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Our members are the local governments of Massachusetts and their elected and appointed leadership.
A Senate provision requiring municipal contributions for retirees to be the same as for active employees would undermine the benefits of municipal health insurance reform for many communities across the state, according to a preliminary analysis released today by the Massachusetts Taxpayers Foundation.
The Taxpayers Foundation identified 50 municipalities and regional school districts that would be affected, but said that number is likely to be as high as 100 when all communities have been analyzed.
The 50 municipalities are scattered throughout the state, ranging from small towns like Williamstown and Salisbury to larger municipalities like Westfield and Natick, according to the foundation’s report.
The majority of the 50 communities currently pay half of retiree premiums; under the Senate plan, many would have to increase their share to 70 percent or more. The resulting increases in municipal costs for retiree health insurance would range from 6.7 percent in Harvard to 60 percent in Bellingham, Charlton, Dedham, Lancaster and Norwell, consuming much – if not all – of the savings that could result from the municipal health reform proposal.
According to the Taxpayers Foundation, even those communities that have identical contribution rates today would have their hands permanently tied in controlling unaffordable retiree health costs under the Senate provision, which was not part of the original Senate Ways and Means budget proposal but was adopted by Senate amendment.
“Since virtually no community in the state can pay for its current retiree health care liability, limiting the ability of local officials to make changes in the future will send cities and towns into a permanent spiral, with ever deeper cuts in critical local services such as schools and public safety,” the report states.
Both the House and the Senate have approved a municipal health insurance reform proposal as part of their fiscal 2012 state budget bill. Both proposals would create a process for cities and towns to adjust plan features such as co-pays and deductibles, or join the state’s Group Insurance Commission, without having to go through the full collective bargaining process. The House plan, however, offers a greater opportunity for municipal cost savings.
A House-Senate conference committee is currently working out the differences between the budget bills passed by each branch, including the health reform proposals. The committee is expected to release its compromise budget bill early next week.
Based on its analysis, the Taxpayers Foundation is urging Senate and House conferees to reject the Senate provision.
The foundation points out that the Senate version of municipal health insurance reform would fall well short of the estimated $100 million in first-year savings for cities and towns because of the cost of increased retiree contributions.
By placing additional obligations on communities, the foundation argues that the Senate amendment runs counter to the purpose of the municipal health reform legislation: to give municipalities greater flexibility to control their soaring health costs.
At a time when municipalities need to address their unaffordable retiree health care liabilities (as described in the foundation’s recent report, “Retiree Health Care: The Brick That Broke Municipalities’ Backs”), the foundation asserts that the Senate amendment would add to the burden for a substantial proportion of Massachusetts communities and “limit the ability of all cities and towns to address an obligation that is beyond the ability of local taxpayers to pay without decimating basic services.”
The report states: “In tying retiree contributions to active employee contributions, which are negotiated through collective bargaining, the Senate amendment takes a huge step backward by further constraining the ability of local officials to manage retiree health care liabilities.”
Examining the cost of the Senate proposal in 16 communities, the Taxpayers Foundation found that many of the communities would face an immediate increase of hundreds of thousands of dollars in retiree health insurance costs. The town of Chelmsford, for example, would pay an additional $582,000 for retiree health insurance for just one year, and the costs would grow each year thereafter. Nine more communities would face additional retiree costs of more than $250,000 in the first year.
• Link to the Massachusetts Taxpayers Foundation website for the full report