The Massachusetts House of Representatives voted last night to give Bay State cities and towns the ability to manage soaring health insurance costs that threaten the jobs of thousands of teachers, firefighters and police officers.

House members voted 113 to 42 to 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.

AIM and the Massachusetts employer community strongly support the House vote, which is expected to save cash-strapped cities and towns approximately $100 million in the fiscal year that begins July 1. Municipal leaders are expected to use that savings to maintain jobs in critical areas such as schools, public safety and public works.

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

The House action underscores a new economic reality for organized labor – unions can no longer hold onto gold-plated insurance benefits while the commonwealth struggles with a persistent fiscal crisis and private-sector workers and employers face the choice of managing costs or going out of business.

“The Massachusetts House has provided a breath of fresh air by taking a courageous vote to help cities and towns provide the services upon which we all rely. Every employer and citizen who cares about the financial stability of her or his community owes a debt of gratitude to Speaker Robert DeLeo, Ways and Means Chairman Brian Dempsey and every member of the House who voted for this measure,” said Richard C. Lord, President and Chief Executive Officer of AIM.

The municipal health insurance reform will move to the Massachusetts Senate as part of the Fiscal Year 2012 bill expected to be finalized by the House this week. Senate President Therese Murray has expressed some reluctance to reduce the ability of workers to bargain over their health care plans.

The House passed its reform with two concessions to public-employee unions.

First, workers would have 30 days to discuss proposed health-insurance changes with municipal officials, though cities and towns could still impose the changes unilaterally at the end of that period. The reform also increased from 10 to 20 percent the share of savings from health care changes that will go to union members for one year.

“This issue is about protecting services, protecting jobs and protecting quality health care for municipal employees and this reform achieves all of those goals,” Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, told State House News Service. He noted that municipal employees would still retain a greater degree of collective bargaining power than state employees enjoy in the Group Insurance Commission.

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 the Massachusetts Taxpayers Foundation, 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.

The report’s findings:

• The average municipal family plan premium of $20,925 is $5,600 higher (37 percent) than the average private sector family premium, 33 percent more than the federal plan premium, and 21 percent more than the state’s Group Insurance Commission plans.
• In the municipal plans, the average co-payment for a visit to a primary care physician (PCP) is $11. State, federal, and private sector employees on average pay almost twice as much for visits to a primary care physician. Specialist visits averaged $14 for municipal workers, while the co-pays were a minimum of $20 in the GIC plans, $30 for federal workers, and averaged $20 for private sector HMO plans.
• Municipal employees pay less for generic prescriptions than other employees.
• Nine of the 14 communities had no co-pays for most other medical services, including high-tech imaging, outpatient surgery, and inpatient hospitalization. The other five communities have no co-payments for high-tech imaging but have co-payments averaging $128 and $228 for outpatient surgery and inpatient hospitalization. State, federal, and private sector workers pay at least $75 for high-tech imaging, $150 for outpatient surgery, and $250 for an inpatient hospitalization.
• No municipal plan studied includes a deductible. In the other public and private plans, members are responsible for a minimum deductible of $250 for individuals and $700 for families.