What Are Cities Doing to Keep Healthcare Costs Down?

In advance of our annual State of the Cities report, which will be released later this year, this blog series captures speeches given by mayors in 2017. This blog is part four of a four-part series focused on mayoral dialogues and sentiments around the fiscal responsibility of the city and the retirement needs of the workforce.

In America, healthcare is offered to nearly 90 percent of all state and local government workers. Almost all HR professionals surveyed by the Society for Human Resource Management indicated that healthcare benefits rank number one as the most important benefit to employees. Organizations that try to reduce costs by reducing healthcare coverage or shifting costs to employees risk damaging their recruitment and retention efforts.

This is especially true for retiree healthcare.

For states and cities that offer less generous plans, many workers delay retirement until they are eligible for Medicare because they cannot afford healthcare. “People are working longer because they can’t afford health insurance,” said one Oregon human resources officer. “If there was more support for health insurance, they’d choose to retire sooner rather than later.”

But we know that healthcare costs are rising — and that offering a generous plan is not always feasible. Some strategies to lower healthcare costs include negotiating better benefits contracts with vendors, self-funding of healthcare, shifting healthcare costs to employees, attaching a surcharge to spousal coverage, changing prescription drug benefits, or adopting consumer-directed health plan designs.

However, some of these strategies might be met with employee discontent. Instead, more welcoming strategies might be offering health risk assessments, creating a health management program or developing a robust employee wellness program.

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Wellness initiatives are becoming more prevalent as a way to manage healthcare costs, increase productivity and reduce absences. Approximately 63 percent of state and local government workers have access to these initiatives compared to 39 percent in the private industry. As a preventive measure, wellness programs are typically moderate-to-low cost, thereby posing little to no direct threat to cities’ current fiscal conditions.

In fact, these programs tend to have a long-term positive impact on employees’ health, which can not only save cities’ bottom lines but also show employees the city cares. In addition, while both serve to cut healthcare spending in the long run, there is no doubt that wellness initiatives are more popular among employees than cutting active and retiree health benefits because they are seen as an added benefit.

“Research shows that companies can save anywhere from $3 to $15 for every $1 spent on health and wellness within 12 to 18 months of implementing a program,” says Mercedes Carnethon, Ph.D., an assistant professor in the department of preventive medicine at Northwestern University. And about two-thirds (68 percent) of human resources professionals recently indicated their organizations offered some type of wellness program, resource or service to their employees.

Mayors representing communities of all sizes are proposing wellness initiatives to improve the health of the local citizens. For example, cities like Vista, California, and Clarksville, Tennessee, both launched a “Walk with the Mayor” program for residents to get active. The “Walk the Talk” program implemented by Kim McMillian, Mayor of Clarksville, “demonstrated the city’s commitment to building a healthier and more successful community” and received applause from the Governor’s Foundation for Health and Wellness.”

Additionally, the city of Kettering, Ohio, implemented a community wellness campaign named “Healthy Heart, Healthy You” to promote a healthy lifestyle. In Kingston, New York, Mayor Steven Noble established the Live Well Kingston Commission to address wellness programs for residents.

Some mayors have focused specifically on gym facilities and space. For example, the city of Buffalo, New York, continued its investment on the Jefferson Health and Wellness Center to improve the general health of the neighborhood. Similarly, the city of Clarksville developed an in-house gym facility and fitness center for its employees. Additionally, the city of Bloomington, Minnesota, offered reimbursements to its employees for health club memberships.

Other mayors are making commitments to build healthier communities starting with the city hall. “We’re serious about creating a healthier community. For me, that means gearing up at City Hall, where we’ve set a good example with workplace programs that encourage better health and fitness for all of our employees.”, said Mayor McMillian. Some common preventive wellness initiatives adopted by many cities include biometric screening, physical screening, mammograms and colon examination.

Another popular wellness initiative adopted by mayors is focused on smoking cessation. For example, the city of Bloomington, Minnesota, developed preventive health measures to reduce smoking. The Mayor of Clarksville also ensures a tobacco-free work environment to reduce the chances of smoking-related diseases, which have aided the city in cutting down future healthcare costs.

Some state leagues have also adopted smoking cessation programs, including Arkansas Municipal League, which offers a voluntary wellness initiative titled #AMLMoves to reduce tobacco use among municipal employees.

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Wellness initiatives by cost.

Wellness and preventative initiatives have gained popularity among mayors for their moderate financial inputs, popularity among employees, high retention rate among workers and ability to control healthcare costs in the long term.

As the cost of healthcare continues to grow at a fast pace, it is expected that more mayors will implement wellness initiatives to curb future costs and balance the city’s budget.

anita-photo.pngAbout the Authors: Anita Yadavalli is program director for city fiscal policy in NLC’s Center for City Solutions.



headshot.jpgYang You is the research intern for NLC’s Center for City Solutions. He supports the Center’s research priorities, with an emphasis on the annual State of the Cities and City Fiscal Conditions reports and Mayors Institute on Preemption. Yang holds a Bachelor of Arts in Political Science and a Bachelor of Science in Supply Chain and Operations Management from the University of Minnesota.