinical quality and
patient outcomes, not extracting price concessions from
providers. As one administrator put it, “the overarching
idea is that if they have better quality you will get the
cost savings [through] good outcomes and [fewer]
readmissions.”
Others discussed why they have chosen not to develop a
Center of Excellence program, which include objections
from key stakeholders. For example, one SEHP
administrator recalled encountering “a lot of resistance”
to offering nancial incentives for enrollees to travel to a
large urban center for certain procedures, instead of using
their local provider. “Most communities—and the state
representatives from those communities—are ercely loyal
to their local hospital,” he said.
Primary Care-based Initiatives: Better Health
Outcomes, Less Evidence of Cost Savings
The second-most popular network-based initiative cited
in our survey relates to primary care, with 19 states
indicating that they had implemented one or more of
the following strategies in the last three years: Patient-
centered Medical Home, Direct Primary Care, and
worksite or worksite-adjacent clinics.
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SEHP administrators widely recognize that access to
primary care is critical to improved health outcomes,
and only two percent of states indicated that the cost
of ambulatory services is a driver of rising costs for
their plan. As a result, a key focus of their primary care-
based initiatives is quality improvement, better care
coordination, and reduced absenteeism, leading to
investments that may not always translate into observable
or short-term cost savings.
Two states in our survey have been able to document cost
savings from their Patient-centered Medical Home programs.
In interviews, administrators were generally positive about
the impact of Patient-centered Medical Homes. One
reported “very promising” results from its “direct primary
medical home” program, noting a reduction in emergency
room admissions as well as high patient satisfaction. Another
state views its primary care initiatives as part of a longer-
term effort to shift physician groups from fee-for-service
based payment to a risk-sharing arrangement that includes
accepting some downside nancial risk. This SEHP worked
with its TPA to create Patient-centered Medical Homes over
a decade ago and over time has converted those medical
homes into accountable care organizations accepting risk-
based payments. Today, 85 percent of their primary care
practices are in accountable care organizations.
Worksite, or worksite-adjacent, primary care clinics have
grown in popularity. One state cited it as a source of cost
savings. However, although sometimes pitched as a
cost containment strategy, several SEHP administrators
disagreed with that characterization. One noted that cost
savings have been “difcult to demonstrate.” Another argued
that the clinics’ primary benet is convenience for employees
and reduced absenteeism. Yet another state that recently
opened its worksite clinics observed that COVID-19 and the
sudden switch to a virtual workplace had negated whatever
potential benets the clinics could provide.
Risk-sharing Arrangements:
Easier Said than Done
Nineteen states reported implementing, in the last
three years, payment models in which providers take
on nancial risk through either rewards or penalties (or
both) based on their ability to deliver services at lower
cost, better patient outcomes, or better performance on
selected quality metrics. These risk-based arrangements
can take various forms, such as capitation, accountable
care organizations, or episode-based payments.
Three states in our survey reported that they could
document cost savings associated with one or more
risk-sharing arrangements. In interviews, several
SEHP administrators had high hopes that risk-sharing
payment models would result in better patient care and
PRIMARY CARE-BASED INITIATIVES
Patient-centered Medical Homes: A primary
care delivery model that emphasizes
comprehensive and coordinated health care.
Medical homes are accountable for meeting the
physical and mental health needs of patients with
an emphasis on prevention and wellness. Services
are often delivered by a care team that includes a
variety of providers including physicians, advance
practice nurses, pharmacists, dietitians, social
workers and care coordinators. Care is expected
to be accessible after hours on an urgent basis
and to follow high quality and safety practices.
Direct Primary Care: A model of delivering
primary care services that charges patients a
monthly, quarterly, or annual fee in exchange for
on demand primary care services that often also
includes laboratory services, care coordination,
and disease management services. DPC is often
used in addition to a regular health insurance
plan that covers hospitalization and emergency
services.
Worksite Clinics: A setting in which an employer
provides access to medical services exclusively
for its employees. Clinics are often located in
close proximity or in the same facility as the
workplace and are offered as an employee benet
for easy access to health services for employees.
Such clinics have the potential to help employers
improve worker productivity and lower overall
health costs by steering patients to lower cost
specialty or other services.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 15 -
demonstrable efciencies. “Rather than constantly
trying to . . . increase utilization within their facilities and
increase their reimbursement rates,” one said, “we’re
trying to have [providers] compete . . . to improve their
quality and efciency.” For many SEHPs, their contracts
with TPAs require the TPAs to engage in, and grow, their
risk-sharing arrangements with providers.
However, administrators cited several obstacles to these
programs. Two states are in the process of implementing
episode-based payment models with their network
providers. Both noted that the effort is resource intensive
for their agency. It’s “a ton of work,” one said.
RISK-SHARING ARRANGEMENTS
Capitation: A provider or group of providers
agrees to accept a certain amount of compensation
per patient over a dened period of time, such as
per month. If the cost of delivering services to those
patients exceeds the amount received from the
payer, the provider bears the nancial loss.
Accountable Care Organizations (ACOs): A model
of delivering services where a group of providers
work together to coordinate care for patients. If the
ACO meets quality and cost-savings targets, they
share in those savings with the payer. Some ACOs
also take on “downside” nancial risk, meaning
that they must bear the nancial loss if the cost of
delivering care exceeds a target amount.
Episode-based Payments: A provider or group of
providers will receive a pre-established total amount
of compensation for a patient’s sequence of care
related to a single episode or medical event, instead
of a fee for each service delivered by each individual
provider. If the patient’s care for that episode
exceeds the pre-determined amount, the provider
must bear the nancial loss.
Value-based Payments: Also sometimes called
“Pay for Performance,” these programs link
providers’ performance on quality metrics, and
sometimes cost savings targets, to enhanced
reimbursement.
Other administrators pointed to challenges getting providers
to agree to risk-sharing arrangements, particularly those that
have the potential for downside nancial risk. However, there
is evidence that payment programs that expose providers
solely to upside risk do not generate savings (and indeed,
can even increase costs).
17
“We have an open invitation”
to providers to engage in a risk-sharing initiative with both
upside and downside nancial risk,” said one administrator.
“Not tons of success yet, but we have it out there.” Another
began its risk-sharing initiative by requiring providers to
take on both upside and downside risk, but had to reverse
course. “We got a lot of pushback—and a lot of legislative
pushback . . . we ended up with just upside [risk] after
the pushback from providers.” Additionally, hospitals and
hospital systems are less likely to participate in accountable
care organizations because they are disinclined to take on
downside risk, and often have the market power to reject
such requests during contract negotiations.
18
As a result,
accountable care organizations in the commercial insurance
market often only involve physician group practices.
One SEHP leveraged a credible threat of shifting to
Medicare-based reference pricing (with support from the
Governor’s ofce) to bring providers to the negotiating
table for a risk-sharing initiative that requires them to
take on downside nancial risk. The administrator noted
that, while the risk-sharing arrangement is a “longer-term
strategy” than reference pricing, he hoped it would better
align incentives between providers and the state as a
purchaser, leading not only to lower costs but also to quality
improvement.
Another frustration with accountable care organizations is
that the payment incentives are on top of a reimbursement
structure that is entirely based on a fee-for-service model,
so that providers retain strong incentives to deliver
excess services. One state, for example, abandoned its
accountable care organization program in favor of an
episode-based care initiative for that reason. “About three
years ago, we’d had enough with the [accountable care
organization] negotiations between the [TPAs] and the
providers, because they always ended up back at fee-for-
service,” he said.
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Direct Contracting:
Cutting Out the Middleman
Fourteen states reported engaging in direct negotiations
or contracting with providers in the last three years,
essentially cutting their TPA out of the process. Of these,
four states reported documented cost savings from their
direct contracting initiative.
that they could make no believable threat to drop them
from the network. And another noted that his state had a
severe provider shortage, similarly reducing their ability to
ask those providers to agree to greater discounts.
Narrow and Tiered Provider Networks: Where
Feasible, Positive Returns
Twelve states in our survey indicated that they had
offered SEHP enrollees a narrow network plan in the last
three years. Five out of the 12 SEHPs also offer tiered
network plans. Another four states have offered just
tiered network plans in the last three years. Both types
of networks have the potential to generate savings by
encouraging providers to agree to discounted prices in
exchange for higher patient volume.
DIRECT PROVIDER CONTRACTING
Direct-to-provider contracting is a strategy in
which a self-insured entity negotiates a contract
directly with a provider of health care services
rather than through a TPA. The goals of such
efforts include obtaining lower provider prices than
achieved by the TPA, engaging in a risk-sharing
program, or encouraging value-based care.
Four states indicated that offering a narrow or tiered
network plan has produced documented cost savings.
However, for many states, their ability to generate price
concessions from providers is blunted by the compulsion
to offer enrollees a broad network plan option in addition
to the narrow or tiered network option. As a result, they
are unable to guarantee providers sufcient growth in
patient volume to justify large discounts. Further, some
state administrators report that, even when the narrow
network plan option is less expensive than a broad network
option, their enrollees are unwilling to give up unfettered
choice of providers. “We presented it probably the wrong
way,” said one. “It was presented as a ‘gatekeeper plan,’
and our members don’t like those.” The state is working
to improve its communications with enrollees about the
benets of a narrow network plan, as well as increasing
the differential in premiums between the narrow and broad
network options.
NETWORK DESIGN STRATEGIES
Narrow Network Plan: A plan that limits coverage
to a select set of hospitals, physicians, and other
providers. Similar to an HMO, these plans may not
cover the cost of services received out-of-network.
Tiered Network Plan: A plan that groups or “tiers”
providers based on their performance on cost and/
or quality metrics. Enrollees are encouraged to seek
services from the top performing providers through
lower cost-sharing.
In interviews, states engaged in direct contracting
initiatives pointed to several advantages, but also some
challenges with instituting such programs. For example,
one state that uses direct contracting across all providers
and services touted it as their primary source of cost
savings, and reported minimal friction with providers.
Another state used its direct contracting to obtain a
“preferential government rate” compared to the rest of
the commercial market. It was later able to leverage that
preferential rate when it merged the state employee plan
with the state teacher plan, which had previously been
paying an undiscounted commercial rate.
However, another state reported difculties nding a
TPA willing to work with them when they sought to direct
contract for an episode-based care payment initiative. Most
of the TPAs they approached declined to participate. A very
large TPA that had a signicant portion of their business
decided to “walk away,” the administrator said. “They didn’t
want to agree to let us directly negotiate with hospitals and
other provider groups.”
Other states reported interest in pursuing direct contracting
but faced other constraints. In one, administrators found
that the SEHP’s small market share (with enrollment
representing only ve percent or less of the employer
market) and conservative culture meant “you don’t see a
whole lot of innovation.” Another administrator found that,
in several regions of the state, there were no “deals to be
had,” because providers were sufciently consolidated
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One SEHP that engages in rate setting established a
fee schedule for hospital and ambulatory services that it
updates annually. According to this SEHP’s administrator,
its TPA does not negotiate provider rates and serves
primarily as a claims administrator. The agency sets rates
based on the commercial prices in the state’s all-payer
claims database (thus does not use a Medicare reference
price). “It’s the leading thing we have to address costs,”
the administrator reported, noting further that by
tweaking its fee schedule as needed to meet budget
targets, the plan had been able to protect enrollees from
increased cost-sharing or reduced benets. He further
noted that providers have largely accepted the SEHP
fee schedule for two primary reasons. First, he believes
providers appreciate that the SEHP is a “fast payer,”
meaning that their TPA is able to process claims more
quickly than other payers. Second, their ability to keep
deductibles low means providers “have less patient
liability to collect . . . that’s something providers generally
hate to do in my experience,” he said. “They’d rather get
the money from the plan.”
Negotiating with hospitals based on a Medicare reference
price (averaging 234 percent of Medicare in the rst year)
has paid off for Montana’s SEHP, saving the state $47.8
million over three years.
