Legislature stalls on municipal health insurance reform

Despite three straight years of dramatic local aid cuts, the Legislature completed its formal sessions for 2010 without addressing the issue of municipal health insurance reform, which has the potential to save cities and towns $100 million.

Unlike state government, cities and towns must collectively bargain health insurance changes and get every union to agree before implementing them. As a result, municipal costs have risen faster than the state’s, and co-pays and deductibles are substantially below state levels and dramatically more generous than private-sector benefits. For example, the health insurance industry reports that municipal government is the only client to whom they sell a product with a $5 office visit co-pay.

As it did last year, the Senate put forward a proposal during the budget process that, in the end, would not provide any meaningful reform. This year’s plan would have relied on binding arbitration – even in the face of overwhelming public opposition to binding arbitration in the Boston firefighters case – to settle disputes between local officials and municipal unions over issues of plan design as well as the insurance premium split. The Senate plan would have only guaranteed that 25 percent of any health insurance savings would go to taxpayers.

Like last year, the Senate plan was dropped during House-Senate budget negotiations, so the status quo remains.

Over the past three years every newspaper in the state that has weighed in on this issue has sided with the municipal position, saying that cities and towns need the same authority that the state has to make changes in health insurance plan design.

The reforms proposed by the MMA would guarantee municipal employees that they would have the same benefits as state employees, which, in most cases, would also be superior to benefits for private-sector employees.

Local officials and the MMA are asking for the same authority that the state has to set co-pays and deductibles. The ability to do so would allow cities and towns to save between 4 percent and 6 percent on health insurance premiums, or roughly $100 million statewide. The MMA argues that this $100 million can be used to protect vital municipal services and jobs.

The strain on municipal budgets caused by health insurance worsens each year. At this point, health insurance in some communities consumes more than 15 percent of the municipal budget.

Every analysis of state finances shows that fiscal 2012 will be an even more difficult budget year than recent years, with additional local aid cuts almost guaranteed. If voters approve a ballot question to reduce the state sales tax, the situation will get much worse.