Senate passes municipal health insurance reform plan

As part of its fiscal 2012 state budget bill, the Senate last night adopted a municipal health insurance reform that would enable 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.

While the process in the Senate bill differs somewhat from the one adopted by the House last month – the House plan is more favorable to municipalities – the end result is similar: both provide a framework for reform that is expected to save cities and towns $100 million statewide.

Like the House plan, the Senate proposal would give municipal unions a voice, but not a veto, regarding plan design changes or enrollment in the GIC, and municipal unions would retain more collective bargaining power over health insurance than state employees have.

The Senate bill would allow no more than one-third of any first-year savings to be shared with employees, while the House plan would limit the sharing to 20 percent.

Both reform proposals would also require all municipalities to enroll all eligible retirees into Medicare, and cities and towns would still have to negotiate any change in employee-employer premium shares.

Local officials and the MMA have made the reform a top priority, asserting that relief from soaring municipal insurance costs is critical in order to protect municipal services and preserve jobs.

The House and Senate versions of the state budget and municipal health insurance reform now head to a joint House-Senate conference committee, which will iron out differences and agree on a final bill by late June.

The Senate plan

Under the Senate proposal, municipalities would accept the new law by a vote of the board of selectmen or by approval of the mayor and city council each time they want to use the law to change health insurance benefits.

The municipal executive would then propose a plan to modernize the design of employee health plans or join the state GIC, with a guarantee that all municipal and school employees would still have health plans with co-pays, deductibles and other plan features that are the same as or less costly than the median co-pays, deductibles and plan design features offered by the GIC.

The municipal executive’s plan would include the desired plan design changes or proposed entrance into the GIC, the projected one-year savings (or avoided costs) that the plan would generate, and a plan to mitigate or moderate the impact on retirees, low-income employees and those with high out-of-pocket costs (such as through a health reimbursement account, a temporary subsidy of rates, or other proposals).

In order to transfer employees and retirees into the GIC, communities would be required to document that the savings realized by entering the GIC would be at least 10 percent greater than the amount that would be saved by increasing co-pays, deductibles and tiered network provider co-pays to the maximum allowable level in the community’s existing plans.

Communities would then convene a public employee committee, identical to the makeup of the PEC in Section 19 of Chapter 32B. If a community already has adopted Section 19, then that would be the PEC; otherwise, a temporary PEC would be established just for the purpose of negotiating on the proposal offered by the municipal executive.

The community and the PEC would have 30 days to reach agreement on the municipality’s proposal. If no agreement is reached, the impasse would be referred to a three-member “municipal health insurance review panel” that would include a municipal representative, a labor representative, and an “impartial” third party chosen from a list provided by the Administration and Finance secretary. If the community and labor representative cannot decide on the third member, the secretary would make the choice.

The review panel would have 10 days to review and decide whether the changes to co-pays, deductibles and other features proposed by the community are the same as or lower than the median level of the features offered by the GIC; what the one-year savings would be; and whether the proposal to mitigate or moderate the impact of the changes on retirees, low-income workers and subscribers with high out-of-pocket costs is sufficient. For communities seeking to transfer into the GIC, the panel would certify that the savings are 10 percent greater than could be achieved through changes in its existing plan.

If the municipality’s proposed plan design changes do not exceed the GIC median, the panel would be required to approve their immediate implementation. If the community documents that it would save an additional 10 percent by joining the GIC, the panel would be required to approve the transfer into the GIC.

The panel would also confirm the projected savings amount and would determine whether the mitigation proposal is sufficient. The panel could require additional savings to be dedicated to health reimbursement accounts, premium reductions, or other arrangements, but in no case could the panel designate more than one-third of one-year’s savings to the mitigation plan.

Any new co-pays or deductibles higher than the GIC median would have to be approved through collective bargaining.

Communities using this new local-option law would be required to adjust, if necessary, the percentage contribution paid by retirees, surviving spouses and dependents to the average percentage contributed by active employees to their plans. For example, if a community has an average 80-20 contribution ratio for active employees and an average 70-30 or even 50-50 contribution ratio for retirees, the community would need to shift to an average 80-20 ratio for retirees in order to implement plan design changes under the new law. (The House bill has no such language.) This provision could be prohibitively expensive for many communities, and the MMA will be calling on legislators to set this aside.

The Senate plan specifies that plan design changes that municipalities can initiate under the legislation include increasing co-pays, deductibles and tiered provider network co-payments up to the median amounts in the GIC plans. This provision may exclude communities from using the new law to introduce new plans with different provider networks.

The proposal also clarifies that cities and towns may adopt health reimbursement arrangements to mitigate the impact of any plan design change or decision to join the GIC. (Currently, the GIC does not allow HRAs for new entrants.) This provision does not mandate HRAs, but it does allow them.

Communities in regional purchasing groups would have to ensure that proposed plan design changes presented to the public employee committee are consistent with the standards set by the purchasing group. (This language is intended to facilitate the process of making group-wide plan design changes under the proposed law.)

In cases where existing contracts specify “dollar amount limits on co-payments, deductibles or other health care plan design features,” changes could not take effect “until the expiration of the initial term of such agreement.”

The Senate reform plan was made possible by the work of Senate Ways and Means Chair Stephen Brewer and vice chairs Steven Baddour and Jennifer Flanagan, as well as Public Service Committee Chair Katherine Clark and Senate President Therese Murray.