19
Similarly, when Oregon enacted
legislation in 2017 to limit its SEHP to paying no more
than 200 percent of the Medicare rate for in-network
hospital services and 185 percent of Medicare for out-
of-network hospital services, it was projected to save
the state $81 million.
20
However, an administrator in one
state with reference pricing identied a downside to the
effort: providers who had previously been paid at prices
lower than the benchmark began demanding to have their
compensation increased to equal the benchmark.
Where other states have a large differential in premium for
narrow versus broad network plans, they report greater
enrollment in the narrow network option. For at least one
state, however, they were unhappy with the result. “[The
narrow network plan] is very cheap because nobody
on it uses any health care . . . . It is actually driving up
the costs of the other plans.” This happens because as
healthy people gravitated to the narrow network option,
the insurers offering broad network plans were left with
enrollees with higher claims costs, forcing them to increase
their premiums. “You need to . . . narrow the choices so you
don’t get so much adverse selection,” the ofcial said.
For tiered networks, SEHP administrators pointed to
two challenges. First, they noted that a lack of data and
data analytics capacity can make it difcult to identify
and classify providers who are high performers on
quality metrics. Second, another SEHP found that even
signicant cost-sharing incentives were not sufcient to
move enrollees from lower-performing providers to higher-
performing providers. “People don’t know what ‘tiered’
means, and inertia is one of the most powerful forces in
health care,” the administrator said. “People didn’t take it
because they weren’t educated about it.”
Rate Setting, Reference Pricing: Exercising
Market Power to Improve Affordability
Seven states indicated that in the last three years they have
or are currently pursuing initiatives to set provider rates or
peg those rates to a reference price, such as the amount
Medicare pays for the service. An additional three states
have plans to implement such a program in the future.
RATE-SETTING AND REFERENCE PRICING
Rate-setting: The plan or payer establishes a
non-negotiable price for each health care service.
Reference pricing: Not to be confused with
reference pricing or “Right to Shop” initiatives that
adjust enrollee cost sharing based on provider
costs (discussed above), under this initiative the
plan or payer pays providers a non-negotiable,
established rate that is equal to or a percentile of
a reference rate, such as the price Medicare pays
for the same service.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Other Cost Containment Efforts: Utilization Management,
Fraud Prevention, Global Budgets and More
Initiative Number of States
Chronic disease management
41
Case management for high-cost
enrollees
37
Prior authorization or referrals 33
Behavioral health management 10
Table 6. Common Additional Cost Containment
Initiatives Reported by Responding States
Source: Authors’ analysis of survey responses. Respondents were
permitted to select more than one initiative. This question received
47 responses. For detailed information on cost containment
initiatives implemented in the past three years by each state, see
Appendix VI.
States reported engaging in a range of cost containment
strategies, in addition to the benet and network design
strategies discussed above. These include utilization
management initiatives such as:
Management of chronic conditions such as diabetes,
heart disease;
Case management for high-cost enrollees;
Prior authorization or requiring referrals prior to
receipt of specialty care services; and
Behavioral health management.
Such programs are common among SEHPs. Forty-
one of the 47 responding states have implemented a
chronic disease management program; twenty-nine have
implemented three or more of the above initiatives (see
Table 6). Seven states report that they have documented
cost savings from one or more of these utilization
management activities. For more detail on states’
activities in these areas see Appendix VI.
SEHPs have been active with other strategies designed
to constrain cost growth. Six states reported having
an annual spending growth target or cap in place. In
interviews, two states reported that either their legislature
or another agency within the executive branch had
imposed a cap on the percentage of spending growth,
and one state mentioned they were able to use that
externally set growth cap as leverage during their
discussions with stakeholders and negotiations with
vendors.
Thirty states report that they audit claims to identify
inappropriate utilization or fraud. Eighteen states report
providing enrollees with greater transparency about the
prices of shoppable health care services to encourage
enrollees to consider cost in choosing a provider.
However, few states report that either of these initiatives
have generated any cost savings. For more detail on
SEHP activity on these initiatives, see Appendix VI.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Percent of People with ESI
Enrolled in a SEHP
Number of States
0-5
20
6-10
14
11-15 8
16-22 5
Table 7. SEHP Enrollment as a Percentage of Total
Enrollment in Employer-sponsored Insurance
Variations in SEHPs’ Role and Structure Affect Ability
to Achieve Cost Containment Goals
The adage “When you’ve seen one state, you’ve seen
one state” holds true for SEHPs. Each operates within
the context of their state’s unique environment, with
longstanding and constantly evolving political, market,
and operational dynamics that make it challenging to
identify strategies or programs that can be replicated
easily across all or even many states. For example,
although many SEHPs have a sizable proportion of
commercial market enrollment compared to other
employer plans, that is not universally true (see Table 7).
Source: Survey responses and KFF. In order to calculate the percentage
of population with employer sponsored insurance enrolled in the state
employee health plan, we used the enrollment numbers (both individuals
and dependents) provided by respondent states in our survey and
used Kaiser Family Foundation’s State Health Facts for 2019 to nd the
total number of people in each state enrolled in employer-sponsored
insurance, available at https://www.kff.org/other/state-indicator/total-po
pulation/?dataView=1¤tTimeframe=0&sortModel=%7B%22co
lId%22:%22Location%22,%22sort%22:%22asc%22%7D. For more
detailed information on enrollment data, see Appendix V.
The smaller market share for many SEHPs results
from their fragmented nature. While Washington and
Oregon, for example, have worked to consolidate health
benet plan purchasing for public employees within
a single state agency, many other states administer
benets for teachers, local government employees, or
retirees separately. This can limit their negotiating clout
with TPAs, providers, and other vendors. Conversely,
consolidating state and local government employees
under one purchasing agency can improve the SEHP’s
power to garner concessions from providers. For
example, one state that recently added municipal
employees to its plan reported that the added enrollment
has helped make providers more willing to accept a new
risk-based payment model.
Many states also dilute their health benet purchasing
power by offering options from more than one insurer or
TPA. At least 19 states offer both self-funded and fully
insured plan options, while Wisconsin’s fully insured
SEHP has nine different health insurers participating.
One-third of states offer employees ve or more different
plans. At the same time, administrators in states with
only one dominant carrier told us that it can lead to
complacency and inertia. “We don’t see a whole lot of
innovation [from our TPA]” said one.
State government employees also tend to be scattered
geographically, with many located in lightly populated, rural
parts of the state. The SEHP must ensure these employees
have access to in-network providers. This means that they
have no choice but to enter into contracts with hospitals
and physician group practices in rural communities
where there is limited competition. This blunts the SEHP’s
potential negotiating power, resulting in payments to these
providers that signicantly exceed the amount Medicare or
Medicaid would pay for the same services.
Cross-Agency Collaboration is the
Exception, not the Norm
In our survey, only four states reported collaborating with
another state agency to implement a cost containment
initiative. For example, Tennessee’s SEHP has partnered
with TennCare, the Medicaid agency, to implement a
program to pay providers an incentive payment if their
spending is below a specied level for an episode of care
and if quality metrics are achieved.
21
Of all states,
Washington has engaged in the most comprehensive
effort to combine the market clout of its public purchasers
by bringing their K-12 teachers, public higher education
employees, and state agency employee plans together
with Medicaid into one integrated purchasing agency.
22
For the most part, SEHP administrators told us that cross-
agency collaboration is too difcult, given the different
missions, regulatory structure, and populations covered
under different state programs, particularly between the
SEHP and the Medicaid programs. “The way we each get
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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data makes it hard to collaborate,” said one administrator.
“And our populations are so different.” Although thus
far successful, the cross-agency effort in Tennessee to
implement episode-based payments was made possible
because of a grant from the federal CMS Innovation Center.
One SEHP administrator eager to engage in a joint initiative
with her state Medicaid agency could not nd a willing
partner. “We express interest all the time [in a collaborative
purchasing approach] . . . . But the sense I get . . . is
that the idea of embarking on a cost savings initiative in
Medicaid is unheard of . . . . It’s a total missed opportunity.”
Washington ofcials reported several benets of joint
SEHP-Medicaid purchasing efforts, including an ability to
discuss “bigger picture purchasing goals” for the state,
engage in “sensitive rate conversations” that can remain
proprietary, and jointly respond to provider and other
stakeholder pushback, including litigation. “When one
side gets sued, we know the other side is likely to get
sued, and we try to settle all aspects of potential litigation
for both parts of the purchasing portfolio if possible.” The
ofcial went on to say: “These things may sound small,
but they are huge advantages.”
Resistance from Internal and External
Stakeholders is a Top Barrier to Cost
Containment
Even for those SEHPs with a proportionately large
membership, which might offer the power to demand
lower provider prices, a number of barriers remain to
implementing cost containment initiatives. In their survey
responses, SEHPs identied “resistance from stakeholders”
as the top barrier. That resistance can take several forms,
depending on the type of stakeholder. For example, several
SEHP administrators noted that it took constant, diligent
effort—and signicant in-house data analysis capacity—
to educate their governing boards, legislators, and other
inuential policymakers about cost trends and the evidence
supporting the effectiveness of different initiatives. As one
administrator put it: “[The board] wants lower rates, but . . .
they don’t want narrower networks, increased cost sharing,
or lower actuarial value. So how are we going to do that
when the costs of health care are the costs of the services
that are being provided?” Indeed, SEHP administrators
face a potentially more challenging set of stakeholders
than private employers. While private employers need to
educate their boards and employees, SEHP administrators
also must confront the perspectives of state legislators and
the providers that are often the largest employers in those
legislators’ districts.
SEHP administrators reported varying degrees of
engagement from their legislatures and other executive
branch agencies. They also noted that as the makeup of
the legislature changes over time, so too can its interests.
“The legislators could be very provider-friendly, or friendly
towards the insurance industry . . . it really varies . . . [but]
it can really impact us.” In many cases, SEHPs are under
legislative pressure to control costs. “The path we’re on is
unsustainable,” noted one administrator. “As we’re having
conversations with the legislature about what we’re doing
to control costs, our answer can’t be nothing.” Others
reported very little direct interference in their work from
legislators, while others noted that legislative involvement
can lead to increased costs, such as when the SEHP
is used to pilot a state benet mandate. In others, the
legislature has sought to use the SEHP as a proving ground
for cost containment initiatives, such as high deductible
health plans or, as in Oregon’s case, a requirement to cap
hospital prices at 200 percent of the Medicare rate. As
one administrator put it, the only reason their SEHP has a
high deductible health plan is that it was “one of the few
instances where it was directly decided by the legislature.”
Other executive branch agencies can also inuence
SEHPs. For example, one state administrator reported that
the SEHP was often an enticing source of savings for their
budgeting agency. “When they need . . . an extra $4 or $5
million to close their budget . . . we’ve been able to deliver
for the most part.”
Perhaps the biggest constraint on state cost containment
initiatives is less structural than cultural. The expectation
among public employees that they have a generous benet
package and unfettered choice of providers—and the
strong resistance to any erosion of that—has led most
SEHP administrators to be extremely conservative in their
approach to plan changes. A common perception among
employees is that “a dollar saved is a dollar saved for the
state” and therefore a dollar taken away from enrollees,
reported one administrator. Others noted that any effort
to cut costs by, for example, dropping a marquee hospital
system from a plan network, would garner immediate and
severe blowback from enrollees and the politically powerful
unions that represent them.
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The Role of Labor:
Antagonist and Advocate for Cost Containment
Approximately 36 percent of state and local government
workers are union members, a number that has declined
over the last two decades.
23
The union membership rate
of public-sector workers is consistently higher than the
rate of private-sector workers, with more than ve times
the level of union membership in 2020.
24
In our survey,
21 of 47 states reported that they have a collective
bargaining agreement in place with one or more state
employee unions. See Appendix VIII. Of these, 15 report
that unions participate in the SEHP’s benet design
decisions and seven report that they engage in decision-
making over the plan’s network designs.
While unions are not indifferent to the burden of rising
health care costs on total employee compensation, they
generally advocate to maintain or expand health benets
for their members.
