Health reform anniversary shows huge savings

From The Beacon, Summer 2012

This summer marks the one-year anniversary of the landmark municipal health insurance reform law, and the record so far clearly proves an early prediction: the legislation is the most significant reform to benefit cities, towns and local taxpayers in at least 30 years.

Perhaps this explains why the fight to enact the reform took so long. The MMA and local officials launched the reform drive in 2004, propelled by the dramatic rise in municipal health insurance costs and the inability to control those costs because of the restrictions in state law that tied the hands of local leaders and blocked municipalities from implementing the same cost-saving steps that state government was routinely using to control insurance costs for state employees.

The MMA, working closely with countless municipal leaders across the state, was the principal advocate for the reform bill. The association led negotiations with legislators and the governor and was a chief member of the powerful coalition that organized civic, business and community leaders in support of the legislation.

From 2004 to 2011, local officials, civic groups and taxpayer advocates waged a long battle on Beacon Hill and faced unyielding resistance from public sector unions – opposition that did not make sense because the biggest beneficiaries of the law would be the thousands of public employees whose jobs would be saved by the reform.

The great news is that after just one year, the evidence shows that last year’s victory was well worth the effort. A recent analysis by the Massachusetts Taxpayers Foundation estimates that the first-year savings for communities and taxpayers will reach $178 million, far exceeding the initial estimate of $100 million.

Municipal health insurance reform, known as Chapter 69 of the Acts of 2011, was signed into law on July 12, 2011. According to the MTF analysis, confirmed by the MMA’s ongoing survey of cities and towns, the new law has been used to implement or leverage health insurance savings in 127 cities, towns and districts, yielding an estimated savings of $178 million in lower-than-anticipated health insurance costs, and another 33 communities have either adopted Chapter 69 or are scheduled to do so in order to pursue savings in the coming year.

The overwhelming majority of communities have achieved savings by implementing changes in the co-pays and deductibles of their existing health insurance plans, while only a handful of communities have joined the state’s Group Insurance Commission. As anticipated, the results show that almost all cities and towns can achieve much greater savings by updating their own insurance plans, and this reform law gives communities the flexibility and authority to do so in the best interests of their taxpayers and employees.

The law simply allows local governments to update the co-pays, deductibles and plan design features of their health insurance plans up to the same level that state employees receive. In the past, communities could only make such plan design changes after receiving the approval of every municipal union. Under the new law the union veto has been removed, and municipalities can implement their health plan changes after a consultation process with unions, as long as up to 25 percent of the first-year savings is shared with employees and retirees.

The final push toward enactment of the new law gathered momentum when the public and lawmakers recognized the double standard that allowed the state to make these changes unilaterally with no consultation with employee unions, but prevented the same flexibility and management authority for cities and towns, causing municipal health insurance costs to skyrocket because it was virtually impossible to make any changes to hold down costs.

The new law is being used in every corner of Massachusetts, saving taxpayers millions of dollars, preserving essential local services, and protecting the jobs of teachers, police officers, firefighters and key employees across the state.

The one-year point is an important milestone, and it gives us an opportunity to again express the MMA’s appreciation to all those who contributed to this victory and the legacy of success it will bring across the Commonwealth.

Many public officials and organizations contributed to the passage of the reform law. Everyone agrees that the path to reform became clear when House Speaker Robert DeLeo and House Ways and Means Chair Brian Dempsey and Vice Chair Stephen Kulik unveiled their powerful reform proposal in April of 2011. The full House overwhelmingly embraced the speaker’s bold and groundbreaking plan, and Senate leaders, including President Therese Murray and budget chief Stephen Brewer then came forward with a comprehensive plan as well. After the Legislature embraced strong reform, the MMA negotiated with Gov. Deval Patrick and Secretary Jay Gonzalez on modest changes that preserved a very strong framework for reform and savings.

The MMA was one of many organizations that championed reform, and as is the case with every successful coalition, there are many stakeholders who are responsible for this achievement. The Massachusetts Taxpayers Foundation was there from the very beginning with steadfast support in 2004, and soon a broad and impressive coalition formed with strong backing and resources from The Boston Foundation, including the Metropolitan Area Planning Council, the Boston Municipal Research Bureau, the Massachusetts Business Roundtable, Stand For Children, the Massachusetts Business Alliance for Education, Associated Industries of Massachusetts, and many others. This reform would not have been possible without the leadership of these outstanding groups.

At the bill signing last year, local officials, legislators, many unions, and civic leaders stood together to praise the final product, a reform plan that balances the needs of cities and towns, taxpayers, municipal employees, retirees and municipal unions.

One year later, these same participants, and every city and town, can applaud the $178 million in taxpayer savings, the thousands of jobs that have been preserved, and the essential local services that have been protected.

So we celebrate Chapter 69’s one-year anniversary, and know that the law’s success will endure for years to come. Congratulations to all!