Insurance Premium Moratorium Extended

New Focus on Retiree Healthcare Reform

SEPTEMBER 2016 VOICE: In the final hours of the formal legislative session for 2016, the House and Senate voted to override Governor Baker’s veto of Section 45 of the FY17 State Budget.

Section 45 extends the municipal retiree health insurance premium moratorium by two years, until July 1, 2018. Had the veto not been overridden, some municipalities were poised to immediately increase insurance contribution percentage rates for retirees.

The moratorium was first created in 2011 to prevent cities and towns that chose to implement plan design changes as allowed by Chapter 69, Acts of 2011. Chapter 69 allows municipalities to increase copayments and deductibles up to the level charged by the state’s GIC without the need to bargain or negotiate with unions or retirees. Another section of the law makes it easier for cities and towns to opt into the GIC all together.

While the law does require municipalities to share up to 25% of the first year’s savings generated by the health insurance changes, cities and towns are allowed wide latitude to make the changes without negotiating or bargaining.
The intent of the moratorium is to prevent municipalities from increasing both out-of-pocket costs and contribution percentage rates.

“There is a real concern here over the ability of many municipal retirees to afford higher and higher health insurance costs. Is it at all fair to force retirees to absorb new out-of-pocket costs, while also paying higher monthly premiums,” questions Legislative Director Shawn Duhamel who also served on the Retiree Healthcare Commission. “Keep in mind that the average municipal pension is $22,000, with many smaller towns still below $18,000. This protects these retirees from endless cost shifting.”

Baker vetoed the measure at the behest of the Mass. Municipal Association. His reasoning is that the law inhibits cities and towns from having the option of raising insurance contribution percentage rates.

The Town of Andover and City of Haverhill were both poised to increase rates on retirees had the moratorium not been extended.
The Legislature voted overwhelmingly to override Baker’s veto, with just twelve Reps. voting to sustain the veto. Rep. Jim Lyons (R-Andover) led the fight against the moratorium. Lyons is a  vocal member of a small group of right-wing legislators closely aligned with the conservative Mass Fiscal Alliance

All six Republican members of the State Senate voted with our Association to extend the moratorium. Senators Vinny deMacedo (R-Plymouth) and Patrick O’Connor (R-Weymouth) worked closely with their Democrat colleagues, including Senators Tom McGee (D-Lynn) and Ken Donnelly (D-Arlington) to cosponsor legislation protecting public retirees.

“We don’t view our advocacy for fair treatment of retirees to be a partisan issue. Our approach to retiree healthcare is very reasonable and fair, which is why we have such broad support,” explains President Frank Valeri. “Sadly, we have this very small, yet vocal group of ultra conservatives who seem to want to slash benefits and force retirees to pay more. They use propaganda and rhetoric as a means to frighten local officials into making kneejerk decisions around retiree healthcare.”

Reform Eyed in 2017-18

In conversations with legislative leaders from both parties, it has become increasingly clear that a long-term solution is needed for retiree healthcare.

Absent a statewide unified approach, many cities and towns will continue to erode the quality of retiree insurance plans, while simultaneously requiring retirees to pay a larger share of the total cost.

Currently, the average retiree contribution rate split is 75/25 for municipal retirees (including teachers). At the state level, three contribution rates exist for retirees depending on the date of retirement (90/10, 85/15 and 80/20). Since 1994, state policy has been to hold existing state retirees harmless from contribution percentage rate increases.

“We believe the same policy should exist at the local level as well, whereby retirees are grandfathered under the rates that existed upon their retirement. Changing the rules and requiring retirees to pay substantially more is inherently unfair,” said Valeri. “Retirees deserve long-term stability and should not have to worry about their health insurance plan year after year. The only way to solve this problem is by creating a new statewide law that protects the rights of local retirees, while ensuring the financial sustainability of the health plans.

“Our Association will work closely with our public employee union allies, as well as legislative officials, to achieve a fair solution. We are very disappointed that Governor Baker chose to veto the moratorium, but are thankful for the bipartisan support we received in the legislature for the override. Hopefully this is a sign to the Governor that we need to work together on this issue and find a solution.”