Public employees enjoy some of the most generous health benefits out there. Nationally, state and local governments spend $4.43 per hour on health benefits while private sector employers spend an average of $2.01 per hour. Many public workers receive full health insurance while paying very little or no premiums and no co-pays and often times have dental and vision as a part of the package. Such generous health benefits are almost never feasible in the private sector and it is no different for public employees.
The cost of retiree health care is so high that it has begun to overtake the cost of regular pensions. In 2009 the Michigan Public School Employees' Retirement System (MPSERS) paid about $1 billion dollars into its pension fund and $705 million into its Other Post Employment Benefits (OPEB) fund, but this does not tell the whole story. The $1 billion dollars put towards the pensions exceeded the required contribution and the plan is over 80% funded. The $705 million dollars towards OPEB was only a fraction of the required of $2.5 billion dollars and that plan is only about 3% funded. And this is just the cost of retiree health care, and does not include active employees.
MPSERS OPEB Contributions
These benefits are not only overly generous offers in themselves, but public employees and retirees spend far more money on their health care than do their peers in the private sector. Because these employees typically do not have co-pays, have very extensive coverage, and will likely never see a bill, they have little reason to be tactful about their visits to the doctors office. For a bit of comparison, the average Ann Arbor public employee pays only 6% of their monthly health care cost of $981, while the average private sector worker pays 41% of their $532 health care cost.To help solve these issues, public employees and retirees should first be paying a certain percent of their health insurance premiums. Phasing in payments until they are up to at least one-third of total cost will take a significant bite out of health care plans' unfunded liabilities (about $26 billion in the case of MPSERS). Also, public employees and retirees should be paying minimum co-pays on doctor visits, hospital visits, and medication, forcing them to be more judicious with these things. These measures will not only save money in themselves, but they will also bring down the overall cost of health care for public employees.