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Funding Healthcare Costs: Legislation Taking Shape PDF Print E-mail
JANUARY 2006 - Focus On GASB Varies Among Communities - As we expected, interest, in funding future healthcare costs for retirees, is accelerating at the State House where legislation on the issue is currently taking shape.

Association officials are working with key legislators to draft a bill, called "retiree health insurance liability" legislation, that will enable the state and municipalities to fund these costs in much the same way as was done with our pension systems back in the '80's.

In September, we reported on the forum, sponsored by the Public Employee Retirement Administration Commission (PERAC), which centered on retiree healthcare. Speakers and participants focused on the new accounting rules, issued by the Government Accounting Standards Board (GASB), that essentially require state and local governments to fund future liabilities associated with retiree healthcare costs, beginning in 2007.

"We're moving beyond the initial discussion stage to the 'nuts and bolts' as to how the state and municipalities will in fact put money aside in a long term funding schedule to pay these future costs," comments Legislative Chairman Bill Hill. "Recently we testified before the Public Service Committee, on proposed legislation, allowing cities and towns to do just that.

"During our testimony, we urged the Committee to take the initiative and get out front on this issue, in order to avoid a crisis later." Association President Ralph White proposed that the Committee's legislation include language that the state, cities and towns would be required to use the upcoming federal drug subsidy toward future healthcare costs."

"The money coming back from the Centers for Medicare and Medicaid Services (CMS), approximately $25 million for the state, is available because most over-age-65 retirees belong to Medicare at no cost to the state and its cities and towns," White said in his testimony. "These retirees save millions of dollars for the state and locals, most of whom contribute little or nothing toward the retirees' Medicare costs.

"It's (money) unencumbered when it's distributed back to Massachusetts, but we believe that the CMS money should not be used for unrelated state or local use. The retiree health insurance liability legislation ought to include a directive for its use."

Locals: Federal Drug Subsidy Linked With GASB

At the local level, we can most aptly describe the situation as a mixed bag. While most appear to be waiting for the state to provide direction on how best to proceed on this issue, some communities have taken the initiative. Editor's Note: We have reported, in previous issues of the Voice, on towns, such as Arlington and Brookline, that have set aside funds to pay future healthcare costs for retirees.

According to John Brouder of Boston Benefit Partners, which consults with teacher and employee unions throughout the state: "While the interest level varies from one community to the next, there's no question that local retirees, employees and officials, with whom I work, realize that the time to act is fast approaching. They're waiting to see what the state will do in terms of the bill now being drafted.

"However, on a major issue like this, you simply can't afford to wait until the end of next year. So hopefully the State House will move sooner than later - early '06 - on the legislation," he continued.

"Here in Quincy, we recognize that GASB's potential impact on this city's finances and also our health insurance plans could be devastating," comments Association member Steve Moynihan, who is president of the Quincy Retiree Association and also serves on that city's insurance advisory committee. "Hopefully, the legislation, which comes out of the State House, will provide us with a solid framework, so that we can address these costs without eroding away our basic (healthcare) benefits."

"We're also anxious to see what the state law will allow us to do," adds Bob Cunha of the Lexington Fire Department, who is also chairman of the Lexington Retirement Board, as well as chairman of the (Health Insurance) Coalition Bargaining Committee [Our readers will recall that Lexington was one of the first communities to enact the coalition bargaining law, Section 19 of Chapter 32B, for local health insurance.] "But in the meantime, we're doing some groundwork on just where the money will come from to pay for this.

"I've met with the town manager and finance committee, asking that funds coming back to Lexington from Medicare be used for the insurance liability fund," Cunha reported. "It's a perfect start... a perfect fit to include CMS incentive payments to cities and towns as a starting point for the retirees health insurance liability fund. I hope it's included in the legislation.

"I also remember that prior to our pension funding law, city and town officials would use any annual excess pension fund earnings for other purposes instead of using the excess to build the pension fund. That's why we have such a large unfunded liability. To use CMS refunds for purposes, other than insurance, would be making the same mistake," Cunha said.

 
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