Health insurance reform regulations expected soon

The Executive Office for Administration and Finance is expected to issue emergency regulations in August to outline administrative procedures for two aspects of the Municipal Health Insurance Reform Act.

The landmark law, which authorizes cities and towns to modify employee health plans without going through the full collective bargaining process, was signed by Gov. Deval Patrick on July 12.

The law lays out a process for cities and towns to increase co-pays and deductibles and introduce tiered networks, steps that will enable communities to avoid an estimated $100 million in health insurance cost increases statewide.

The regulations from Administration and Finance will outline the administrative procedures for a 30-day period of negotiation between municipal management and labor over proposed plan design changes.

A&F will also issue administrative procedures for the local “municipal health insurance review panel,” which, in cases where an agreement is not reached between management and labor, would review the plan design proposal to ensure that it meets the statewide benchmark and would evaluate plans to mitigate the impact of the changes on certain subscribers.

The MMA has written to Administration and Finance Secretary Jay Gonzalez emphasizing that the regulations should only address administrative procedures, as instructed by the law, and should not add any conditions on communities that would slow the process or add costs.

The Legislature included a municipal health insurance reform plan in the fiscal 2012 state budget bill that was enacted on July 1. Over the course of the following week, key stakeholders – the governor, legislative leaders, the MMA, and labor unions – were able to reach agreement on four amendments to the plan.

The governor then returned the reform plan, with the amendments, to the Legislature as separate legislation. The House and Senate promptly adopted the bill by overwhelming margins.

MMA Executive Director Geoff Beckwith called the final legislation “a strong reform that will save taxpayers money, preserve essential local services, and protect municipal union jobs.”

The Municipal Health Insurance Reform Act, he added, guarantees that municipal employees will have health benefits that are no more costly than what state employees have, and municipal unions will retain more bargaining power than state unions have.

Municipal health insurance reform was the top legislative priority for cities and towns, who argued that they should have the same authority the state has to manage soaring health insurance costs, which have been crippling local budgets. The issue commanded center stage on Beacon Hill since the House passed its reform proposal in April.

The MMA and local leaders argued that the reform was necessary in order to save municipal services and jobs. The case was bolstered by organizations such as the Massachusetts Taxpayers Foundation, the Boston Foundation, and the Massachusetts Business Alliance for Education, which issued reports and held forums making strong arguments for the reform. Newspapers across the state published editorials urging the Legislature to act.

In a statement, the MMA applauded the leadership of House Speaker Robert DeLeo, House Ways and Means Chair Brian Dempsey and Vice Chair Stephen Kulik, Gov. Patrick, Administration and Finance Secretary Jay Gonzalez, Senate President Therese Murray, Senate Ways and Means Chair Stephen Brewer and Vice Chair Steven Baddour, budget conferees Rep. Vinny deMacedo and Sen. Michael Knapik, Public Service Committee Chairs Rep. John Scibak and Sen. Katherine Clark, and all members of the House and Senate who advocated for reform this session.

The local process

The new local-option statute would be accepted by a vote of the city council in cities and by the board of selectmen in towns. The community only has to vote once to opt in.

After local acceptance, the appropriate municipal authority (generally the executive) may follow a process prescribed by the law in order to make health insurance plan design changes or to transfer the community into the state’s Group Insurance Commission. No proposed plan could have co-pays, deductibles, tiered network co-payments or other plan features that exceed the dollar amounts in the most-subscribed GIC plan.

The executive would notify the local Insurance Advisory Board of the estimated one-year savings under his or her proposal and provide documentation.

After discussion with the Insurance Advisory Board as to the estimated savings, the executive would convene a meeting of a new public employee committee (PEC), composed of a representative of every union (bargaining unit) as well as a retiree representative. The executive would detail the proposed changes, the analysis and estimate of anticipated savings, and a proposal to mitigate, moderate or cap the impact of the changes on subscribers, including retirees, low-income subscribers and subscribers with high out-of-pocket costs who would otherwise be disproportionately affected.

The executive and the PEC would have 30 days from the date of notice to negotiate over the proposed plan design changes and the executive’s plan for sharing a portion of the first-year savings with employees, especially with retirees and those most affected by the changes. A majority vote of the PEC would be required to approve an agreement. (Each participant on the PEC would have an equal vote, except for the retiree representative, who would have a 10 percent vote.)

If there is a written agreement by the end of the 30-day period, the community would implement the plan as agreed. If there is no agreement, the matter would be referred to a “municipal health insurance review panel.” The panel would be composed of a municipal and labor representative and an impartial third member chosen from a list, provided by the Executive Office for Administration and Finance, of individuals with professional experience in dispute mediation and municipal finance or municipal health benefits. If there is no agreement on the third member after three business days, the Administration and Finance secretary would choose the third member.

If the proposed plan design changes do not exceed the GIC benchmark, the panel would be required to approve the community’s immediate implementation of the changes. If the community is seeking to join the GIC, the panel must approve the transfer if the community can demonstrate that the savings would be 5 percent greater than the savings that could be achieved by implementing design changes to existing insurance plans.

The municipal health insurance review panel would have 10 days to do the following:

• Confirm the estimated monetary savings, to be substantiated by documentation provided by the executive

• Review the proposal to mitigate, moderate or cap the impact of the changes on subscribers, including retirees, low-income subscribers and subscribers with high out-of-pocket costs who would otherwise be disproportionately affected

• Concur with the community that the proposed mitigation plan is sufficient

The review panel has the authority to determine if the mitigation proposal is insufficient and to require that additional savings be shared with subscribers, but the total cost of any mitigation plan developed by the panel (such as establishing a health reimbursement account) may not exceed 25 percent of the total first-year savings, even if the mitigation plan is in place for more than one year. All mitigation plan obligations on the part of the community expire once the mitigation funds are expended.

The review panel is prohibited from imposing any changes to contribution ratios.

The decisions of the panel are binding.

Regional and joint purchasing groups are allowed to establish a common plan design structure, although participating communities would each go through the steps above to notify unions and retirees of the estimated savings, and they would follow the 30-day negotiation process and 10-day review panel process regarding plan design changes and structuring the mitigation plan.

Plan design changes could be implemented immediately after a community completes the process, except in communities where collective bargaining agreements or Section 19 agreements set specific co-pays and deductibles that are different from the new plan. In those cases, communities would have to wait until the initial term of the agreement has expired to implement changes for the affected bargaining units.

For fiscal 2012, the law gives cities and towns three opportunities to transfer subscribers to the GIC – on January 1, April 1 and July 1 – following a four-month notification to the commission. After fiscal 2012, enrollment in the GIC can occur each July 1, with notification by the previous Dec. 1. The contribution ratios for employees entering the GIC would remain the same, and any future changes in contribution ratios would have to be approved through full collective bargaining.

The Administration and Finance secretary will issue guidelines for evaluating which subscribers would be disproportionately affected by plan design changes or transferal to the GIC.

The Legislature ultimately rejected a provision that had been adopted by the Senate that would have forced dozens of communities to increase contribution rates for retirees. As enacted, the law delays any change in the contribution ratios paid by retirees for a three-year period for any community that uses the reform act to implement changes. Communities making such changes may not change retiree contribution ratios from July 1, 2011, through June 30, 2014, unless the contribution ratio changes were approved prior to July 1, 2011.

The law requires all eligible retirees to be enrolled in a Medicare health plan, and governmental units are required to pay any federal penalties associated with a transfer to Medicare Part B.