Municipal Health Care Reform (Plan Design)
We asked to call and email your legislators, and you did it! In 2011, first the House and then the Senate passed historic reform legislation!
In recent years, there has been no more important fiscal issue facing state and local governments than rising health care costs. The Massachusetts Taxpayers Foundation estimates that cities and towns have been missing out on over $100 million a year by not reforming how they pay for employee health care.
The Boston Foundation released a report in December 2010, saying “soaring costs for school employee health care coverage have drained school budgets,” and concluding that virtually none of the additional revenue directed toward education since the 1993 education reform law has actually gone toward educating children--it has gone toward employee health care.
Why? Because municipal health care plans are far more expensive than either the state plan (GIC), federal plans, or those offered by the private sector. According to an April 2011 Boston Foundation report: "Health insurance plans to cover city and town employees cost 37 percent more than similar plans for workers at private companies, mostly because municipal employees pay minimal copayments or deductibles when they get care, according to a new statewide survey..."
"The issue is cost-sharing, and right now the cost-sharing of municipal employees is minuscule,’’ said Bob Carey, author of the report. “Cost sharing must go up. It’s way out of synch with the rest of the employer market."
In 2007, as part of the Municipal Partnership Act, the Massachusetts Legislature passed as a provision that allowed cities and towns to enter the state's Group Insurance Commission (GIC) if 70% of their Public Employee Commissions approve. The state's GIC saves money on health care costs by leveraging its larger size to negotiate better rates, and by requiring that employees pay a generally larger share of their premiums. When the City of Springfield joined the GIC, it saw annual savings of approximately five million dollars. Unfortunately, the 70% threshold proved too high for most.
Cash-strapped municipalities pressured state legislators to change state law and allow cities and towns to impose more affordable health care coverage on their employees. In 2011, thanks to municipal groups, dedicated state legislators and voters like you, Masachusetts got the reforms it needed! Here's what happened:
Governor Patrick proposed reforms in early 2011. In the Patrick Administration proposal:
- All cities and towns must either join the Group Insurance Commission and have the same options state (and some local) employees already have, or create their own programs with equivalent or lesser cost.
- Eligible retired employees must join Medicare rather than staying on the municipal plans.
- There is a time limit on negotiations with the employee unions towards a new plan, but an undefined one.
- The plan leaves it up to the secretaries of administration and finance and of labor and workforce development to decide how much of the savings goes back to the employees.
- The administration estimates over $94 million in savings. (Read the full text of Governor Patrick’s plan, in Section 6, here.)
Then, the Massachusetts House of Representatives passed reform legislation in April 2011. Two plans were proposed, one from Speaker of the House DeLeo and one from Representative Walsh. Here are the plans as they were originally proposed (also see the comparison chart below):
Representative DeLeo’s plan was similar to Governor Patrick’s, but took it a few strides further toward meaningful reform:
- All cities and towns must either join the GIC or design and implement an equivalent or less costly plan.
- Eligible retirees must join Medicare.
- There is a strict limit on the savings that go back to the employees. In the first year of the plan’s implementation, 10% of the savings goes back to the employees to be used for health-related programs.
- Details of the
health care plans are not up for negotiation with the municipal employee unions.
The only thing still subject to collective bargaining would be changes in the
employee-employer premium share.
- The plan is estimated to save $100 million annually. (Read the full text of Representative DeLeo’s plan, Section 46 of the Budget, under “Outside Sections,” here.)
Representative DeLeo’s plan was endorsed by the Massachusetts Municipal Association (the association of town and city leaders struggling to provide services to their residents under the weight of outrageously high health care costs).
Representative Walsh's proposal was the least attractive. Scot Lehigh at the Globe called it a "Trojan horse," and here’s why:
- The plan gives municipal management and employee unions 45 days to negotiate on the terms of their health care plans (with no specific cost-saving stipulations), at which point they’ll be forced into arbitration.
- Arbitration decisions, made by a third party, will be binding on towns and cities unless blocked by a two-thirds majority of the council or selectmen.
- This amendment also preserves the necessity of a 70% union majority to make changes
Here's what passed in the House: The House of Representatives voted 111-42 to pass a version of the DeLeo/Dempsey plan, but with a couple of concessions:
- There is a 30-day negotiation period for making changes to the plan. This means that the municipal authorities present their version of the plan, then negotiate with the municipal employee unions for 30 days.
- If at the end of the negotiating period, the parties have agreed on the details, then 10% of the estimated savings will go to the employee union members for a health care program they decide on. If the parties have not agreed, then 20% of the annual savings goes into an account to offset the cost of "high utilizers."
- Local approval is required. This means that the board of aldermen or council members of each municipality must vote to institute the plan in that municipality. Depending on the municipality, this could prove to be a sticking point.
To read the full text of what was passed in the House (further Amendment 749.1), click here.
The Senate Ways and Means Committee released their version of the fiscal year 2012 budget, and it contained a different plan for municipal health care reform. The plan includes provisions for a 30-day negotiating period (with more room for input from employee committees than the House plan), an impartial three-member panel to settle any undecided changes after the 30-day period, the requirement of local approval for adoption, and a measure that would equalize the amount a municipality pays between its active employees and its retirees. Read the MMA's summary of the Senate plan here. Read the full text of the proposed legislation here (click Outside Sections; see sections 45-49, 51, 109 and 110). For an updated version of our own point-by-point comparison of all the proposed plans, see below.
A joint Conference Committee reconciled the two budgets to create one final one to put before Governor Patrick. The final budget included the following measures:
- The city council or a town's board of selectment would have to vote to adopt plan design, but they would only have to vote once.
- The municipal executive can propose to move employees to the GIC or propose a plan with copays and deductibles no more costly to the employee than the median GIC plan. Then the municipality must provide documentation of the estimated first-year savings.
- The executive explains the proposal, the estimated savings and the plan for cost mitigation to a public employee committee (PEC) made up of a representative of each union and a retiree representative.
- There is a 30-day window in which the municipality and the PEC negotiate the changes; a majority vote of the PEC is required for agreement.
- If no agreement is reached after 30 days, a three-person panel (a labor representative, a municipal representative and an "impartial" third-party) considers the situation and will be required to approve the changes or transfer, as long as they meet the GIC benchmark.
- The panel has the authority to review the estimated savings and the cost mitigation plan, and if they decide the shared savings is not enough, to require greater savings, although not more than 25%. (The obligation to share savings is only for the first year.)
- All eligible retirees are required to move to Medicare.
Finally, Governor Patrick filed a few amendments on July 11th as a final compromise between municipalities and unions, and those amendments passed almost unanimously in both houses. The compromise had broad support from the legislature, unions and municipal groups (you can read the MMA's statement in support of the measures here).
The changes include the the requirement that municipalities show that switching employees to the GIC would save 5% more than local plan design, a three-year moratorium on increasing costs for retirees rather than two-year, an increase in shared estimated savings and protection for local health plans. Read Governor Patrick's letter to the legislature and the text of the amendments here (see Attachment F).
For articles and op-eds on this issue, click here.
On July 12th, the final bill passed! Read it here. See how your legislators voted along the way here.
Check out our point-by-point comparison of the plans below.