25
The 21 SEHPs reporting a collective
bargaining agreement or agreements in place are more
likely to report offering generous plan benets compared
to those reported by their 26 less unionized peers. The
average actuarial value (or the amount the plan covers for
the average plan enrollee) is 90 percent in these states,
compared to 84 percent in those states without collective
bargaining agreements in place. Even in states that
reported that their unions were not involved in benet or
network design decisions, administrators noted that labor
groups engaged heavily in efforts to maintain or increase
the state’s contributions to employee plan costs.
Administrators generally reported that unions are
effective advocates for maintaining robust plan benets
and pushing back against efforts to increase cost-
sharing or limit provider access. Administrators in less
unionized states appeared to have had less pushback in
cost-shifting exercises such as increasing deductibles.
Only 38 percent of states with collective bargaining
agreements had a high deductible health plan (HDHP)
option, compared to 81 percent of states without a
collective bargaining agreement.
State administrators also reported that union
representatives pushed to maintain a robust network
of providers. For example, one administrator observed
its membership would only support the SEHP offering
plans with narrow provider networks if enrollees could
continue to have a broad network plan option. However,
when faced with a choice between increased enrollee
cost-sharing and more constrained provider choice,
administrators reported that unions are more likely to
favor the latter.
As a result, unions can be helpful allies in SEHPs’ efforts
to tackle high and rising provider prices. For example,
union representatives in North Carolina and Oregon have
supported their state SEHP efforts to target hospital
prices to a Medicare reference price.
26
“There was a lot
of interest from labor [in the reference pricing initiative],”
observed one administrator. “The increases in [health
care] costs were seen as a threat to the sustainability of
robust benets.”
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The Role of SEHP Vendors in Cost Containment Efforts
According to the survey, almost all states contract with
TPAs, benet consultants, or pharmacy benet managers
(PBMs) to perform a range of functions, including
providing actuarial services, designing benets and
cost-sharing, developing plan networks, conducting
utilization management, delivering customer service, and
processing claims. Of the 44 state SEHPs that self-fund
at least one of their plans, 26 of them rely exclusively on
their TPA to negotiate provider contracts and manage
networks, while only nine states reported that they
collaborate with their TPA on network development. See
Appendix IX. In interviews, SEHP administrators who
oversee self-funded plans reported that they largely
delegate network design responsibilities to their TPAs. As
one put it, network design “is almost exclusively handled
through the health plans . . . . If a provider proposes a
[price] increase that would materially impact our costs,
we’re advised . . . [but] we generally support the health
plans in their negotiating positions.”
Setting Performance Targets
TPAs, by design, do not hold any direct nancial risk
for high and rising claims costs. SEHP respondents
reported that they must contractually incentivize TPAs
to implement cost containment initiatives, and in many
cases the TPAs have resisted new and innovative cost
containment strategies. In our survey, six SEHPs report
that they contractually require their TPAs to meet an
annual spending growth target. A number of these
contracts include nancial penalties if the TPA fails to
meet the target. In interviews, administrators in a few
of these states reported that they do not dictate to their
TPAs how to meet these targets, so long as they do meet
them. However, the level of enforcement of these targets
varies across states. For example, one state reported
that its TPA faces only a modest $20 per enrollee-per
month fee if it fails to meet its discount guarantees, an
amount the administrator did not feel was a sufcient
incentive. Another SEHP administrator touted their
contracts’ strong penalties, asserting that they “force [the
TPAs] to either negotiate better, or steer people to lower-
cost facilities.” Yet another state does not set explicit
performance targets, but has negotiated a nancial
arrangement with its TPAs in which the state holds the
fee-for-service claims dollars in an account from which it
reimburses the plans. Any costs that exceed the dollars
reserved in the account must be borne by the health
plans. Administrators in this state report that this self-
funding/fully insured hybrid model gives the SEHP the
benets of self-funding while passing along the nancial
risk of excessive claims costs to its contracted TPAs.
Leveraging the Procurement Process
Fourteen survey respondents report that they use
the vendor procurement process to advance their
cost containment goals. In interviews, three SEHP
administrators emphasized the importance of this
process in extracting performance guarantees and
holding TPAs accountable to cost containment goals. As
one administrator put it, “The best way to get [your TPA]
to take it seriously is to make sure it’s part of the formal
procurement process.”
Some states have begun rethinking their procurement
process in order to generate greater savings from
potential vendors. For example, one state reported
“incredible success” with the use of a tailored reverse
auction system. Another state was able to report savings
from its “invitation to negotiate” program, which uses
responses from potential vendors to initiate a negotiation
process.
REVERSE AUCTION
A process by which the state shares bid
information among competing vendors in order
to incentivize lower offers in subsequent rounds
of bidding.
INVITATION TO NEGOTIATE
A solicitation for competitive sealed replies
to select one or more vendors with which to
commence negotiations.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Reverse auctions have generated interest among several
of the SEHP administrators interviewed. The process
begins with each vendor submitting an initial bid and
technical and programmatic responses as requested
by the SEHP agency. The state then shares information
about the bids received with each competing bidder. For
example, the SEHP might tell a PBM bidder that they are
the third lowest-priced within the specialty drug category.
Each bidder then re-submits offers in subsequent rounds
of bidding, with the goal of improving its placement for
each category. This state reported that the reverse auction
not only works well to attract the lowest possible price
from vendors, but also to achieve certain programmatic
goals, such as cost transparency. “We’d tell [the bidder]
that three out of the four nalists have agreed to [greater
transparency] but you haven’t . . . . By the end [of the
reverse auction] we ended up with a bidder that agreed to
everything we wanted.” This process encourages bidders
whose initial bids were not in line with what the state
wants to rene these bids to better suit the state’s needs.
Although one SEHP administrator characterized the
reverse auction process as a “win win” for the state,
there are barriers that may make it challenging to
implement or less effective. First, in many states, SEHPs
need legislative changes to procurement rules to enable
a reverse auction. For example, New Jersey’s law permits
reverse auctions for PBMs but not for TPAs.
27
Second,
many states have just one dominant insurance carrier,
and would face signicant employee pushback if that
carrier were to be replaced as the plan’s TPA.
Access to and Use of Claims Data
Having access to claims data and the capacity to analyze
it can be critical to the development and assessment
of cost containment strategies. For self-funded SEHPs,
TPAs are responsible for claims administration and thus
house their SEHP client’s claims data. Out of 47 survey
respondents, 43 reported that they have access to
their claims data, but during interviews administrators
raised some challenges with respect to both access and
analysis. See Appendix X.
One state reported having access to their claims data,
but noted that the claims were not in a format to facilitate
analysis. The legislature has enacted a requirement for
the SEHP to contract with a data warehouse, which
the administrator predicted would improve their ability
to use the data to identify cost drivers and evaluate
the effectiveness of programs and initiatives. However,
she also observed that their current TPA has generally
resisted these legislatively mandated efforts to improve
the SEHP’s data analytic capabilities. Another state
reported that it had to terminate its relationship with a
longstanding TPA because the carrier refused to share its
data on provider prices. In North Carolina, the SEHP has
had to turn to the legislature to grant it the authority to
view its own claims data.
28
Other states expressed frustration with their ability to use
their claims data in meaningful ways. For example, one
SEHP administrator in a state with signicant regional
provider shortages noted that data on provider costs and
clinical quality was not useful when there were too few
providers to institute tiered networks or other initiatives
that would steer enrollees to high performing providers.
Another state acknowledged that while they have access
to the data they need, they did not have the in-house
capacity or expertise to use the data to inform their cost
containment efforts.
Maintaining a Level Playing Field:
Risk Mitigation Strategies
For SEHPs with multiple carriers or a mix of fully insured
and self-funded plans, a key component of several cost
containment strategies is to prevent adverse selection
that could disadvantage certain carriers while favoring
others. For example, when enrollees have a choice
between a plan with a broad provider network and one
with a narrow provider network, those with higher risk
proles are more likely to select the plan with the broad
network. This can lead to higher costs for the broad
network plan and higher premiums for its enrollees.
Similarly, when given a choice between a high deductible
plan and a low deductible plan, sicker employees
are more likely to choose the low deductible plan. In
interviews, one state reported that adverse selection
among its plans has led to price distortions. As a result,
it is planning to implement a front-end risk adjustment
program that adjusts enrollee premiums so they do not
reect the expected health costs of each plan’s enrollees.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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A Work in Progress: Future Cost Containment Strategies
States identied a number of cost containment strategies
that they hope to implement in the next one or two years.
Eight states plan to implement provider risk-sharing,
direct contracting, or reference pricing initiatives that
tie provider reimbursement to a benchmark, such as
the Medicare rate. Meanwhile, although only one state
identied excess utilization as its primary cost driver, ten
states plan to expand programs that attempt to lower
or optimize utilization, such as HDHPs, value-based
insurance design, wellness incentives, Right to Shop,
“rare condition management,” and price transparency.
Among the network design strategies, several states
emphasized various forms of risk-based contracting
as most appealing, in part because these payment
arrangements tend to focus not just on cost but on
improving clinical quality and outcomes. As a cost
containment measure, however, many of these initiatives
are unproven. A few states that have implemented risk-
sharing more recently also noted that the dramatically
depressed utilization caused by the COVID-19 pandemic
in 2020 had limited their ability to evaluate whether these
programs have generated any savings.
Increasing enrollee cost-sharing via benet design
remains a key cost containment strategy for SEHP
administrators. One state discussed its intent to
introduce new plan options with higher enrollee cost-
sharing. Employees would be automatically enrolled in
these plans unless they proactively choose something
else. Workplace wellness programs also remain popular,
in spite of the fact that few states have been able
to document any measurable savings. In interviews,
administrators suggested that their workplace wellness
programs were worthwhile endeavors, with or without
any cost savings. Others believe that if they could target
their wellness program just to those employees most in
need, such as diabetics, they could obtain a better return
on the investment.
States identied several other strategies that are showing
promise. For example, after reports of New Jersey’s
success with a reverse auction for its PBM, several states
expressed interest in a similar process. Others noted it
could work not just for PBM procurement but for other
vendors as well, including TPAs.
Other states pointed to the value of greater access to
claims data, including previously proprietary, negotiated
payment rates between commercial payers and
providers. One administrator reported looking forward
to using this newly available data (as required by recent
federal regulations) to force providers to offer the SEHP
a “most favored nation” discount, meaning the SEHP
would always pay no more for health care services than
other commercial payers. “I’m just asking the hospital to
give me their lowest negotiated rate that they’re giving
any other commercial payer,” she said. “If they want me
to go in the direction Montana or North Carolina did, we
can, but I just want them to give me their best deal. I
think that’s hard to argue with.”
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Lessons Learned from SEHP Cost Containment Initiatives
SEHPs—or any large health care purchaser—looking to
implement a cost containment initiative can draw lessons
from the experiences of their peers in other states.
Through the survey and in interviews, we heard several
recurring themes.
Education and Communication
Successful implementation of signicant cost
containment initiatives requires buy-in from multiple
stakeholders, including the SEHP’s governing board, the
executive branch and legislators, TPA vendors, unions
if applicable, participating providers, and of course,
state employees themselves. Administrators cited the
need for constant and consistent education of these
stakeholders about the drivers of health care costs, the
trade-offs associated with different benet and network
design options, and consequences of inaction. SEHPs’
communication with and messaging to their enrollees
is particularly important, with multiple administrators
discovering that an initiative they had thought promising,
such as a narrow network plan option or reference
pricing program, generated anemic results because
enrollees were either unaware of or had a mistaken or
poor perception of the program. By the same token,
engaging stakeholders and helping them to understand
the SEHP’s cost drivers and the tradeoffs of strategies
to bring costs under control can bear considerable fruit.
For example, the Montana SEHP’s efforts to institute
Medicare reference pricing for hospitals was aided by
partnering with the employee union, which then launched
a successful letter writing campaign to pressure hospitals
to participate in the program.
