Report: Communities could have saved $3B with health insurance reform

A report released today by the Massachusetts Taxpayers Foundation concludes that cities and towns have sacrificed hundreds of millions of dollars and thousands of jobs in the last decade because local officials have had limited authority to manage their exploding growth in health insurance costs.

The community-by-community analysis quantifies the dramatic impact of health insurance on municipal budgets and jobs.

By comparing each community’s actual health insurance spending to what it would have been if it had grown at the same rate as the state’s Group Insurance Commission – which can adjust plan design outside of collective bargaining – the foundation determined that cities and towns statewide could have saved more than $3 billion had they been granted plan design authority in 2001.

The savings, according to the report, translates to approximately 6,500 municipal jobs statewide (at $50,000 per job per year).

More than 90 percent of Massachusetts cities and towns saw health insurance costs grow at much faster rates than the GIC’s average increase of 6.4 percent per year between fiscal 2001 and 2010. Every Senate district would have realized at least $10 million in savings over that period.

“With cities and towns facing another year of cuts in local aid, it is critical that municipalities be given the same powers as the state to manage their unaffordable health care costs,” said Massachusetts Taxpayers Foundation President Michael Widmer. “Without this modest reform, cities and towns across the state will suffer irreparable damage as they are forced to lay off more and more teachers, police officers, firefighters, and other local employees who provide critical public services.”

Last month, the House approved municipal health reform legislation that would give local officials the ability to make modest changes in health insurance outside of collective bargaining, bringing critical relief so municipalities can preserve jobs and services. Under the House plan, municipal employees would retain more bargaining power than state employees have.

The data contained in the Massachusetts Taxpayers Foundation’s report can be viewed by municipality and by state Senate district. Information is available for all but one of the state’s 351 municipalities – data was not available for New Ashford – and for each of the state’s 40 Senate districts.

The analysis covers the following five data points:

• Actual total spending: The total expenditures of each community on health insurance between fiscal 2001 and 2010. (This data is reported by each municipality annually to the Division of Local Services.)

• Total spending if increased by 6.4 percent annually: The amount each community would have spent if health insurance increased at the GIC’s rate of 6.4 percent annually between fiscal 2001 and 2010.

• Total potential savings: The difference between a community’s actual total spending and what it would have spent if its health insurance costs grew at 6.4 percent annually.

• Average annual savings

• Estimated jobs lost per year: The average annual savings divided by $50,000.

• Link to Massachusetts Taxpayers Foundation website for full report

Note to Mac users: The MTF report data is contained in an Excel file. If you have trouble opening it, you may want to use NeoOffice, a full-featured set of office applications for Mac OS X. It’s a free download available at www.neooffice.org.