Senators Katherine Clark & Kenneth Donnelly

June 14, 2011

Dear Colleagues:

You have recently received several correspondences on the Senate version of the municipal healthcare reform.  We have set forth some information to help you address questions you may be receiving from constituents and the communities in your district.

Key Components of the Senate Plan

The Senate plan establishes a new tool for municipalities to achieve savings in health insurance costs.  This reform allows the city or town to make plan design changes up to the level of the state’s Group Insurance Commission (GIC) or, if even greater savings can be had, to transfer coverage to the GIC.

Under the Senate version, a municipality may choose an expedited process that allows a municipality to implement its plan design within 40 days.  A municipality only needs a simple majority vote of its council or Board of Selectman to take advantage of the expedited process.  This leaves the control and discretion where it should be – with the municipality.

The municipality presents its plan design and anticipated savings in avoided health insurance costs. This begins a 30 day expedited bargaining process. There is a voice for labor and retirees, but no veto power. If an agreement cannot be reached within 30 days, the community moves forward with its plan design as long as it reaches the benchmark.  The benchmark is the median level of GIC’s active and Medicare supplemental plans. This benchmark leaves flexibility for communities to design their plan, including tiered networks.

If the parties cannot agree within the 30 day bargaining period, a review panel will do two tasks within 10 days: 1) review the municipality’s plan to ensure it meets benchmark; and 2) review the impact of the plan design on employees and retirees. The panel may mitigate the higher costs of the new plan design by using tools such as Health Reimbursement Accounts (HRA), flexible spending plans or caps. The panel may only provide mitigation up to one third of the savings the community’s plan design will yield. This protects both employees and retirees and the communities’ anticipated savings.

Protecting Retirees

A priority of the Senate version is giving retirees a voice in the process and extending protections for this vulnerable population.  The Senate provided several tools in its reform to ensure that seniors living on fixed incomes and those managing chronic illnesses have protections including establishing HRAs in the GIC program.

The Senate version also includes additional protections for retirees so that they cannot be forced to disproportionately shoulder an increase in premium splits. Retirees and survivors do not have collective bargaining rights and therefore premiums can be raised unilaterally and without warning. To prevent runaway premium contributions for retirees, the Senate limited retiree and survivor contribution for communities who opted into the expedited process to the average municipal contribution for active employees.

There is no intention of providing a “windfall” for retirees or inserting a “reform killer” into this important legislation.  This is not a zero sum game: retirees can be protected from undue costs shifting while ensuring municipalities can achieve significant savings over the next months.  This has been demonstrated by the GIC’s success at containing costs while capping premium contributions for retirees and survivors at 25%. Overblown rhetoric pitting retirees against communities does not help move this important reform towards compromise and savings for all communities.

Summary

Our cities and towns need relief from sky rocketing health insurance costs. Yet, besides wages, there is no benefit more important than health insurance. We are on the cusp of providing the meaningful reform that will protect critical local services, retirees, the chronically ill and jobs.  We are counting on our partners in this reform effort to work towards reasoned compromise within the conference committee process.

We have attached a fact sheet for your reference.  Thank you, and please do not hesitate to contact us if you have any further questions.

Municipal Health Reform Fact Sheet

Concern: Teachers will have “veto” power over plan designs brought to the table by municipalities.

Reality****: No group has veto power. If the PEC and municipality cannot come to agreement, the municipality has the right to implement their plan design that meets benchmarks.

Concern: The newly created Health Insurance Review Panel has the power to change municipalities’ plan design.

Reality****: The Panel is only empowered to determine whether a municipality has met GIC benchmarks. The panel may also use up to 1/3 of the cost savings calculated by the municipality in implementing the new plan to mitigate costs for subscribers.

Concern: The vote to use the expedited process is “overly burdensome”.

Reality****: Each community will decide for itself whether to access the expedited process through a simple majority vote of its City Council or Board of Selectman. This measure protects municipalities as well as employees.

Concern: Chronically ill and elderly employees or retirees will not be able to receive the preventative care that they need.

Reality****: The Senate has ensured that the PEC’s share of cost savings through plan design changes will fund HRAs and other cost mitigating avenues for a municipal workforce’s most vulnerable employees.  This will include preventative care access that will save taxpayers millions over hospitalization and nursing home care.

Concern: Providing protections for retirees’ premium contribution rates is a “reform killer”

Reality****: The Senate has ensured that the PEC’s share of cost savings through plan design changes will fund HRAs and other cost mitigating tools for a municipal workforce’s most vulnerable employees.  Fixed income retirees and survivors often shoulder increases in premium splits and at the same time are enrolled in high deductible plans. Retirees cannot collectively bargain their premium splits like active employees can and therefore, will benefit from the tools and protections that Senate version contains.