29
Leveraging Data to Achieve Cost
Containment Goals
Many SEHP agencies either do not have access to
claims and other data that could inform and improve their
cost containment initiatives or do not have the analytic
capacity to use the data effectively. However, several
administrators commented on the importance of being
able to review and analyze the health claims generated
by SEHP enrollees, and two states we interviewed are
in the process of improving their data analytic capacity.
As one administrator put it, “it really pays” to have
data expertise in-house instead of relying on the TPA
or other external consultants. This can help the SEHP
identify outliers or cost drivers and ask vendors the right
questions. In at least one case, it enabled a state to
determine that it could do a better job containing costs by
bypassing its TPA and directly contracting with providers.
The “Lesser of Evils” Option: Getting
Provider Stakeholders on Board
SEHP administrators almost universally recognize
hospitals as the primary driver of rising costs. They also
are well aware of the political risks of threatening to
exclude or shift business away from certain high cost
hospitals, with many bearing the scars of blowback from
legislators and employees when they tried to do just that.
Yet some states have been able to generate provider
buy-in to one cost containment initiative by threatening
to implement another that the providers deem more
draconian. For example, one administrator reported using
his Governor’s budget proposal to institute Medicare
reference pricing to convince providers to agree to a
risk-sharing payment model in which they had been
previously reluctant to engage.
Vendors are Not Your Friend:
Breaking Down Complacency and
Inertia to Reach Cost Savings Goals
The majority of SEHPs in our survey delegate all network
design responsibility, including the negotiation and
establishment of provider reimbursement rates, to their
TPA. Yet there is strong evidence that TPAs lack sufcient
incentive to extract the largest possible cost savings from
network providers. In interviews, SEHP administrators
reported signicant resistance from their TPAs to
payment reform initiatives, such as the expansion of
risk-sharing arrangements. For example, one state
administrator reported that their TPA was “so unwilling
to annoy the hospital system” that they backed away
from implementing a tiered network strategy. A number
of SEHPs report promising returns, however, from efforts
to use the vendor procurement process, such as reverse
auctions and annual growth caps, to ratchet up pressure
on TPAs to deliver more cost savings through network
design strategies.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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No Cookie Cutters: Programs Must be
Tailored to Unique State Conditions
An age-old question in health care policy is why a
strategy that is proven successful in one state is not
broadly adopted, or if adopted, fails to perform as hoped.
Time and again, SEHP administrators identied reasons
why certain cost containment initiatives implemented by
their peers would not work in their state. Reasons include
unique political dynamics, such as the 2017 push by the
Oregon legislature to institute Medicare reference pricing.
Given the level of hospital opposition to such efforts,
a similar legislative effort is unlikely to be replicated in
many other states. Other states are dominated by just
one large insurer, making it almost impossible to leverage
TPAs against one another during a procurement process.
Similarly, many states are dominated by a very small
number of “must have” hospital systems, such that
efforts to engage in direct contracting or offer a narrow
network plan wouldn’t generate much in savings. In these
states, cost containment strategies need to be designed
for the health care system they actually have.
Conclusion
SEHP administrators are fully aware of the factors—
notably hospital prices—that are driving the steady
increase in the cost of employee health benets. Yet to
date they have focused their cost containment energy
primarily on initiatives that target secondary cost drivers
such as enrollee utilization. All cost containment is
difcult—if there is a strategy that harms no one it has
already been implemented—but so far strategies that
shift costs to employees, such as high deductible plans
and wellness incentive programs, have proven easier to
implement. That said, some states are demonstrating that
it is possible to rein in hospital prices through a mixture
of political will, creative thinking, and simple hard work. It
will be important to document the impact of these efforts
and share successful outcomes, including state savings
and lower enrollee premiums and cost sharing, so that
other state SEHPs as well as other government and
private purchasers can learn from and implement similar
programs.
Acknowledgments
The authors wish to thank the SEHP administrators who generously shared their time, expertise, and
insights for this project. We are also grateful for the thoughtful review and editing from Jack Hoadley,
Beth Fuchs, Ann Kempski, Marilyn Bartlett, and Jim DeWan, and research support from Mari Tikoyan
and Nia Gooding. Design and layout provided by Nancy Magill.
About Georgetown University Center on Health Insurance Reforms
The Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public
Policy is a nonpartisan, expert team of faculty and staff dedicated to conducting research on
commercial health insurance and the complex federal and state laws that shape the market. For
more information, visit www.chir.georgetown.edu.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 27 -
Endnotes
1
Centers for Medicare and Medicaid Services, National Health
Expenditure Fact Sheet 2019-2028, December 16, 2020, https://www.
cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-
and-Reports/NationalHealthExpendData/NHE-Fact-Sheet (accessed
February 25, 2021).
2
Claxton G, Rae M, Young G, McDermott D, 2020 Employer Health
Benefits Survey, Menlo Park, CA: Kaiser Family Foundation, October 8,
2020, https://www.kff.org/report-section/ehbs-2020-section-1-cost-of-
health-insurance/ (accessed February 25, 2021).
3
Segema J, Kollar M, Shrider EA, Creamer J, Income and Poverty in
the United States: 2019, U.S. Census Bureau, September 15, 2020,
https://www.census.gov/library/publications/2020/demo/p60-270.html
(accessed February 25, 2021).
4
Claxton G et al., 2020 Employer Health Benefits Survey.
5
Oregon HB 2266 (2019), https://olis.leg.state.or.us/liz/2019R1/
Downloads/MeasureDocument/HB2266.
6
Centers for Medicare and Medicaid Services, National Health
Expenditures: 2019, https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/NationalHealthAccountsHistorical
(accessed April 6, 2021).
7
Riley T, Schneiter E, Hensley-Quinn M et al., Cross-Agency Strategies
to Curb Health Care Costs: Leveraging State Purchasing Power,
Portland, ME: National Academy for State Health Policy, April 2019,
https://www.nashp.org/wp-content/uploads/2019/04/States-Leverage-
Purchasing-Power.pdf.
8
Whaley CM et al., Nationwide Evaluation of Health Care Prices Paid
by Private Health Plans, Santa Monica, CA: RAND Corporation, 2020,
https://www.rand.org/pubs/research_reports/RR4394.html.
8
Kaiser Family Foundation, State Health Facts: Health Insurance
Coverage of the Total Population, Menlo Park, CA: 2019, https://www.
kff.org/other/state-indicator/total-population/?dataView=0¤tTim
eframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort
%22:%22asc%22%7D (accessed March 22, 2021).
10
Bureau of Labor Statistics, Current Employment Statistics survey.
11
Keefe J, “Are Public Employees Overpaid?” Labor Studies Journal
37(1): 104-126, 2012.
12
HealthCare.Gov, Glossary – Actuarial Value, https://www.healthcare.
gov/glossary/actuarial-value/ (accessed April 2021).
13
Centers of Medicare and Medicaid Services, National Health
Expenditure Data, Table 24: Employer-Sponsored Private Health
Insurance, 2020, https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/
NationalHealthAccountsHistorical (accessed March 2021).
14
Zawacki AM, Vistnes JP, and Buchmueller TC, “Why are employer-
sponsored health insurance premiums higher in the public sector
than in the private sector?” Monthly Labor Review, Bureau of Labor
Statistics. September 2018, https://www.bls.gov/opub/mlr/2018/
article/pdf/employer-sponsored-health-insurance-premiums.pdf.
15
Kurani N, Cox C, What drives health spending in the U.S. compared
to other countries, Menlo Park, CA: Peterson-Kaiser Family
Foundation Health System Tracker, November 2020, https://www.
healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-
compared-to-other-countries/.
16
Rau J, “North Carolina Treasurer Took on the Hospitals. Now He’s
Paying Political Price,” Kaiser Health News, October 26, 2020, https://
khn.org/news/north-carolina-treasurer-took-on-the-hospitals-now-hes-
paying-political-price/ (accessed March 1, 2021).
17
Verma S, “Pathways To Success: A New Start For Medicare’s
Accountable Care Organizations,” Washington, DC: Health Affairs
Blog, August 2018, https://www.healthaffairs.org/do/10.1377/
hblog20180809.12285/full/.
18
Corlette S, Hoadley J, Keith K, Hoppe O, Assessing Responses
to Increased Provider Consolidation in Six Markets: Final Report,
Washington, DC: National Institute for Health Care Reform, October
2019, https://georgetown.app.box.com/s/65qfhbzz7fabx9oypsteg6d1
aghz4fsj.
19
Schramm S, Aters Z, Estimating the Impact of Reference-Based
Hospital Pricing in the Montana State Employee Plan, Optumas, April
2021, https://www.nashp.org/wp-content/uploads/2021/04/MT-Eval-
Analysis-Final-4-2-2021.pdf.
20
Oregon Ofce of the Secretary of State, Notice of Proposed
Rulemaking: Amendments to Hospital Payment Rules, October 30,
2020, https://www.oregon.gov/oha/OEBB/DivisionRules/Proposed-
OEBB-80-Hospital-Payment-20201030.pdf#page=2.
21
Division of TennCare, Episodes of Care, Nashville, TN, https://
www.tn.gov/tenncare/health-care-innovation/episodes-of-care.html
(accessed April 23, 2021).
22
Riley T, Schneiter E, Hensley-Quinn M, et al., Cross-Agency
Strategies to Curb Health Care Costs: Leveraging State Purchasing
Power, op. cit.
23
Wolfe J, Schmitt J, A profile of union workers in state and local
government, Washington, DC: Economic Policy Institute, Jun. 2018,
https://www.epi.org/publication/a-prole-of-union-workers-in-state-
and-local-government-key-facts-about-the-sector-for-followers-of-
janus-v-afscme-council-31/.
24
Union Members – 2020. Bureau of Labor Statistics. U.S. Department
of Labor. January 22, 2021, https://www.bls.gov/news.release/pdf/
union2.pdf.
25
Budd, JW. “The Effect of Unions on Employee Benets: Updated
Employer Expenditure Results.” Journal of Labor Research XXVI(4):
670-674 (2005).
26
State Employees Association of North Carolina, Clear Pricing Project,
https://www.seanc.org/clear-pricing-project (accessed April 14,
2021); Testimony of Joe Baessler, Oregon AFSCME, Testimony is [sic[
support of HB 2266, https://olis.leg.state.or.us/liz/2019R1/Downloads/
CommitteeMeetingDocument/202821 (accessed April 14, 2021).
27
P.L. 2016, c.67. New Jersey S.B. 2749 (2016) (enacted).
28
North Carolina HB 169 (2021). See also King D, “Bill to make medical
bill data accessible moves forward,” Carolina Journal, April 14, 2021,
https://www.carolinajournal.com/news-article/bill-to-make-medical-
bill-data-accessible-moves-forward/.
29
Allen M, In Montana, a Tough Negotiator Proved Employers Don’t
Have to Pay So Much for Health Care, ProPublica, October 2, 2018,
https://www.propublica.org/article/in-montana-a-tough-negotiator-
proved-employers-do-not-have-to-pay-so-much-for-health-care.
Appendix I: SEHP Administrator Survey Questions
SECTION I - Overview. . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION II - Plan Details. . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION III – Cost-Containment Initiatives . . . . . . . . . . . . . . . . . . . 33
Appendix II: List of 17 cost containment initiatives + denitions . . . . . . . . . . . . . .36
Appendix III: Actuarial Value of SEHPs . . . . . . . . . . . . . . . . . . . . . . 38
Appendix IV: SEHP Employer Premium Contribution . . . . . . . . . . . . . . . . . 39
Appendix V: Enrollment and Eligibility . . . . . . . . . . . . . . . . . . . . . . 41
Appendix VI: Cost Containment Initiatives & Documented cost savings . . . . . . . . . . . 45
Appendix VII: SEHP Offerings . . . . . . . . . . . . . . . . . . . . . . . . 50
Appendix VIII: Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . 52
Appendix IX: Self-funded or Fully Insured; Who Negotiates the Networks . . . . . . . . . . . 53
Appendix X: Claims Data . . . . . . . . . . . . . . . . . . . . . . . . . .55
Table of
Contents
Appendices
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Appendix I: SEHP Administrator Survey Questions
We elded this survey between September 15 and December 7, 2020 and received responses from 47 state employee
health plan administrators.
