The double standard continues

From The Beacon, February 2011, Vol. XXXVII, #2

The latest step by the state Group Insurance Commission, presented, discussed and acted upon during one meeting on Jan. 27, proves once again that the state operates under a double standard, giving itself unilateral authority to change employee health plans at will, while denying cities and towns the same power to manage and save.

Last year, the GIC was struggling mightily because its health costs were rising much higher than expected, creating a budget hole. Usually, the state steps in to fill GIC deficits with supplemental appropriations, but that was not possible given the state budget crisis. Instead, the GIC unilaterally implemented sweeping, midyear plan design changes to increase co-pays and deductibles and lower the cost of employee health plans.

State law, however, continues to deny cities and towns this same essential plan design authority, which is the only reason why municipal health costs continue to rise at a faster pace than the GIC’s. Even this simple, clear and powerful example was not enough to convince state officials that the current system is grossly unfair.

Now we look at what the GIC did in January. Facing another wide budget gap for fiscal 2012, the commission established new limited-network plans that limit subscriber access to a smaller number of health care facilities. Further, the commission voted to require all employees to re-enroll in their current plan or choose a new one; employees who don’t act during the enrollment period will automatically be enrolled in a lower-cost, limited-network plan.

Cities and towns are prohibited from taking any of these steps unless they engage in full collective bargaining with unions and receive their permission. The double standard continues.

How long will it take until state leaders recognize that managing health insurance costs is not magic? It’s pretty straightforward. Sometimes it’s controversial, but state, federal and private employers have been taking these steps for years. The only reason why cities and towns are denied this same authority is political. Plan design control should rest with municipal officials, who represent and serve the taxpayers. It is time to end the double standard. It’s time to end the municipal union veto.

Gov. Deval Patrick appeared before the MMA’s Annual Meeting last month and pledged to file legislation that he said would provide municipal health insurance relief. The measure would require all cities and towns to negotiate with public sector unions and reach agreement on adopting health plans that have “comparable actuarial value” to the GIC or on transferring subscribers to the state plan by July 1. Communities would be required to negotiate with unions following Section 19 coalition bargaining and would be required to share a portion of any savings with employees, with all details to be established by regulations set by the Executive Office for Administration and Finance.

The MMA applauds Gov. Patrick and his team for recognizing that the status quo is intolerable and reform is necessary, and the MMA echoes his call for immediate legislative action by the end of March. Our initial analysis of the legislation, however, shows that there are several key issues to be addressed in order to guarantee meaningful reform and savings:

• First, there should be NO requirement that a portion of any cost savings be shared with employees. One important note is that any reduction in plan cost will already benefit employees by reducing their share of the premium cost. Beyond that, however, there should be no requirement that taxpayers divert the savings to pay for other benefits. Communities need these funds to protect services and avoid layoffs.

• Second, the “comparable actuarial value” standard is vague and clearly open to conflict and disagreement at the local level, especially since further changes will likely be announced to the GIC’s plans later this spring. The MMA strongly urges that this be replaced with clear, simple and straightforward language requiring local plans to have co-pays, deductibles and tiered networks that are comparable to the GIC’s. This would be much easier to implement, and the savings would be clear and identifiable, with little dispute at the local level.

• Third, the legislation shouldn’t be mandatory on every community, as there are many municipalities where the state plan doesn’t work and some that have instituted plan design changes outside of collective bargaining (based on past precedent within the community).

• Fourth, there are costs that arise when communities consider joining the GIC, including potential increased costs for retiree health payments and coverage for employees who work 19 hours a week or more. These added municipal costs drive up the GIC’s cost and need to be factored into the legislation.

The MMA greatly appreciates the governor’s position that the time for reform has come and looks forward to working with the administration and other key stakeholders in passing legislation immediately, including these four elements, so that we achieve the reform that cities and towns need.

Perhaps the final legislative solution will require a complex bill that balances many policy points. But clearly, the most effective policy would be simply to end the double standard once and for all. That’s what our taxpayers want.