GROUPS SEEK TO CUT RETIREE HEALTH BENEFITS

Cite Current & Future Costs

JULY 2012 VOICE: As the strongest advocates for cuts in pension and healthcare benefits, neither the Mass. Taxpayers Foundation (MTF) nor the Mass. Municipal Association (MMA) should be unknown to most public retirees.

To the contrary, Association members are all too familiar with the roles both organizations have played over the past twenty years in leading repeat attacks on pension and health care benefits. Under the guise that these benefit programs are budget busters – steadily bankrupting state and municipal governments alike – these groups have never wavered in their campaign to see pension and health care benefits reduced.

Last year, both the MMA and MTF laid claim to the successful passage of two major benefit reform bills. Chapter 69 significantly altered the local insurance bargaining process, granting significant leverage to municipal officials to redesign health insurance coverage or force entry into the state’s Group Insurance Commission (GIC), over union and retiree objections. Local savings in the first year of implementation will exceed the $100 million projected at the passage of the bill in July 211.

In November, Chapter 176 passed, ushering in a landmark pension reform law that essentially created a new retirement benefit for employees hired on or after April 2, 2012. State officials claim the pension reform will save the Commonwealth and its municipalities some $5 billion over the coming thirty years.

As we have previously reported, no sooner had the two reform laws become law, when both the MMA and MTF were back at it lobbying for even deeper reforms.

Since healthcare benefits do not contain the same contractual legal protections as our contributory retirement benefits, deeper cuts directed at insurance coverage is an easier target for further benefit reductions under the guise of reform. And, unlike last year’s pension reform law, health insurance benefit changes may impact current retirees and employees alike.

“This is a very dangerous time for public retirees, there can be no question about it. Between the struggling economy, which has resulted in lower tax revenues, and increasing health care costs, the climate remains ripe for some to attack retiree benefits,” said Association President Ralph White. “Instead of allowing the recent reforms to take hold and naturally reduce costs, the MTF and MMA continue to lobby for deeper cuts, some of which go well beyond the bounds of decency.”

Simply Cost Shifting

Once again the proposed “reforms” offered by both the MTF and MMA amount to little more than cost shifting – reducing the obligation of the employer, while those, needing to use their insurance benefits, pay more.

In allowing for greater municipal control over healthcare plan design or easier entrance into the state GIC, Chapter 69 essentially shifted costs onto retirees and employees in the form of higher copayments and deductibles. Traditionally, the plans offered by the GIC have had higher out-of-pocket costs than municipal plans.

However, state retiree contribution rates range from 10-20%, depending upon retirement date. While average municipal rates are roughly 75/25, many towns remain at 50/50 for retirees and force surviving spouses to contribute a full 100% of the premium. State surviving spouses contribute 10%.

In its January 2012 report, the MTF questions the viability of municipalities offering retiree insurance coverage at all. “There is a serious question whether many communities can afford to continue to provide any sort of retiree health care, particularly in combination with their pension obligations and the costs of employee health care.”

Interesting, while strongly advocating for a reduction in retiree health care benefits, citing “unsustainable costs”, the MTF has been critical of recent legislative proposals aimed at reducing the overall cost of health care in Massachusetts.

Bills, now advancing in both the House and Senate dubbed “Payment Reform”, increase the state’s role in requiring insurance companies and health care providers to lower their costs, among other things. While complimenting the legislative intent, the MTF warns of government overreach and a path toward price controls.

“It seems that the MTF wants it both ways on this issue. On one hand, they are calling for reduced benefits and increased costs on retirees and survivors, while on the other, they oppose steps that aim to get at the root cause of why these benefits are costing more and more,” says Association Legislative Liaison Shawn Duhamel, who also serves as our retiree representative on the Special Commission on Retiree Healthcare. “Without payment reform, healthcare will continue to grow more unaffordable for everyone. This is a problem for both public and private retirees that must be solved without cost shifting onto people who cannot afford these new costs.”

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