July 12, 2012

Employees Share In Savings As Municipal Health Law Backers Claim Success

Municipal employees will receive almost half of the estimated $78 million in first-year savings under the state's year-old municipal health insurance reform law, which has helped leverage $100 million more in savings, according to the state's budget chief.

In a conference call Wednesday, Administration and Finance Secretary Jay Gonzalez suggested political cooperation - first on Beacon Hill to pass the law and then between municipal officials and employee unions to implement it - had enabled savings to far surpass an initial estimate of $100 million.

"We have blown way past that already," Gonzalez said, noting savings have been realized in 127 municipalities that have deployed the new law with 35 more communities engaged in the process and eyeing future savings. "This has been much more successful that we even imagined a year ago."

According to Massachusetts Municipal Association Executive Director Geoffrey Beckwith, the new law allows local governments to update copayments, deductibles and health plan design features up to the same level that state employees receive. While communities in the past could only make changes after receiving the approval of every municipal union, the new law allows changes after a consultation process with unions, as long as up to 25 percent of the first-year savings are shared with employees.

"Municipal health insurance reform is the most powerful law to benefit cities and towns in at least 30 years," Beckwith said in a statement. "The results of the past year demonstrate that the law is a major success in every corner of Massachusetts, saving taxpayers millions of dollars, preserving essential local services, and protecting the jobs of teachers, police officers, firefighters and key employees across the state."

After some testy moments, public employee unions eventually consented to the 2011 law after provisions were made to ensure a voice for labor in health plan design changes while freeing up municipal officials to overcome traditional union opposition and make those changes to better control overall insurance costs.

Gonzalez said the premium savings are attributable to health plan design changes agreed to locally and are not associated with the overall slowdown in health care cost increases of late locally and nationally.

While touting the ability of municipalities to use the savings to retain teachers, public safety and public workers employees, Gonzalez acknowledged during the conference call that 47 percent of the savings realized under the law will be returned to municipal employees with some of the money serving as "mitigation" for increased employee copayments or deductibles resulting from plan design changes.

Some municipal employees, especially those who are heavier users of health care services, are feeling higher costs due to the plan design changes, Gonzalez said, adding that the "cost shift" in such instances is being done in a way that is consistent with state employee health plan designs and often to address local health plans that are more generous to employees than plans offered in the private sector.

Moving forward into the second year of savings, the split between savings realized by municipal employers and municipal employees will shift to a roughly 75-25 ratio, Gonzalez said.

Supporters of the law like the Metropolitan Area Planning Council, The Boston Foundation and the Massachusetts Taxpayers Foundation released the updated data on the law's one-year anniversary.

According to those groups, 77 municipalities have used the law to negotiate $78 million in savings and at least 50 more communities used traditional collective bargaining, with the new law providing additional leverage, to save about $100 million.

According to supporters of the law, after adopting the new law this year, Framingham reached a plan design agreement with expected first-year savings of almost $3 million, and Littleton, which adopted the law in February, expects savings of $315,000 from design plan changes.

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