Legislature Allowing Cities and Towns to Set Health Plans

The Massachusetts High Technology Council calls on the State Legislature to give cities and towns the same authority enjoyed by the Commonwealth to design health insurance plans outside of collective bargaining as part of the FY11 state budget.

The runaway cost of healthcare and severe restrictions on the ability of municipalities to set their own plans represents a significant drain on scarce resources at a time when cities and towns are laying off teachers and reducing other critical education spending, among other basic services. Moreover, operating without plan design authority disables cities and towns from maximizing the most cost-effective and efficient use of taxpayer dollars.

One way in which cities and towns have been able to curb runaway costs is by joining the state’s Group Insurance Commission (GIC), which has moderated costs by increasing point of service cost sharing and offering plans with tiered provider networks. Only a handful of towns have joined the GIC, however, since 70% union approval is required – too high a barrier in most communities given the challenge of winning union support and/or associated tradeoffs required. The Commonwealth faces no such requirement.

A recent Boston Foundation study found that joining the GIC could save the City of Boston $41.4 – 45.4M annually, Cambridge $3.7 – 4.4M, and Marshfield $450 – 530K. It also found that Melrose, which joined the GIC in 2009, saves between $1.6 – 1.8M. The study also found that municipal health benefits are currently among the most generous offered by any employer, public or private, in the Commonwealth; even Commonwealth Care has higher member cost sharing than many municipal plans. (Note: The Council works closely with the Boston Foundation on a number of education and competitiveness initiatives.)

The GIC is but one option available to cities and towns seeking to design their own health plans, but these findings demonstrate significant savings that could accrue to municipalities if granted such powers. Last year, Governor Deval Patrick’s Readiness Finance Commission, on which Council President Christopher Anderson served, estimated a total potential savings from municipal plan design statewide at $200M.

“At a time when districts are laying off teachers and facing further cuts in state aid, we need to equip cities and towns with basic powers to curb runaway health insurance costs while still providing high quality coverage to employees and retirees,” said Anderson. “Funding for our schools and other local priorities is dependent upon sound municipal finance, and this is arguably the most important thing the Legislature could do to shore up local budgets.”