SECTION I – Overview
1. Your State _______
2. Your Contact Information (this will be kept condential)
a. Name: _________________________________________________
b. Email address: __________________________________________
c. Your state agency: ______________________________________
3. Provide the number of lives covered under the state or public employee plan options administered by your agency. Do not
include retirees.
a. Number of individual employees covered: __________________
b. Number of spouses + dependents covered: __________
4. In addition to active state agency employees, which workforces are eligible to participate in the plan options administered by
your agency (select all that apply)?
_____School district employees – teachers
_____School district employees – staff
_____Local, municipal or county employees
_____State university employees – faculty
_____State university employees – staff
_____Legislators
_____Any others: ____________
_____N/A
5. Does your agency have the authority to execute contracts with plans and/or third-party vendors, such as Third-party
Administrators (Third-Party Administrator (TPA): Also sometimes known as an Administrative Services Only (ASO) entity, these
entities deliver services like claims processing and employee benet management for employers who self-fund health benets
instead of purchasing them from an insurer), Administrative Services Only entities (ASOs), benet advisory rms, or Pharmacy
Benet Managers (Pharmacy Benet Manager (PBM): A third party administrator of prescription drug benets. These entities
are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts
and rebates with drug manufacturers, and processing and paying prescription drug claims)? ____Yes ____No ____Other
6. Does your agency also administer health benets for retirees? ____Yes____No. If No, which state agency is responsible for
administering benets for retirees? ____________________________________________________________________________
7. Do the employees eligible for the health benets administered by your agency have a choice of: (Do not include any dental or
vision plan options. If your answer varies by workforce population, please answer for state agency employees).
_____1 plan option
_____2-4 plan options
_____5 or more plan options
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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8. Does your agency offer eligible employees a High Deductible Health Plan (HDHP) (deductible is $1,400 or more for a self-only
plan; $2,800 for a family plan)? ____Yes____No
a. If Yes, how many active employees are enrolled in the HDHP option with the greatest number of enrollees? Please
include dependents_________________________________________________________________________________
b. If Yes, does your agency offer it in conjunction with a Health Savings Account? (Health Savings Account (HSA): A type
of savings account that lets you set aside money on a pre-tax basis to pay for qualied medical expenses if you have
a High Deductible Health Plan (HDHP)) ____Yes____No. If Yes, does your agency contribute to the HSA? ____Yes____No.
9. Does your agency contribute to a Health Reimbursement Arrangement or Account (Health Reimbursement Arrangement or
Account (HRA): Employer-funded group health plans from which employees are reimbursed tax-free for qualied medical
expenses up to a xed dollar amount per year)? ____Yes____No
10. Does your agency offer eligible employees (NOTE: If you offer more than one of any of the following plan options, please
respond for the plan option with the largest enrollment) (select all that apply):
_____A closed network plan option (e.g., HMO or EPO) (a plan design that provides no out-of-network coverage)
_____HMO with out-of-network option
_____An open network plan option (e.g., PPO) (a plan design that provides lower cost-sharing for in-network coverage and
partially covers some out-of-network services)
_____An indemnity plan option? (a plan design, sometimes also referred to as a fee-for-service plan, that allows enrollees to
see any health care provider and pays providers a set amount per service)
11. If your agency provides multiple plan options, do all active employees have the ability to choose any of the plans?
____Yes____No. If No, explain: _____________________________________________________________________________
12. Is there a collective bargaining agreement in place with one or more state employee unions? ____Yes____No (If you have
multiple collective bargaining agreements in place, please answer the following for the agreement that covers the largest
number of active employees)
a. If Yes, does the union (or unions) participate in benet design decisions (e.g., scope of benets, level of cost-sharing)?
____Yes____No
b. If Yes, does the union (or unions) participate in network design decisions? ____Yes____No. If Yes, what is the duration
of your collective bargaining agreement?
____ 1 year ____ 2-3 years____ 4+ years?
13. Which of the following entities is responsible for network negotiations (select all that apply)?
_____Your agency
_____Other state agency
_____Third-party Administrator (TPA) or Administrative Services Only (ASO) organization
_____Employee union
_____Benet advisory rm, consultant or broker
_____Other: ___________________________________________
14. Beyond enrollee premiums, how is the state employee health benets program—both benet and administrative costs—
funded (select all that apply)?
_____State appropriation
_____State general fund
_____Agency assessment
_____Other: __________________________________________
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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15. Are the plan options administered by your agency:
_____All self-funded (a type of plan where the employer itself collects premiums from enrollees and takes on the responsibility
of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as
enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered)
_____All fully insured (a health plan purchased by an employer from an insurance company or managed care organization)
_____Both self-funded and fully insured
16. Do you purchase any stop loss coverage? ____Yes____No
17. If available, what is the weighted average or range of actuarial values across all offered plan options? (Actuarial Value: the
percentage of the total average costs for covered benets that a plan will cover. For example, if a plan has an actuarial value of
70%, on average, the average enrollee would be responsible for 30% of the costs of all covered benets). _________________
18. Over the last ve years, has the weighted average or range of actuarial values shifted:
_____Higher
_____Lower
_____Stayed the same
____Not available
19. What percentage of the total premium does the state contribute for (NOTE: If you contribute different amount for different
types of employees, please respond for full-time, salaried employees):
a. Employee only? ___________________________________
b. Employee + spouse, partner, or one dependent? _______
c. Employee + children? _______________________________
d. Family coverage? __________________________________
20. Over the last 5 years, has the share of the state contribution to premiums increased, decreased, or stayed the same over the
last 5 years?
_____Increased
_____Decreased
_____Stayed the same
_____Not Available
21. Are more than 50% of employees eligible for the health benets administered by your agency enrolled in a single plan option?
____Yes____No ____I don’t know
If Yes, please continue to Section II. If No, proceed to Section III.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Appendix I: SEHP Administrator Survey Questions
SECTION II – Plan Details
If your state offers multiple plan options, please respond to the rest of these questions for the plan option with the greatest
number of active state agency employees.
1. In addition to active state agency employees, which workforce populations are eligible to participate in this plan option (select
all that apply)?
_____School district employees – teachers
_____School district employees – staff
_____Local, city, or county employees
_____State university system – faculty
_____State university system – staff
_____Legislators
_____Others: ____________________________________________
2. What type of plan is this?
_____Closed network plan option (e.g., HMO or EPO)
_____HMO with out-of-network option
_____Open network plan option (e.g., PPO)
_____Other: ________________________________________________
3. Is this a HDHP? ____Yes____No. If Yes, is it eligible for an HSA? ____Yes____No
4. What is the actuarial value for this plan option for active state employees? _____________________________________
5. Is this plan option:
_____Self-funded?
_____Fully insured?
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Appendix I: SEHP Administrator Survey Questions
SECTION III – Cost-Containment Initiatives
1. In the last 3 years has your agency implemented any of the following initiatives to help contain costs (select all that apply)?
a. Not applicable (state employee plans are all fully insured) (skip questions 1-4)
b. Benet design initiatives:
_____Value-Based Insurance Design
_____Reference pricing
_____Right to Shop
_____Wellness incentives that result in an increase or decrease in premiums or cost-sharing based on enrollee’s
achievement of a target health metric (i.e., BMI, cholesterol level).
_____N/A
c. Provider payment and network design initiatives:
_____Narrow provider networks
_____Tiered provider networks
_____Centers of Excellence
_____Pegging provider reimbursement to a reference price, such as a percentile of the Medicare rate (sometimes
referred to as “reference pricing”)
_____Risk-based contracts with health care providers
_____Direct negotiation or contracting with providers
_____Primary care-based initiatives (e.g., worksite clinics, near worksite clinics, DPCs, patient-centered medical home)
d. Utilization management initiatives:
_____Case management for high-cost enrollees
_____Disease management for enrollees with one or more chronic conditions (e.g., diabetes, heart disease)
_____Prior authorization and other methods of utilization management(e.g., primary care physician referral for
specialty care)
_____N/A
e. Other initiatives:
_____Annual spending growth target or cap
_____Price transparency initiatives (e.g., Member shopping tools - plans/providers)
_____Behavioral health management strategies or benet carve out
_____Auditing of claims (i.e., utilization auditing, payment accuracy, fraud identication)
_____Procurement strategies (e.g., reverse auction, invitation to negotiate)
_____Other: ___________________________________________________________________________
f. Our agency has not implemented any cost-containment initiatives in the last 3 years.____________
2. For the cost-containment initiatives selected in the questions above were any of them implemented as part of a:
_____Cross-agency purchasing strategy, i.e., with your state Medicaid agency, state-based marketplace, or other state
purchasing agencies? ____Yes____No. If Yes, which initiative(s)?______________________________________________
_____Purchasing collaboration with other states? ____Yes____No. If Yes, which initiative(s)?_______________________________
_____Employer purchasing coalition with private employers? ____Yes____No. If Yes, which initiative(s)?_____________________
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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3. Have you identied any documented cost savings from the cost-containment initiatives selected in questions above?
____Yes____No. If Yes, which initiative(s)?____________________________________________________________________
If you can quantify cost savings, what were they and how did you measure them? If possible, break it down by initiative.
_________________________________________________________________________________________________________
4. Of the cost containment initiatives implemented in the last 3 years . . .
a. have any of them been expanded? ____Yes____No. If Yes, which initiative(s)?_______________________________________
b. have any of them not resulted in savings or been eliminated? ____Yes____No. If Yes, which initiative(s)?______________
5. Does the state employee plan contribute claims data to an All-Payer Claims Database (APCD) - Statewide databases that
include all medical, pharmacy and dental claims collected from all private and public payers)? ____Yes____No
6. Does your agency use data from the APCD to assess cost trends/drivers in the state employee plan program? ____Yes____No
7. Does your agency have access to claims data from its Third-Party Administrator (TPA)? ____Yes____No ____N/A
a. If Yes, does your agency use those claims data to assess cost trends/drivers? ____Yes____No. If Yes, is claims data
analysis performed (select all that apply):
_____In-house at the agency?
_____by the carrier/TPA?
_____by a consultant?
_____Other?___________________________________________________________
8. If a collective bargaining agreement has a duration of greater than 1 year, are you able to make mid-course changes to
the agreement in order to implement cost-containment initiatives? ____Yes____No____N/A,because there is no collective
bargaining agreement in place.
Your responses to questions 9 through 13 will be aggregated with other state responses and will not be attributed to your
agency or your state.
9. Is the state considering the implementation of any new cost-containment initiatives in the next 1-2 years? ____Yes____No
If Yes, please describe: ______________________________________________________________________________________
10. What are the primary barriers to your agency implementing cost-containment initiatives (select all that apply)?
_____Governance structure
_____Terms of the collective bargaining agreement
_____Procurement policies and requirements
_____Resistance from stakeholders (e.g., providers or enrollees)
_____Limited or no evidence of return on investment
_____Legislative mandates or requirements
_____Other: __________________________________________________________________
11. Please identify the single highest cost driver for your plans:
_____Prices of hospital services
_____Prices of physician and other ambulatory services
_____Prices of prescription drugs
_____Excessive or inappropriate utilization
_____Other: ________________________________________
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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12. Which of the following benet categories does your agency primarily target when considering cost-containment initiatives
(select all that apply)?
_____Prices of hospital services
_____Prices of physician and other ambulatory services
_____Prices of prescription drugs
_____Excessive or inappropriate utilization
_____Other: ________
13. If available, please share any relevant public reports or agency documents evaluating the cost-containment initiatives above
and about any cost savings produced. If you would rather send us publicly accessible links, please email them to Maanasa.
Kona@georgetown.edu.
Appendix lI: List of 17 Cost Containment Initiatives
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Benefit Design Initiatives
Value-Based
Insurance Design
(VBID)
Benet design that provides incentives for policyholders to seek high-value, cost-effective
services (i.e., primary care, generic drugs) through lower cost-sharing. Some programs also
increase enrollee cost-sharing for services that are considered lower value.
