Retirees To Have Seat At Table

JULY 2009: Following on the coattails of a groundbreaking legislative report that aims to control municipal healthcare costs through sweeping changes in the local insurance law (Chapter 32B), the state Senate has passed a provision, within its version of the FY'10 state budget, that significantly alters the governance of local insurance plans.

In short, the proposal would force municipalities to bring their health insurance costs in line with those of the state, which are generally considered to be lower in many cases.

Originally proposed by Governor Deval Patrick last winter as Municipal Partnership Act II, the proposal seeks to bring various municipal budget costs under control, while also granting local governments the ability to raise certain local taxes. The Senate's legislation, along with a separate proposal awaiting action in the House, are the end product of an eight-month legislative study of local government.

After rejecting calls by the Mass. Municipal Association for unrestricted control of insurance plan design, the Senate has passed a proposal, authored by Senator Stanley Rosenberg (D-Amherst), that would use the average per-subscriber cost of the state Group Insurance Commission (GIC) as a benchmark against which to measure local health plan costs. If local insurance costs are higher than the GIC, a local community would be required to lower their costs, join the state GIC or face a reduction in state aid.

This situation would trigger the creation of a local Public Employee Committee, (PEC) under the coalition bargaining law (Section 19), that would then negotiate with the municipality to revise their local insurance plan or to join the state GIC. Section 19 requires the Association to designate a local retiree to each PEC, who has an automatic 10% weighted vote. The unions also have a weighted vote based on that bargaining unit's membership.

While the news media has openly called for all local retirees and employees to be insured in the state GIC, each of the various legislative proposals leave that decision up to the local community and PEC.

"We understand there is a need to control local costs, but it can't be a one sided solution that simply shifts costs onto retirees," said Association President Ralph White. "Our position all along has been that our members must have a seat at the bargaining table and that the GIC is not a one size fits all solution. Blue Cross and other insurers have been doing an excellent job, and it should remain a local decision as to which health plan our members belong."

The proposal also establishes a binding arbitration process, in which an arbitrator would break an impasse between the local government and PEC. A number of factors, including Medicare Part B reimbursements, would then be considered by the arbitrator.

Mandatory Medicare Eyed

Although not contained in the Senate's proposal, both the governor and legislative report have called for the mandatory enrollment in Medicare for local retirees who are eligible for the federal program. Currently, municipal enrollment in Medicare is not mandated by state law, but rather allowed through a local option law known as Section 18, that roughly half of the Commonwealth's municipal governments have adopted.

The move to shift retirees into Medicare is designed as a cost saving measure, since the lions share of their healthcare costs would then be covered by the federal government. For example, all Medicare eligible retirees, insured by the state's GIC, are required to enroll in Medicare, and because of this, we estimate that the state saves over $400 million a year.

However, mandatory Medicare does not come without its controversy. Medicare retirees are charged $96.40 monthly for Part B, on top of their supplemental insurance premium, meaning their total premium costs could increase.

But, in granting retirees a seat at the bargaining table under coalition bargaining, items like a Medicare Part B reimbursement can be included in the PEC agreement with the local government. Since 2007, most local PEC agreements have included a provision, whereby the municipality reimburses retirees for a portion of their Part B cost.