BIG WEEK FOR HEALTHCARE ON BEACON HILL ENDS

GIC & Special Commission Meetings Held

OCTOBER 26, 2012: On Tuesday, the Special Commission on Retiree Healthcare held its 5th meeting in six months, as it began to outline its report to be issued by December 20, 2012.

The Commission’s legislative mandate is to explore the means to reduce state and municipal retiree unfunded healthcare liabilities. Actuaries have projected the state’s 30-year unfunded liability at $16 billion, while municipal liabilities come in at $30 billion.

Thus far, the twelve-member commission has heard from a variety of healthcare and finance experts specializing in retiree health benefits. It has also retained the services of two actuarial firms, Aon Hewitt and Segal, to assist with modeling various reform scenarios.

At Tuesday’s meeting, Aon presented its preliminary findings on the state’s own retiree healthcare benefits, administered by the Group Insurance Commission (GIC). Some 78% of GIC enrollees were members of Group 1, 9% Group 2, 4% Group 3 and 9% from Group 4.

As we have previously reported, the Commission is considering two main strategies to lower future healthcare costs: Changes in eligibility requirements for future retirees and Proration of insurance contribution rates based on years of service.

For instance, a future state retiree with 15 years of creditable service might be eligible for an insurance contribution of 50/50, while a career employee with 25 years service would retire with an 80/20 contribution split. Currently, one vests for both pension and health insurance benefits with 10 years service.

“Once again, I should remind members that these changes would only apply to future retirees, but when they would take effect remains unknown. Exactly who is impacted and when these changes will begin are likely to be the final questions left for the Commission to decide,” said Association Legislative Liaison Shawn Duhamel, who serves as the retiree representative on the Commission.

A significant development resulting from this meeting was the adoption of a unanimous motion by Commission Chairman Henry Dormitzer to remove from further consideration any notion of a defined contribution plan or inflation indexed employer contribution.

“I think the Commission agreed that there is no place in the report or within Massachusetts public policy for any type of DC plan or a scheme that would shift the burden of inflation unfairly onto the backs of retirees. Any move toward that type of benefit would prove a disaster to our health plans,” continued Duhamel.
The Commission is now scheduled to meet again on November 13, when it will hear a report from Segal on municipal liabilities and potential reforms. Changes at the local level are expected to be offered as local options, preferably as a package of forms that would include universal survivor benefits.

“Beyond protecting our current retirees, our focus has also been on ensuring that all surviving spouses at the municipal level are provided at least a 50% health insurance contribution by the municipality. Preferably, those local survivors should be held harmless at the same contribution rate as retirees,” said Association President Ralph White.

GIC Procurement: Will Blue Cross Bid?

Earlier this week Association officials were on hand for the GIC’s Bidders Conference, where the specifics of the Commission’s RFP were discussed with insurance carriers. As we have previously reported, the GIC is currently in the 5th and final year of its current insurance contracts with carriers such as UniCare, Tufts, Harvard Pilgrim and Fallon, along others.

Joining each of the GIC’s current insurance vendors at the meeting was Blue Cross Blue Shield, which has not placed a bid on the state’s health plans in over twenty years. Members may recall that the Blues once held the contract for the GIC Indemnity Plan, but were outbid by John Hancock nearly thirty years ago. Hancock eventually lost the contract to UniCare, which is the current provider of both the Indemnity and Optional Medicare Extension (OME) plans.

What makes this year’s bidding process unique are the new requirements set forth by Chapter 224, the new Massachusetts Healthcare payment reform law. Under Chapter 224, insurance and healthcare providers are required to take steps to lower and slow the growth of health care costs. In doing so, the healthcare payment and delivery systems will be reformed.

While most of the changes will not been seen or felt by retirees, our Association has been closely monitoring developments to ensure retirees experience no interruptions in service or quality of care.

One assurance we have received is that retirees enrolled in the OME plan will not be required to obtain a Primary Pare Provider (PCP). The reason for this is that Medicare rules are set by the federal, not state, government and there is no federal requirement for a PCP, if enrolled in the OME plan. There are also no current plans to force non Medicare retirees enrolled in the Indemnity Plan to have a PCP.

“This news from the GIC should increase retirees’ comfort levels quite a bit. No one wants to have to switch doctors or be required to jump through hoops in order to seek medical care,” says Duhamel. “We’re thankful that the GIC has been very open about what they’re seeking to do.”

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