Massachusetts Municipal Association’s Analysis of the Governor’s Municipal Health Care Reform Amendments

7/11/11

GOVERNOR, LEGISLATIVE LEADERS, MMA AND LABOR AGREE ON FINAL AMENDMENTS TO MUNICIPAL HEALTH INSURANCE REFORM ACT

FINAL ACTION EXPECTED TODAY TO ENACT A VERY STRONG REFORM LAW FOR CITIES AND TOWNS – A MAJOR VICTORY FOR LOCAL GOVERNMENT

Late on Friday, July 8, Governor Deval Patrick, Speaker Robert DeLeo, Senate President Therese Murray, the MMA and a statewide coalition of labor unions announced agreement on four refining amendments to the municipal health insurance reform act that is on the Governor’s desk, paving the way for final action and approval today (Monday, July 11).

The Governor had been undecided about whether to sign the reform provisions as presented to him, and this agreement resolved the issue, allowing the Governor, legislative leaders and stakeholders to reach common ground.  Municipal health insurance reform has commanded center stage on Beacon Hill ever since the House of Representatives passed a powerful reform proposal in April.  The final product preserves the strong reform framework that House members embraced by a 113-42 vote.

The municipal health insurance reform provisions are attached as outside sections of the state budget.  The plan is for the Governor to return the municipal health provisions to the Legislature early on Monday recommending adoption of the amendments.  The House and Senate leaders have scheduled formal sessions for Monday afternoon, and have pledged to immediately adopt the amendments and return the reform act to the Governor, who will promptly sign the final version into law.

A description of the four amendments is provided below.

The final legislation that the Speaker, Governor and Senate President have all agreed on is a very strong reform act that removes ultimate health insurance plan design decision-making from collective bargaining, saves taxpayers money, preserves essential local services, protects municipal union jobs, guarantees equity with state employee health benefits, and provides municipal unions with more bargaining power than state unions.  It is a balanced and fair reform that would allow cities and towns to save $100 million in avoided health insurance costs, while providing a voice for municipal unions in the process.  Cities and towns will be able to use this reform to provide relief for local taxpayers, protect essential services, and preserve thousands of municipal jobs.

The MMA applauds the leadership of Speaker Robert DeLeo, Chairman Brian Dempsey, Vice Chairman Stephen Kulik, Governor Deval Patrick, Secretary for Administration and Finance Jay Gonzalez, President Therese Murray, Chairman Stephen Brewer, Vice Chairman Steven Baddour, budget conferees Rep. Vinny deMacedo and Sen. Michael Knapik, Public Service Committee Chairs Rep. John Scibak and Sen. Katherine Clark, and all of the members of the House of Representatives and Senate who have advocated for reform this session.

Summary of Governor’s Final Amendments

The four amendments that the Governor will be filing are intended to refine and clarify several provisions of the reform.  The changes are being supported by the House and Senate leadership, the MMA, the Mass. Taxpayers’ Foundation, and a coalition of statewide and municipal unions.  These are intended to be the final changes, enabling the act to become law on July 11, 2011.

Shared Savings.  Under the reform act, cities and towns will set aside up to 25 percent of the first year’s savings to fund a mitigation plan to offset the impact of plan design changes (or entrance into the GIC) on retirees, heavy health care purchasers, and low-income employees.  The first amendment the Governor will file would calculate the one-time shared savings amount based on total savings achieved in the first year, not just the governmental unit’s share of the savings.  For a community with an 80-20 contribution ratio, this amendment would increase the one-time mitigation amount by 5 percent, adding a one-time cost of $50,000 for every $1 million of savings during the first year).

GIC.  The second amendment the Governor will file would set a threshold for unilateral decisions to transfer subscribers into the GIC.  Under the amendment, communities would demonstrate that transferring into the GIC would save 5 percent more than the savings that could be achieved by making plan design changes (increasing co-payments, deductibles and introducing tiered network plans) to existing insurance plans.  While the MMA prefers no threshold, the association agreed to the amendment recognizing that it is highly unlikely that any city or town would transfer its employees and retirees into the GIC without a savings advantage, as joining the GIC would result in a loss of control, and requires a three-year commitment to the state, plus administrative fees.

Retirees. Importantly, the final bill deleted a Senate-voted section that would have forced dozens of communities to increase the municipal share of contribution ratios for retirees, and instead replaced it with a reasonable provision that would have delayed any increase in the contribution ratio paid by retirees for a two-year period for any community that uses the reform act to implement plan design changes.  The third amendment filed by the Governor would extend that period to three years.  Thus, communities making plan design changes or joining the GIC under the new law could not increase retiree contribution ratios from July 1, 2011 through June 30, 2014, unless the contribution ratio changes were approved prior to July 1, 2011.

Plan Design.  Under the act that the Legislature sent to the Governor, cities and towns would be authorized to include co-payments, deductibles, tiered network co-payments and other plan design features no greater in dollar amount than the most subscribed plan in the GIC.  Unions have voiced concern that the “other plan design features” language could be stretched or misinterpreted to allow cities and towns to use this authority to strip employees of basic coverage offered in health plans (such as chiropractic or mental health services).  This is not the intent of the language, and thus the Governor’s amendment will clarify the language to “other cost-sharing plan design features”.  This amendment would refine the law, but would not impact the intended scope.