Reference Pricing A program in which the health plan surveys provider prices for a specic service within a
dened geographic area and determines a cap or “reference price” as the maximum they will
pay for that service. If the enrollee chooses to receive services from a provider that charges
a higher price than the reference price, the enrollee must pay the difference. This type of
reference pricing should not be confused with initiatives that peg provider reimbursement to a
percentile of the Medicare rate. This is also often called reference pricing.
Right to Shop A type of benet design that allows enrollees to share in the cost-savings associated with
choosing lower-priced providers or services to incentivize high-value choices in providers and
services.
Wellness Incentives A program that attempts to encourage enrollees to adopt healthy behaviors or achieve a pre-
determined health outcome (such as body mass index or cholesterol level) by tying health plan
premiums or cost sharing to participation in a wellness program or achievement of the health
outcome.
Provider Payment and Network Design Initiatives
Narrow Provider
Networks
A plan that limits coverage to a select set of hospitals, physicians, and other providers. Similar
to an HMO, these plans may not cover the cost of services received out-of-network.
Tiered Provider
Networks
A plan that groups or “tiers” providers based on their performance on cost and/or quality
metrics. Enrollees are encouraged to seek services from the top performing providers through
lower cost-sharing.
Centers of
Excellence
When health plans incentivize the use of integrated medical systems that have demonstrated
their ability to deliver superior patient outcomes at a lower cost for different groups of
conditions such as heart, cancer, spine and transplants.
Reference
Pricing Provider
Reimbursement
The plan or payer pays providers a non-negotiable, established rate that is equal to or a
percentile of a reference rate, such as the price Medicare pays for the same service. This
should not be confused with reference pricing or “Right to Shop” initiatives that adjust enrollee
cost sharing based on provider costs.
Risk-Based
Contracts with
Providers
Financial arrangements between insurers and providers in which providers take on nancial
risk through either rewards or penalties associated with lower costs, patient health outcomes,
or performance on quality measures.
Direct Contracting
with Providers
Direct-to-provider contracting is a strategy in which a self-insured entity negotiates a contract
directly with a provider of health care services rather than through a TPA. The goals of such
efforts include obtaining lower provider prices than achieved by the TPA, engaging in a risk-
sharing program, or encouraging value-based care.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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List of Cost Containment Initiatives, cont’d
Primary Care-Based
Initiatives
Worksite Clinics or Near Worksite Clinics: A setting in which an employer provides access to
medical services exclusively for its employees. Clinics are often located in close proximity or in
the same facility as the workplace and are offered as an employee benet for easy access to
health services for employees.
Direct Primary Care: A model of delivering primary care services that charges patients a
monthly, quarterly, or annual fee in exchange for on demand primary care services that often
also includes laboratory services, care coordination, and disease management services.
Patient-Centered Medical Home: A primary care delivery model that emphasizes
comprehensive and coordinated health care. Medical homes are accountable for meeting the
physical and mental health needs of patients with an emphasis on prevention and wellness.
Services are often delivered by a care team that includes a wide variety of providers including
physicians, advance practice nurses, pharmacists, dietitians, social workers and care
coordinators. Care is expected to be accessible after hours on an urgent basis, following high
quality and safety practices.
Utilization Management Initiatives
Case Management A program for enrollees of a health plan who have complex health needs or are high-cost
members to help them manage their care and utilize services in a cost-efcient way.
Disease
Management
Programs that provide structured treatment plans that intend to help patients better manage
their chronic diseases. They typically include an element of health education to engage
patients in their care and sometimes provide care coordination between different providers
helping patients manage multiple chronic diseases.
Prior Authorization
and Other Methods
of Utilization
Management
Prior Authorization: Approval from a health plan that may be required before you get a service
or ll a prescription in order for the service or prescription to be covered by your plan.
Utilization Management: Tools that health insurers and employers use to limit the overuse of
health care services by imposing restrictions or gatekeeping to certain health care services
like prior authorization or step therapy in order to contain costs and prohibit inappropriate
utilization of health care services.
Other Initiatives
Annual Spending
Growth Target or
Cap
A pre-established target for the overall growth of health care spending for a particular
population, as set by an insurer, employer, or state government. This approach can be
enhanced by imposing nancial penalties or other incentives to ensure plans and/or providers
adhere to the spending growth target.
Price Transparency
Initiatives
Member shopping tools and cost or price transparency requirements for payers or providers.
Behavioral Health
Management
Strategies
Strategies that health plans use to reduce costs with respect to mental health and substance
use disorder services. For example, by subcontracting with a separate entity responsible for
administering mental health or substance use disorder benets, also called a behavioral health
“carve out.”
Auditing of Claims Utilization auditing, payment accuracy, fraud identication
Procurement
Strategies (e.g.,
Reverse Auction
or Invitation to
Negotiate
Reverse Auction: A process by which the state shares bid information among competing
vendors in order to incentivize lower offers in subsequent rounds of bidding.
Appendix llI: Actuarial Value of SEHPs
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not receive
a response from Arkansas, District of Columbia, Maryland, and South Dakota.
State
Weighted average or range of
actuarial values across all plan options
Difference in weighted average or
range of actuarial values over last 5 years
AK 70% Not available
AL 85% Higher
AZ 82% Lower
CA 95.6% Higher
CO 85% Stayed the same
CT 93% Stayed the same
DE 81.1-92.4% Stayed the same
FL N/A Not available
GA 82% Higher
HI 85.4% Lower
IA N/A Lower
ID N/A Not available
IL Approximately 94% Higher
IN 78.7% to 90% Stayed the same
KS 82% Higher
KY 72% to 88% Stayed the same
LA N/A Not available
MA 70% to 80% Stayed the same
ME 93% Lower
MI
Weighted average unavailable;
self-funded plan 89.7%; HMOs 94.8%
Higher
MN Approximately 92% Stayed the same
MO 83% Lower
MS 73.8 to 79.3% (2016) Higher
MT 80% Lower
NC 95% Lower
NE N/A Not available
ND N/A Higher
NH 95% Higher
NJ 97% Stayed the same
NM 82 to 87% Stayed the same
NV 87.3% or 92.0% Not available
NY 93% Higher
OH 80% Stayed the same
OK 86% Lower
OR N/A Not available
PA 89% Stayed the same
RI N/A Not available
SC 81% Higher
TN 74.1% to 87.8% Higher
TX 83% Higher
UT 88% Traditional; 91% HDHP w/ HSA Stayed the same
VA 92% Higher
VT 98% Stayed the same
WA 80% to 91% Stayed the same
WI N/A Not available
WV N/A Lower
WY N/A Not available
Appendix lV: SEHP Employer Premium Contribution
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 39 -
NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not
receive a response from Arkansas, District of Columbia, Maryland, and South Dakota.
State
Percentage of Total Premium that the State Contributes for:
Difference in
share that state
contributes over
the last 5 years
Employee only
Employee +
spouse/partner/one
dependent
Employee +
children
Family coverage
AK N/A N/A N/A N/A Stayed the same
AL 91% 76% 76% 76% Increased
AZ 89% 89% 89% 89% Decreased
CA 80% 80% 80% 80% Increased
CO 95% 86% 94% 85% Stayed the same
CT* 63% 63% 63% 63% Decreased
DE 86.75 - 95% 86.75 - 95% 86.75 - 95% 86.75 - 95% Stayed the same
FL** 6.35% N/A N/A 9.76% Increased
GA 83% 78% 81% 78% Increased
HI Ranges from 45.6% to
84.3% for the medical/
drug premium; 60% for
dental and vision
Ranges from 45.6% to
84.3% for the medical/
drug premium; 60% for
dental and vision
Ranges from 45.6% to
84.3% for the medical/
drug premium; 60% for
dental and vision
Ranges from 45.6% to
84.3% for the medical/
drug premium; 60% for
dental and vision
Increased
IA** 7% N/A N/A 10% Increased
ID 94% 91% 87% 81% Increased
IL 87% 85.5% N/A 87.1% Increased
IN 80% N/A N/A 80% Stayed the same
KS 90% 76% 86% 64% Increased
KY 93% N/A 87% 75% Increased
LA 75% 62% for Employee
+ Spouse; 71% for
Employee + Child
71% 61% Stayed the same
MA** 25% N/A N/A 25% Stayed the same
ME 90%-100% contingent
on annual wages
Employee only % -plus-
60% of dependent
premium
Employee only %
-plus- 60% dependent
premium
Employee Only %
-plus- 60% dependent
premium
Stayed the same
MI 80% self-funded; 85%
fully insured (HMOs)
80% self-funded PPO;
85% fully insured HMOs
80% self-funded PPO;
85% fully insured HMOs
80% self-funded PPO;
85% fully insured HMOs
Stayed the same
MN 95% 88% 88% 88% Stayed the same
MO 93% 84% 92% 85% Stayed the same
MS 100% for HDHP,
90% - 95% for
non-HDHP option
State does not
contribute to dependent
coverage
State does not
contribute to dependent
coverage
State does not
contribute to dependent
coverage
Stayed the same
MT 97.2% 80.3% 91.3% 76.3% Stayed the same
NC 95% 47.5% 44% 32% Increased
NE 79% 79% 79% 79% Stayed the same
ND 100% N/A N/A 100% Stayed the same
NH 94.5% 94.5% N/A 94.5% Increased
NJ 95% 95% 95% 95% Decreased
NM 72% 72% 72% 72% Stayed the same
NV 91.9% 82.6% 86.6% 80.9% Decreased
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 40 -
* State conrmed that federal grants and other funds help subsidize employee premiums beyond the 63% contribution.
** Authors believe these entries to be an error and these states have been excluded for the purposes of calculating the totals in page 8 of the report.
Note: States may partially fund their SEHP program and premium contributions through federal grants and other revenue sources.
