Allowing Cities and Towns to Set Health Plans

The Massachusetts High Technology Council calls on state officials to give cities and towns the same authority enjoyed by the Commonwealth to design health insurance plans outside of collective bargaining to sustain the fiscal health of our cities and towns. As a member of the Mass Reform First Coalition, the Council supports House bill 2457, which enables cities and towns to design their health plans free from collective bargaining and requiring that all eligible local retirees enroll in Medicare as their primary source of health insurance coverage. The Council submitted testimony on this today at a Joint Public Service Committee hearing.

Council members cite health care costs as one of the greatest competitive disadvantages facing Massachusetts businesses. In a similar vein, members are concerned the quality of life in our cities and towns – a major selling point in attracting and retaining highly mobile technology workers – is threatened by runaway municipal health care costs that are draining scarce resources and crowding out needed investments in P-16 education (including STEM) and other 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.

The potential savings for local communities are eye-popping. 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. Subsequent studies have shown that cities and towns could also reap significant savings by requiring retirees to enroll in Medicare with no discernible downside to retirees.

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. In 2009, 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.

“Given the specter of teacher layoffs and further cuts in state aid, we need to grant 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.”