MUNICIPAL GIC: MEDICARE PART B KEY BARGAINING CHIP

JANUARY 1, 2009: Over the past eighteen months, scores of Massachusetts cities, towns, and various other governmental entities have been in open negotiation over whether or not to enroll local retirees and employees into the state’s Group Insurance Commission (GIC) health insurance plans.

These communities are using a process established by Chapter 67, Acts of 2007, commonly referred to as Section 19 or coalition bargaining. Under coalition bargaining, local retirees negotiate their health insurance benefits together with active city/town employees as part of a public employee committee (PEC). A weighted vote of 70% of the PEC (retirees have an automatic 10% vote) and approval of the governing authority is needed to join the GIC.

As we went to press with the November edition of the Voice, a number of municipalities had just finalized agreements between the local government and the PEC. Pittsfield, Quincy and Weymouth  joined the City of Springfield as major communities that have opted to join the state’s insurance pool.

With a local economic crisis brewing in 2006, Springfield was the first municipality to join the GIC on January 1, 2007, which established much of the process for other communities to now follow suit. After another 6 months of intense negotiations, in which our Association was heavily involved, Chapter 67 was signed into law by Governor Patrick.

Saugus then entered the GIC system on January 1, 2008 under a special law aimed at resolving that community’s fiscal problems. Another five municipalities and six districts joined the GIC that July.

Throughout 2008, some fifty communities worked through the PEC process established by Chapter 67 and examined the various ways to bring local healthcare costs under control. For some communities, the answers were found in renegotiated contracts with Blue Cross and other insurance carriers. Others chose to join local and statewide insurance purchasing groups or pools.

Give and Take

“The common thread among the communities, opting to join the GIC, is the give and take that has existed between the local government leaders and the PEC,” said Association President Ralph White. “Coalition bargaining can work very well if there is an open dialog that leads to compromises being made by both sides. If moving to the GIC is going to save money, then that savings must be shared with retirees.

“Negotiations break down when the local government tries to dictate conditions, set prerequisites or balance the budget on the retirees and employees. But thankfully, cities such as Melrose and Quincy, along with a number of towns have proven that the process can work very well.”

Since January 1, 2007, sixteen municipalities have joined the state GIC through the coalition bargaining process. Of that number, eleven communities – almost 70% – have agreed to reimburse retirees and survivors for a portion of their Medicare Part B premium (see chart above), which remains at $96.40 per month. In addition, the towns of Wenham and Weymouth  agreed to an adjustment of insurance premiums in lieu of a Part B reimbursement.

According to Nancy Brown, Wenham PEC designee and former town accountant, “Currently, we’re part of the state’s largest municipal insurance pool, MIIA, and contribute 40% of the monthly premium. We decided to compare our MIIA plan with other insurance options, including the GIC.

“Town officials did an excellent job in explaining our options and we [on the PEC] looked at the comparisons long and hard before agreeing to join the GIC. One of the strong selling points is the substantial increase in the town’s contribution to the GIC premiums from the current 60% to 75%.

“That means for a retiree, on the indemnity plan, a savings of $1,200 a year. While our agreement doesn’t specifically include a Part B refund, we believe that a savings, like that, compensated for it. We look forward to the move next July.”

To date, only the Western MA cities of Pittsfield and Springfield, along with the Town of Groveland, have refused to acknowledge or grant any Part B reimbursement. Although Springfield did agree to partially subsidize the Medicare supplement premiums of those retirees with pensions under $30,000, this was done primarily to offset increased RX drug costs and not Part B.

The average Medicare Part B reimbursement is 60%, with Holbrook and Melrose agreeing to a 70% payment. Others, like Weston, will be paying a certain dollar amount toward the Part B Premium. Even with the Part B reimbursement in place, these communities are still generating a substantial savings by joining the GIC.

“Here in Weston, our local retiree group, known as AWARE (Assoc. of Weston Active and Retired Employees), has been engaged, with the Association’s help, in an ongoing legal battle over the town’s obligation to refund Part B,” reports designee Carol Dailey, a former teacher who is also an AWARE board member. “Under our agreement, the town will contribute $58 toward the monthly Part B premium ($96.40) with an escalator clause that raises the town’s contribution based upon the percentage increase in future Part B premiums.”

“If done right, joining the GIC can be a win-win for the retirees and taxpayers. In Quincy, the city estimates that it will save $5 million a year, while still providing for a Part B reimbursement,” explains Association Legislative Liaison Shawn Duhamel. “Where we run into a problem is in communities where the manager or mayor is not willing to negotiate in good faith and share the savings.”

Not For All

Since the passage of Chapter 67 in July 2007, critics of coalition bargaining have alleged that retirees and union members obstruct the negotiation process and are unwilling to move to the GIC. Some have even gone as far to suggest that participation in the state insurance plan should be mandatory, without the required retiree/employee input.

Association representatives point to two recent developments in which officials in two Massachusetts cities have worked to block open negotiation or formal discussions on joining the GIC.

In Worcester, at the urging of local retirees and union members, the city council called on City Manager Michael O’Brien to examine the potential for the city to join the GIC. In late October, O’Brien reported back that he would only move forward with negotiations if retirees and local unions agreed to a 75/25 contribution rate as a prerequisite.

More recently in North Adams, longtime Mayor Michael Barrett has openly rejected calls by unions and retirees to form a PEC. Barrett claims that his own internal analysis reveal that costs under the GIC have risen more steadily than those offered locally.

In other communities, such as Newburyport, coalition bargaining has led to agreements being reached in which the town opts to join a joint purchasing group instead of the GIC. Newburyport is now part of the Massachusetts Interlocal Insurance Association (MIIA), which exclusively carries Blue Cross Blue Shield.

“From the beginning, we have argued that joining the GIC is not a one-size fits all solution. It can work very well for some communities, but others are finding that other options are available,” continued Duhamel. “But every community should have an open discussion about healthcare and weigh the options based on the facts.”

GIC officials, under the direction of Executive Director Dolores Mitchell, have done a superb job in working with those municipalities considering the GIC option. Danielle Chaplick is the GIC’s municipal coordinator, working directly with retirees, unions and municipal officials to ensure a smooth transition into the state plan.

“Right now we have over 11,000 local retirees and employees insured under the GIC and another 12,000 coming in this July. So far, we’ve heard few complaints about the transition process or the quality of the GIC plans,” said White. (see related story page 17) “The process is working and our members have a voice where one did not previously exist.”

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