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Health Plan Design Could Have Saved Massachusetts Cities $3.3 Billion

Posted on May 10, 2011

Massachusetts cities and towns could have saved $3.3 billion on health insurance premiums during the past decade that could have been used for road construction, tax relief or retaining the jobs of some 66,000 teachers and police officers, according to a Massachusetts Taxpayers Foundation (MTF) report published this morning.

Municipal reformMTF reports that Massachusetts’ 351 cities and towns spent $3.297 billion more on health insurance from 2001 to 2010 than they would have spent had they purchased coverage through the Group Insurance Commission, which buys insurance for state employees. The Commission limited annual premium increases to a modest 6.4 percent during that time because it is able to make plan design changes outside of collective bargaining.

The report underscores the importance of legislation passed in late April by the House that would allow cities and towns the same ability as the state to manage plan design. Employers care about municipal health care costs because the more money that cities and towns must spend on health premiums, the less they spend on schools, public safety, roads, bridges and other services that impact the Massachusetts economy.

The full report is available on the Taxpayers Foundation Web site, The site allows visitors to review the potential savings for each city and town, as well as by Senate district.

“The results of the MTF report are staggering,” said Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts.

“Cities and towns are losing 6,600 jobs each year that they do not have to lose. It’s time to give municipal governments the same tools to manage health insurance costs that private employers take for granted.”

More than 90 percent of Massachusetts cities and towns saw health insurance costs grow at much faster rates than the Group Insurance Commission. Every Senate district would have realized at least $10 million in savings over that period.

Publication of the report comes two weeks after the Massachusetts House of Representatives included in its proposed Fiscal Year 2012 budget a provision that would give municipal officials the authority to set health-insurance co-pays and deductibles outside of collective bargaining. Cities and towns would continue to negotiate with unions over the percentage of premiums paid by employees.

The proposal also forces all eligible retirees to enroll in Medicare, a plan endorsed by AIM, Governor Deval Patrick and others.

Analysts estimate that the reform would save cash-strapped cities and towns approximately $100 million in the fiscal year that begins July 1.

The proposal is now pending before the Massachusetts Senate, where President Therese Murray has expressed some reluctance to reduce the ability of workers to bargain over their health care plans.

A recent report found that Massachusetts cities and towns spend 37 percent more to provide health insurance to their employees than the amount spent by private companies as measured by the AIM Benefits Survey.

The report by The Boston Foundation and MTF, entitled Municipal Health Plans: Gilded Benefits from a Bygone Era, concluded that municipalities face a deepening financial crisis because of generous health insurance benefits under which employees pay minimal co-payments or deductibles. The result: some cities and towns face significant layoffs because they must use more than 20 percent of their budgets to buy health insurance for employees and retirees.