Percentage of Total Premium that the State Contributes for:
Difference in
share that state
contributes over
the last 5 years
State Employee only
Employee +
spouse/partner/one
dependent
Employee +
children
Family coverage
NY Salary grade 9
and below=88%;
salary grade 10 and
above=84%
N/A N/A Salary grade 9
and below=73%;
salary grade 10 and
above=69%
Stayed the same
OH 85% 85% 85% 85% Stayed the same
OK $659.89/mo $1,312.75/mo (EE +
Spouse); $892.24/mo
(EE + Child)
$1,054.18/mo $1,542.66/mo (EE
+ Spouse + Child);
$1,677.96/mo (EE +
Spouse + Children 2 or
more)
Increased
OR 95% or 99%, depending
on plan selection
95% or 99%, depending
on plan selection
95% or 99%, depending
on plan selection
95% or 99%, depending
on plan selection
Increased
PA 89% 89% 89% 89% Stayed the same
RI 80% 80% 80% 80% Stayed the same
SC 80.5% 75.9% 81.1% 76.5% Increased
TN 80% 80% 80% 80% Stayed the same
TX 100% 73% 78% 67% Stayed the same
UT 92% for Traditional;
98% for HSA
92% Traditional; 98%
HSA
N/A Traditional 92%; HSA
98%
Stayed the same
VA 90% 87% N/A 88% Stayed the same
VT 80% 80% N/A 80% Stayed the same
WA On average 85% On average 85% On average 85% On average 85% Stayed the same
WI 88% N/A N/A 88% Stayed the same
WV 80% 80% 80% 80% Increased
WY 82% 82% 82% 82% Decreased
SEHP Employer Premium Contribution, cont’d
Appendix V: Enrollment and Eligibility
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 41 -
State
Number of
individual
employees
covered
Number of
dependents
covered
Percentage of population
with employer-sponsored
insurance enrolled in the
SEHP*
Workforces eligible to participate
in addition to active executive
branch employees
AK 5,900 8,900 4.36% School district employees – teachers, staff
Local, municipal or county employees
Retirees
AL 29,652 28,569 2.59% Legislators
Retirees
AZ 138,000 70,000 6.50%
State university employees - faculty, staff
Legislators
Retirees
CA 427,371 595,555 5.52%
School district employees - teachers, staff
Local, municipal or county employees
Retirees
CO 32,274 30,000 2.08%
State university employees, staff
Legislators
CT 74,707 as of
September 2020
106,534 as of
September 2020
9.92%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
DE 33,302 69,983 22.08%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
FL 143,343 178,485 3.81%
State university employees - faculty, staff
Legislators
Retirees
GA 231,000 256,000 9.67%
School district employees - teachers, staff
Legislators
Retirees employed before June 30, 2009
HI 66,500 52,700 16.33% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
IA 23,525 33,053 3.40% Legislators
Retirees
ID 19,000 28,000 5.48%
State university employees - faculty, staff
Legislators
Judicial brance employees
Retirees
IL 97,984 as of
6/30/20
120,287 as of
6/30/20
3.24%
State university employees - faculty, staff
Legislators
IN 26,217 31,689 1.67%
School district employees - teachers, staff
Legislators
Retirees
NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not
receive a response from Arkansas, District of Columbia, Maryland, and South Dakota.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 42 -
State
Number of
individual
employees
covered
Number of
dependents
covered
Percentage of population
with employer-sponsored
insurance enrolled in the
SEHP*
Workforces eligible to participate
in addition to active executive
branch employees
KS 37,031 35,759 4.77% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
KY 180,969 114,000 14.54%
School district employees - teachers, staff
Local, municipal, or county employees
Legislators
LA 76,163 74,749 8.02%
School district employees - teachers, staff
State university employees - faculty, staff
Legislators
Retirees
MA 170,000 100,000 7.27% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
ME 128,46 16,066 4.77%
Legislators
Retirees
MI 43,692 71,758 2.32%
Judges
Legislative staff
Retirees
MN 52,087 75,820 4.01%
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
MO 34,584 34,234 2.23%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
MS 111,600 52,716 13.58%
School district employees - teachers, staff
State university employees - faculty, staff
Legislators
Retirees
MT 12,204 13,090 5.66%
Legislators
Retirees
NC 309,190 183,362 10.50%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
NE 13,010 14,427 2.58% Legislators
Retirees
ND 19,200 31,900 12.56%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
NH 9,791 14,578 3.30%
Legislators
Retirees
Enrollment and Eligibility, cont’d
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 43 -
State
Number of
individual
employees
covered
Number of
dependents
covered
Percentage of population
with employer-sponsored
insurance enrolled in the
SEHP*
Workforces eligible to participate
in addition to active executive
branch employees
NJ 340,000 356,000 14.37% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
NM 27,350 30,176 7.69%
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
NV 26,757 24,231 3.40%
State university employees - faculty, staff
Legislators
Retirees
NY 622,593 616,250 13.15% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
OH 44,162 65,990 1.84% Legislators
OK 109,093 as of
10/31/2020
66,400 as of
10/31/2020
10.07%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
OR 55,250 86,700 6.97%
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
PA 74,416 89,505 2.56%
Retirees
RI 12,500 20,000 5.92%
State university employees - faculty, staff
Legislators
Retirees
SC 195,594 187,140 16.90%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
TN 138,957 142,719 8.87% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislative, judicial branch employees
Pre-65 Retirees
TX 214,252 163,390 2.81%
State university employees - faculty, staff
Legislators
Retirees
UT 24,786 state and
other eligible
individual employees
50,658 3.95% School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
VA 83,098 103,717 4.22%
State university employees - faculty, staff
Legislators
Retirees
VT 7,574 9,834 6.01%
Retirees
Enrollment and Eligibility, cont’d
* Author’s analysis of survey responses. In order to calculate the percentage of population with employer sponsored insurance enrolled in the state
employee health plan, we used the enrollment numbers (both individuals and dependents) provided by respondent states in our survey and used Kaiser
Family Foundation’s State Health Facts for 2019 to nd the total number of people in each state enrolled in employer-sponsored insurance.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 44 -
State
Number of
individual
employees
covered
Number of
dependents
covered
Percentage of population
with employer-sponsored
insurance enrolled in the
SEHP*
Workforces eligible to participate
in addition to active executive
branch employees
WA 260,515 277,625 13.7% All K-12 employees – teachers, classied
staff, administrators, etc.
State university employees - faculty, staff
Legislators
Retirees (both state agency and K-12)
Judges
Charter school employees
The following can opt into the system:
Local, municipal, county, and other political
subdivision employees
Tribal governments
Locally elected school boards
Employee organizations representing state
civil service employees
WI 79,569 114,279 6.04%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
WV 70,000 90,000 20.93%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
WY 17,853 25,373 15.02%
School district employees - teachers, staff
Local, municipal, or county employees
State university employees - faculty, staff
Legislators
Retirees
Enrollment and Eligibility, cont’d
Appendix Vl: Cost Containment Initiatives & Documented Cost Savings
State
Cost Containment Initiatives Implemented by the State in the Past Three Years
Which initiatives
resulted in cost
Savings, if any?
Benefit Design
Initiatives
Provider Payment
and Network Design
Initiatives
Utilization
Management
Initiatives
Other
Initiatives
AK Value-Based
Insurance Design
Narrow provider
networks
Case management
Disease
management
Utilization
management
N/A Stayed the same
AL
Wellness incentives N/A Case management
Disease
management
Price transparency N/A
AZ
Wellness incentives Centers of
Excellence
Primary care-based
initiatives
Case management
Disease
management
Utilization
management
Price transparency
Auditing of claims
Procurement
strategies
N/A
CA
Value-Based
Insurance Design
Wellness incentives
Narrow provider
networks
Primary care-based
initiatives
Risk-based contracts
Utilization
management
Behavioral health
management
N/A
CO Value-Based
Insurance Design
Reference pricing
Centers of
Excellence
Primary care-based
initiatives
Risk-based contracts
Direct contracting
Case management
Disease
management
Utilization
management
Behavioral health
management
Price transparency
Auditing of claims
Procurement
strategies
N/A
CT Value-Based
Insurance Design
Right to shop
Narrow provider
networks
Tiered provider
networks
Centers of
Excellence
Primary care-based
initiatives
Risk-based contracts
Direct contracting
Disease
management
Utilization
management
Annual spending
growth target or
cap
Price transparency
Auditing of claims
Procurement
strategies
VBID, Right to Shop,
Disease management
DE
Value-Based
Insurance Design
Centers of
Excellence
Risk-based contracts
Direct contracting
Case management
Disease
management
Utilization
management
Auditing of claims Direct contracting for
Centers of Excellence
FL
Right to shop Centers of
Excellence
Direct contracting
Case management
Disease
management
Utilization
management
Price transparency
Auditing of claims
Procurement
strategies
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 45 -
NOTE: All responses seen are as they were provided by survey respondents with minimal edits. For complete list of the
17 initiatives that states could choose from, see Appendix II.
State
Cost Containment Initiatives Implemented by the State in the Past Three Years
Which initiatives
resulted in cost
Savings, if any?
Benefit Design
Initiatives
Provider Payment
and Network Design
Initiatives
Utilization
Management
Initiatives
Other
Initiatives
GA Wellness incentives N/A Case management
Disease
management
Utilization
management
Behavioral health
management
Price transparency
Auditing of claims
Wellness program
HI N/A N/A
Case management
Disease
management
Utilization
management
Auditing of claims N/A
IA N/A
Centers of
Excellence
Case management
Disease
management
N/A N/A
ID
Value-Based
Insurance Design
Risk-based contracts Case management
Disease
management
Utilization
management
Price transparency
Auditing of claims
Value based payment
arrangements, claim
payment auditing
(both pre-payment and
post-payment), disease
management programs
IL Wellness incentives N/A N/A N/A N/A
IN N/A
Primary care-based
initiatives
Case management
Disease
management
Prior authorization N/A
KS
Value-Based
Insurance Design
Wellness incentives
Right to shop
Tiered provider
networks
Centers of
Excellence
Risk-based contracts
Direct contracting
Case management
Disease
management
Utilization
management
Annual spending
growth target or
cap
Behavioral health
management
Price transparency
Auditing of claims
Procurement
strategies
Smart Shopper program,
RFP process, Wellness
program, and annual
vendor audits
KY
Value-Based
Insurance Design
Centers of
Excellence
Primary care-based
initiatives
Case management
Disease
management
Utilization
management
Behavioral health
management
Price transparency
Auditing of claims
Value-based design
LA
Wellness incentives Narrow provider
networks
Tiered provider
networks
Primary care-based
initiatives
Case management
Disease
management
Utilization
management
Auditing of claims N/A
MA
Value-Based
Insurance Design
Narrow provider
networks
Tiered provider
networks
Centers of
Excellence
Risk-based contracts
Case management
Disease
management
Behavioral health
management
Price transparency
Auditing of claims
Procurement
strategies
Utilization management
initiatives and contracted
pass-through of PBM
rebates
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 46 -
Cost Containment Initiatives & Documented Cost Savings, cont’d
State
Cost Containment Initiatives Implemented by the State in the Past Three Years
Which initiatives
resulted in cost
Savings, if any?
Benefit Design
Initiatives
Provider Payment
and Network Design
Initiatives
Utilization
Management
Initiatives
Other
Initiatives
ME Value-Based
Insurance Design
Wellness incentives
Narrow provider
networks
Tiered provider
networks
Centers of
Excellence
Risk-based contracts
Case management
Disease
management
Utilization
management
Annual spending
growth target or
cap
Auditing of claims
Procurement
strategies
N/A
MI N/A N/A
Case management
Disease
management
Auditing of claims
Procurement
strategies
PBM prior authorization
MN
Value-Based
Insurance Design
Wellness incentives
Tiered provider
networks
Centers of
Excellence
Risk-based contracts
Case management
Disease
management
Utilization
management
Auditing of claims N/A
MO Right to shop Primary care-based
initiatives
Case management
Utilization
management
Auditing of claims N/A
MS N/A
Centers of
Excellence
Provider reference
pricing
Risk-based contracts
Direct contracting
Case management
Disease
management
Utilization
management
Auditing of claims Prior authorizations,
case management, direct
contracting, etc.
MT
Wellness incentives
Reference pricing
Centers of
Excellence
Provider reference
pricing
Primary care-based
initiatives
Direct contracting
Case management
Disease
management
Price transparency N/A
NC
Reference pricing Provider reference
pricing
Primary care-based
initiatives
Direct contracting
Case management
Disease
management
Utilization
management
Auditing of claims N/A
NE N/A
Narrow provider
networks
Tiered provider
networks
Primary care-based
initiatives
N/A Auditing of claims N/A
ND
Value-Based
Insurance Design
Risk-based contracts Case management
Disease
management
Auditing of claims N/A
NH
Value-Based
Insurance Design
N/A Case management
Disease
management
Utilization
management
Auditing of claims N/A
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 47 -
Cost Containment Initiatives & Documented Cost Savings, cont’d
State
Cost Containment Initiatives Implemented by the State in the Past Three Years
Which initiatives
resulted in cost
Savings, if any?
