MMA Statement Calling for Municipal Health Insurance Reform

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On behalf of the cities, towns and local taxpayers, the Massachusetts Municipal Association calls on the Legislature to enact H. 2964, legislation to provide communities with the tools to manage and control skyrocketing municipal health insurance costs.

The MMA has been supporting and calling for reform for seven years, and, unfortunately, the problem has become worse with each passing year. The time for action has come.

Municipalities must gain greater control over their health insurance costs. H. 2964 would simply give local officials the same power the state has to shape employee health plans, and save taxpayers up to $100 million a year. This call for plan design reform has been embraced by municipal leaders from across the Commonwealth and by leading organizations, including the Massachusetts Taxpayers Foundation, Associated Industries of Massachusetts, the Boston Foundation, the Greater Boston and local chambers of commerce, and many others.

Total municipal aid is $416 million lower than what it was three years ago, and the governor’s budget proposes a further $65 million reduction for fiscal 2012. Communities are in fiscal crisis, and health insurance reform offers meaningful relief that taxpayers deserve. There can be no excuse for keeping the unique and special veto power that municipal unions hold over health plan changes – this veto power is costing taxpayers millions of dollars a year, forcing cuts in essential municipal and school services that are crowded out by soaring health costs, and forcing the elimination of teachers, firefighters, police officers and other key employees. Without real reform, taxpayers will continue to pay millions more than they should, which will force even more service cuts and layoffs.

While health insurance costs are a problem for everyone, municipalities have been forced to pay much more than necessary because of Chapter 32B, the state law that gives municipal unions a veto over common-sense changes that would reduce the cost to taxpayers. Over the past 10 years, cities and towns have seen their health insurance costs rise by more than 150 percent. Health insurance is the biggest budget buster at the local level, accounting for 15 percent or more of local budgets, squeezing out vital services and costing local taxpayers more and more every year. The state has been able to moderate the cost of employee health benefits by implementing increases in co-pays and deductibles, just as the federal government and private employers have done. But communities have been blocked by the Chapter 32B bargaining mandate and are trapped in outdated plans that are too costly.

As part of their effort to block needed reform of municipal health insurance, many of the state’s public sector unions have been trying to rewrite history and claim that current municipal health plan benefits, such as $5 co-pays and 90 percent HMO premium payments, were shaped or won at the bargaining table. The fact is those municipal health benefits were NOT set through collective bargaining. Original co-pays were set by insurers, and the employee-employer contribution percentages were set by state law.

In the 2000s, our state government, the federal government and private employers increased co-pays and introduced deductibles in order to reduce the cost of health plans, without any collective bargaining. With cities and towns chained to Chapter 32B, however, Massachusetts municipalities have been forced to seek union approval to change co-pays and deductibles that were not negotiated in the first place.

Cities and towns are locked into overly expensive health plans because they cannot gain the required union approval to implement cost-savings, while the state has exempted itself from this mandate and routinely implements basic decisions on health insurance outside of collective bargaining, such as increasing co-pays and deductibles to lower the cost of their plans. The state must end this double standard by giving cities and towns the same authority to design health insurance plans outside of collective bargaining. The MMA estimates that most cities and towns would be able to lower their health insurance costs by 4 percent to 6 percent, or as much as $100 million statewide. This is fiscal relief that taxpayers deserve, and employees would share in this savings because the premiums they pay would be lower.

Some state officials have tried to defend the status quo by claiming that labor “has a seat at the table” on the state Group Insurance Commission – but the fact is the 15-member GIC has only four labor seats, and the governor appoints the remaining 11 commissioners, who make all the decisions. State officials may be unaware that every city and town already has an Insurance Advisory Committee made up of labor union representatives, and communities are required to consult with their IAC on all health insurance matters before taking action. This is at least as real as what the state claims is their inclusive process. Rhetoric aside, there is no comparison with the state’s mandate that cities and towns must go through collective bargaining and receive union approval before making co-pay and deductible changes in health plans, and the state’s power to impose changes at will. This double standard costs local taxpayers millions of dollars each year.

On Monday, several municipal unions released a repackaged framework that includes no new proposals and little in the way of reform or taxpayer relief. Their framework would retain full collective bargaining over plan design changes through coalition bargaining, require at least 50 percent of any savings or avoided costs to be redirected to increase health or other employee benefits, impose binding arbitration that would allow an outside unaccountable arbitrator to impose costs and health plans on cities and towns – even though the voters repealed binding arbitration as unaffordable in 1980 – and then sunset the entire framework after three years and place all future health insurance matters in full collective bargaining. Because health care costs are rising every year, most of the taxpayer relief will come in the form of avoided cost increases, and will not generate revenue or money that can be used to pay for additional benefit enhancements. That’s why the state has never bargained over or offered additional benefits or wages as part of any GIC plan design changes. The bottom line is that the framework is not a compromise, and it does not offer the necessary reform. It would actually expand union leverage in health insurance bargaining, would not provide local taxpayers with the relief they need, and would force communities to cut services or lay off employees to fund the added benefits and costs.

H. 2964 offers real reform. It would eliminate the double standard in state law and give cities and towns the same power the state has to implement necessary cost savings changes in municipal health insurance plans. This is a very focused and moderate proposal, offered in a spirit of compromise to find meaningful middle ground while achieving meaningful reform. Under the bill, municipalities would still negotiate any change in the employee-employer premium share, giving municipal unions more bargaining authority than state unions. Municipalities would be able to modernize the health plan design outside of collective bargaining, with a guarantee that all municipal and school employees would still have health plans that are the same or better than what state employees receive, meaning no municipal plan would have higher co-pays or deductibles than the state. Any higher co-pays or deductibles would have to be approved in collective bargaining. The bill simply gives plan design parity to cities and towns.

In short, the MMA’s legislation saves taxpayers money, protects municipal union jobs, guarantees equity with state employee health benefits, and still leaves municipal unions with more bargaining power than state unions. This is a balanced, meaningful, fair and transparent reform.

Communities are experiencing extreme fiscal distress. This is the time for real reform and real action. This is the time to pass plan design reform – the most flexible, transparent, and effective way to immediately achieve meaningful and lasting reform and savings. Further delay will only serve to hurt taxpayers, municipal employees and the public. We ask the Legislature and governor to support this straightforward and necessary measure.