Turlock’s spending on employee health care is highest in state. What can be done?

Turlock City Hall
Turlock City Hall Modesto Bee

Turlock’s health insurance costs for city employees are highest among the larger cities in California, according to a study released Monday.

The city could save millions if its health insurance costs for employees were closer to what the private sector pays, says the analysis by Transparent California.

Turlock paid almost $24,000 per employee for health coverage in 2018, which is higher than any other California city with 100 or more employees.

Transparent California, a Nevada-based think tank known for its database on public employee compensation, studied the inflated costs of insuring public-sector employees by looking at 672,000 payroll records from 1,500 government agencies statewide. It found that one special district in Southern California paid more than $80,000 for a staff member’s medical insurance.

In state and local government agencies, the average annual spending on coverage was $14,288 per employee, which is 52 percent more costly than the market-rate average of $9,381 in California and other western states. About $3.3 billion in taxpayer money is spent annually on public employee health coverage statewide, the study says.

Paying $23,236 per employee annually, Patterson was eighth on the list of 465 California cities and Waterford was 10th with a cost of $22,816 per employee. Turlock and those two cities paid about 2 1/2 times more for employee health coverage than the “market-rate average” or what’s usually paid in the private sector.

Transparent California said Turlock could save $3.6 million annually if it paid market-rate costs.

Turlock officials did not contest the city’s ranking and acknowledged the costs of the city’s self-funded health insurance program are a significant budget issue. The city expects to spend around $8.2 million this year on coverage for its 338 full-time employees and dependents.

The city pays the full cost for the generous health plan that covers employees. The city workers are not responsible for monthly premiums, co-insurance or deductibles, but they do make co-payments at the doctors office.

“It looks like they are providing a very generous plan that insures the whole family and expects that government is paying 100 percent of the cost,” said Robert Fellner, executive director of Transparent California.

In government agencies with more reasonable health care costs, Fellner said, employers more typically cover 70 percent of the health plan’s cost and employees pay 30 percent.

Fellner said when public sector employers bear the full cost of coverage it’s easier for insurance carriers to raise the rates. Employees who pay for a share of premiums will raise questions about cost increases and put pressure on their employers to seek a better deal from competing insurers, Fellner explained.

Michael Cooke, Turlock’s interim city manager, said with self-funded plans, two or three big claims in a year can affect how much is paid for coverage. He said health care is an item in current negotiations with employee union groups and the city has looked at other options in hopes of controlling future cost increases.

Neither Cooke nor a union representative contacted by The Modesto Bee said that employees would be asked to pick up a share of health insurance costs.

Cooke said employees have accepted less generous salary increases in the past to keep their above-standard health benefits. He said a comparison with comparable cities found that, for general employees, Turlock’s salaries were 7.3 percent below the median and its health benefits were 6.7 percent above the average.

Paul Arai, president of the union representing Turlock firefighters, said he believes employee groups are open to talking about health coverage in the negotiations but bargaining rules prevented him from disclosing if health care is a major topic.

Arai said the current health plan existed before Affordable Care Act provisions and was grandfathered in, so it does not have the preventive medicine services mandated by Obamacare.

Of the nine cities in Stanislaus County, Modesto was closest to the average market-rate costs in terms of health care spending for employees. The city paid $10,488 per worker in 2018.

The costs were $18,021 for Ceres, $15,823 for Riverbank, $13,962 for Hughson, $13,735 for Oakdale and $11,211 for Newman.

Transparent California gave credit to Ventura, Pomona, Newark and Hanford for “behaving in a fiscally responsible manner when it comes to health costs” and said San Diego and transit districts in that area were paying reasonable costs.

The study also cited some outrageous outliers, such as the $80,665 paid by the Water Replenishment District of Southern California for a communications director’s health benefits. The Los Angeles Department of Water and Power paid $57,800 her head for premium medical plans for about 150 of its employees, the study says.

“Spending over $50,000 on a single employee’s health insurance plan is an inexcusable waste of taxpayer funds,” Fellner said.

Ken Carlson covers county government and health care for The Modesto Bee. His coverage of public health, medicine, consumer health issues and the business of health care has appeared in The Bee for 15 years.