Missouri Fire District Finds Success in HSAs

Published May 1, 2008

A fire district in St. Louis County, Missouri has shattered the myth that tax increases are the only way to cure health care ills in the public sector by setting its 2008 health care budget at its lowest cost since 1999.

Since 2005, the Mehlville Fire Protection District, which provides fire and emergency medical coverage to approximately 110,000 residents, has become known for making landmark reforms. Until recently, the largest reform had been termination of the district’s expensive defined benefit pension plan and replacement with a more efficient defined contribution plan.

No Tax Increase Necessary

For fiscal year 2008 the district made an even more remarkable reform: It reduced its health care budget to a staggeringly low $940,000. That total is a far cry from just four years previous, when the district’s firefighters union-controlled board members told voters a 36 percent tax increase was necessary because by 2009 health care costs would be more than $4,000,000 a year.

After voters ousted several incumbent board members in 2005 in favor of reform-minded candidates, details of the excessive benefits employees were enjoying at the expense of residents began to come to light. Employees were receiving free health insurance not only for themselves, but for their families as well. Co-pays were negligible, deductibles non-existent, and children were being covered until age 26.

The system was radically changed after the 2005 election. Employees were held responsible for 50 percent of dependent coverage, larger co-pays, and a $500 deductible.

Employees learned there is a cost for going to the doctor. As a result, claims slowed, and they were followed on their downward path by the cost of insurance renewal rates.

Making HSAs Available

The decrease in unnecessary use of health benefits, and its accompanying drop in the cost of premiums, enabled the district in 2008 to invest its health benefit-earmarked funds more efficiently, by transitioning its public health coverage to a high-deductible health plan accompanied by a health savings account, or an HDHP/HSA.

The lower cost of the HDHP has allowed the district to place a $1,500 contribution into an HSA for each participant. Now in its first year, enrollment in the HDHP/HSA is already at roughly 36 percent of eligible public-sector workers. The high-deductible plan should be available to all workers within three years.

The Mehlville Fire Protection District’s move to the forefront of reform stands in stark contrast to the performance of other public entities on health care and pensions, where the vast majority of private employers have frozen or terminated defined benefit pension plans while government largely holds these obsolete plans sacrosanct and watches unfunded obligations spiral upward.

Aaron Hilmer ([email protected]) serves on the board of the Mehlville Fire Protection District in suburban St. Louis, Missouri.