Benefit Design
Initiatives
Provider Payment
and Network Design
Initiatives
Utilization
Management
Initiatives
Other
Initiatives
NJ Wellness incentives Tiered provider
networks
Primary care-based
initiatives
Direct contracting
Case management
Disease
management
Utilization
management
Price transparency
Auditing of claims
Procurement
strategies
N/A
NM
Value-Based
Insurance Design
Centers of
Excellence
Primary care-based
initiatives
Risk-based contracts
Case management
Disease
management
Utilization
management
Procurement
strategies
N/A
NV N/A
Narrow provider
networks
Centers of
Excellence
Direct contracting
Case management
Disease
management
Utilization
management
Price transparency
Auditing of claims
N/A
NY N/A Direct contracting N/A Auditing of claims N/A
OH
Wellness incentives Primary care-based
initiatives
Case management
Disease
management
Procurement
strategies
N/A
OK N/A N/A
Disease
management
N/A N/A
OR
Wellness incentives Narrow provider
networks
Centers of
Excellence
Provider reference
pricing
Disease
management
Utilization
management
Annual spending
growth target or
cap
N/A
PA N/A
Narrow provider
networks
Centers of
Excellence
Case management
Disease
management
Behavioral health
management
Auditing of claims
Narrow networks
RI
Wellness incentives Centers of
Excellence
Primary care-based
initiatives
Case management
Disease
management
Utilization
management
N/A N/A
SC
Value-Based
Insurance Design
Centers of
Excellence
Provider reference
pricing
Primary care-based
initiatives
Risk-based contracts
Direct negotiations
or contracting
Note: State sets a site-
neutral fee schedule
Case management
Disease
management
Utilization
management
N/A All provider contracting
initiatives, PCMH,
utilization management,
case management
TN Value-Based
Insurance Design
Narrow provider
networks
Centers of
Excellence
Primary care-based
initiatives
Risk-based contracts
Case management
Disease
management
Utilization
management
Annual spending
growth target or
cap
Behavioral health
management
Price transparency
Auditing of claims
Narrow networks,
utilization management,
prior authorization,
disease management,
onsite clinic
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
- 48 -
Cost Containment Initiatives & Documented Cost Savings, cont’d
State
Cost Containment Initiatives Implemented by the State in the Past Three Years
Which initiatives
resulted in cost
Savings, if any?
Benefit Design
Initiatives
Provider Payment
and Network Design
Initiatives
Utilization
Management
Initiatives
Other
Initiatives
TX Right to shop Centers of
Excellence
Primary care-based
initiatives
Risk-based contracts
Case management
Disease
management
Utilization
management
Behavioral health
management
Price transparency
Auditing of claims
Patient-centered medical
home initiative
UT
Reference pricing
Right to shop
Narrow provider
networks
Risk-based contracts
Direct contracting
Case management
Disease
management
Utilization
management
Behavioral health
management
Price transparency
Auditing of claims
Pharmacy program,
medical management,
narrow network option,
exclusive contracting
for DME, claims review,
price transparency
with “Right to Shop
Cash Back,” contract
negotiations with
providers including
risk-bearing, use of data
analytics, increased use
of HSAs
VA N/A N/A
Case management
Disease
management
Utilization
management
Procurement
strategies
N/A
VT N/A N/A
Disease
management
Auditing of claims N/A
WA Value-Based
Insurance Design
Centers of
Excellence
Risk-based contracts
Disease
management
Annual spending
growth target or
cap
Procurement
strategies
Accountable care
program (implemented
in 2016); Centers of
Excellence (prospective
bundled payment for
hips/knees, and spine
care)
WI N/A N/A N/A Annual spending
growth target or
cap
Procurement
strategies
Annual spending
growth cap; invitation to
negotiate
WV
Value-Based
Insurance Design
Wellness incentives
Reference pricing
Narrow provider
networks
Centers of
Excellence
Provider reference
pricing
Primary care-based
initiatives
Risk-based contracts
Direct contracting
Case management
Disease
management
Utilization
management
Price transparency
Auditing of claims
Opiate program
WY N/A N/A
Case management
Disease
management
Utilization
management
Price transparency Member shopping
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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Cost Containment Initiatives & Documented Cost Savings, cont’d
Appendix Vll: SEHP Offerings
NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not receive a
response from Arkansas, District of Columbia, Maryland, and South Dakota.
* Author’s analysis of survey responses. The survey asked respondents to provide the total enrollment in high-deductible health plans as well the number
of individuals and dependents enrolled in all plans. This percentage was calculated using the numbers provided by survey respondents.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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State
Number of plan
options offered
Types of plan
options
High-Deductible Health Plans (HDHP)
Offered?
Percentage of
total enrollees
in HDHPs*
Offered with a
Health Savings
Account?
Does state
contribute to the
Health Savings
Account?
AK 2-4 PPO Y 3.11% Y N
AL 1 PPO N
AZ 2-4 HMO or EPO, PPO Y 7.21% Y Y
CA Depends on the
region
HMO or EPO, PPO N
CO 5 or more HMO or EPO, PPO Y 22.48% Y Y
CT 2-4 PPO, HMO or EPO,
HMO with out-of-
network option
N
DE 2-4 HMO or EPO, PPO Y 6.43% N
FL 2-4 HMO or EPO, PPO Y 2.53% Y Y
GA 5 or more HMO or EPO Y 1.89% Y N
HI 5 or more HMO or EPO, PPO N
IA 2-4 HMO or EPO N
ID 2-4 PPO Y 0.69% N
IL 5 or more HMO or EPO, HMO
with out-of-network
option, PPO
N
IN 2-4 PPO Y 93.40% Y Y
KS 5 or more PPO Y 46.37% Y Y
KY 2-4 PPO Y 39.27% N
LA 5 or more HMO or EPO, PPO Y 13.54% Y Y
MA 5 or more HMO or EPO, PPO,
an indemnity plan
option
N
ME 1 PPO N
MI 5 or more PPO, HMO or EPO N
MN 2-4 HMO or EPO Y 0.18% Y Y
MO 2-4 PPO Y 7.65% Y Y
MS 2-4 PPO Y 13.41% N
MT 1 PPO N
NC 2-4 PPO N
NE 5 or more PPO Y 8.81% Y Y
ND 2-4 PPO Y 2.30% Y Y
NH 2-4 HMO or EPO, PPO N
NJ 5 or more HMO with out-of-
network option, PPO
Y 0.22% Y N
* Author’s analysis of survey responses. The survey asked respondents to provide the total enrollment in high-deductible health plans as well the number
of individuals and dependents enrolled in all plans. This percentage was calculated using the numbers provided by survey respondents.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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State
Number of plan
options offered
Types of plan
options
High-Deductible Health Plans (HDHP)
Offered?
Percentage of
total enrollees
in HDHPs*
Offered with a
Health Savings
Account?
Does state
contribute to the
Health Savings
Account?
NM 2-4 HMO or EPO, PPO N
NV 2-4 HMO or EPO Y 72.77% Y Y
NY 2-4 HMO or EPO, PPO N
OH 2-4 PPO Y 0.92% Y Y
OK 5 or more HMO with out-of-
network option,
PPO, an indemnity
plan option
Y 11.28% Y N
OR 2-4 HMO or EPO, HMO
with out-of-network
option, PPO
N
PA 2-4 HMO or EPO, PPO N
RI 2-4 PPO Y 4.62% Y Y
SC 2-4 PPO Y 5.19% Y N
TN 2-4 PPO Y 4.26% Y Y
TX 2-4 HMO or EPO, PPO Y 1.00% Y Y
UT 2-4 PPO Y 40.00% Y Y
VA 5 or more HMO or EPO, PPO Y 0.87% N
VT 2-4 PPO N
WA 5 or more HMO or EPO, HMO
with out-of-network
option, PPO
Y 6.60% Y Y
WI 5 or more HMO or EPO, HMO
with out-of-network
option, PPO
Y 11.31% Y Y
WV 5 or more HMO or EPO, HMO
with out-of-network
option, PPO
Y 0.38% N
WY 2-4 PPO Y 6.59% N/A N/A
SEHP Offerings, cont’d
Appendix Vlll: Collective Bargaining Agreements
NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not receive a
response from Arkansas, District of Columbia, Maryland, and South Dakota.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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State
Collective
bargaining
agreement in place?
Does the union participate in
benefit design decisions
(i.e. scope of benefits, level of
cost-sharing)?
Does the union
participate in provider
network design
decisions?
What is the duration
of your collective
bargaining agreement?
AK Y Y Y 2-3 years
AL N
AZ N
CA Y N N Depends on the union
CO N
CT Y Y Y 4+ years
DE N
FL Y N N 4+ years
GA N
HI Y N N 2-3 years
IA Y N
ID N
IL Y Y N 4+ years
IN N
KS N
KY N
LA N
MA N
ME Y Y Y 2-3 years
MI Y Y N 2-3 years
MN Y Y Y 2-3 years
MO N
MS N
MT Y N N 2-3 years
NC N
NE Y 2-3 years
ND N
NH Y Y N 2-3 years
NJ Y Y N 4+ years
NM N
NV N
NY Y Y Y 4+ years
OH Y Y N 2-3 years
OK N
OR Y Y Y 2-3 years
PA Y Y Y 4+ years
RI Y Y N 2-3 years
SC N
TN N
TX N
UT N
VA N
VT Y Y N 2-3 years
WA Y N N 2-3 years
WI N
WV N
WY N
Appendix VlX: – Self-funded or Fully Insured -
Who Negotiates the Networks?
NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not receive a
response from Arkansas, District of Columbia, Maryland, and South Dakota.
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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State All self-funded, all fully insured, or both Entities that participate in network negotiations
AK All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization, SEHP Agency
AL All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
AZ All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
CA Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
CO Both self-funded and fully insured SEHP Agency, Benet advisory rm, consultant, or broker
CT All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization, SEHP Agency
DE All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
FL Both self-funded and fully insured SEHP Agency
GA Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
HI Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization, Insurance carrier
IA Both self-funded and fully insured SEHP Agency
ID All fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
IL Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
IN All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
KS Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
KY All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
LA Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
MA All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
ME All self-funded SEHP Agency
MI Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
MN All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization, SEHP Agency,
Benet advisory rm, consultant, or broker
MO All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
MS All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
MT All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization, SEHP Agency
NC Both self-funded and fully insured SEHP Agency, Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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State
All self-funded, all fully insured, or both
Entities that participate in network negotiations
NE All self-funded SEHP Agency
ND All fully insured SEHP Agency, Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
NH All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
NJ Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
NM All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
NV Both self-funded and fully insured SEHP Agency, Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
NY Both self-funded and fully insured SEHP Agency, Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
OH All self-funded Other state agency
OK Both self-funded and fully insured SEHP Agency
OR Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
PA All self-funded PEBTF
RI All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
SC All self-funded SEHP Agency, Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization,
Benet advisory rm, consultant, or broker
TN All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
TX Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
UT All self-funded SEHP Agency
VA Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
VT All self-funded Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
WA Both self-funded and fully insured Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
WI All fully insured Fully Funded Health Plans
WV Both self-funded and fully insured SEHP Agency, Third-party Administrator (TPA) or
Administrative Services Only (ASO) organization
WY All self-funded Third-party Administrator (TPA) or Administrative Services Only
(ASO) organization
Self-Funded or Fully Insured - Who Negotiates the Networks, cont’d
Appendix X: Claims Data
Opportunities for State Health Insurance Plans to Drive Improvements in Affordability
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NOTE: All responses seen are as they were provided by survey respondents with minimal edits. We did not receive a
response from Arkansas, District of Columbia, Maryland, and South Dakota
State
Does the SEHP agency
have access to claims
data from its TPA?
Does the SEHP agency
use its claims data to
assess cost trends/
drivers?
Does the SEHP agency
contribute claims data
to an All-Payer Claims
Database (APCD)?
Does the SEHP agency
use data from the
APCD to assess cost
trends/drivers?
AK Y Y N N
AL Y Y N N
AZ Y Y N N
CA Y Y N N/A
CO Y Y Y Y
CT Y Y Y N
DE Y Y Y N
FL Y Y Y N
GA Y Y N N
HI Y Y Y N
IA Y Y N N/A
ID Y Y N N
IL Y Y N N
IN Y Y N N
KS Y Y Y Y
KY Y Y N N
LA Y Y N N
MA Y Y Y Y
ME Y Y Y Y
MI Y Y N N
MN Y Y Y Y
MO Y Y N N
MS Y Y N N
MT Y Y N N
NC Y Y N N
NE Y Y N N
ND Y Y N N
NH Y Y Y N
NJ Y N N N
NM Y Y N N
NV Y Y N N
NY Y Y N N
OH Y Y N N
OK Y Y N N
OR Y Y Y N
PA Y Y N N
RI Y Y Y N
SC Y Y Y N
TN Y Y N N
TX Y Y N N
UT N/A N/A Y Y
VA Y Y Y Y
VT Y Y N N
WA Y Y Y Y
WI N/A N/A N N
WV Y Y Y N
WY Y Y N N
