Tuesday, July 12, 2011
LEGISLATURE ENACTS MUNICIPAL HEALTH INSURANCE REFORM ACT BY OVERWHELMING VOTE, GOVERNOR TO SIGN INTO LAW TODAY
MAJOR VICTORY FOR LOCAL GOVERNMENT CAPS ACTION ON STATE BUDGET
July 12, 2011 — In a tightly coordinated orchestration of events, Governor Deval Patrick and the Legislature are completing final action on municipal health insurance reform. Acting swiftly during formal sessions yesterday afternoon, the Legislature adopted four consensus amendments submitted by the Governor earlier in the day. The House voted 149-2 to support the final version, and the Senate followed suit by a 37-0 margin. The Governor will formally sign the Municipal Health Insurance Reform Act today in a ceremony in his office.
The final legislation is a 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.
Of course, this victory would not have been possible without the unyielding leadership and advocacy provided by hundreds of municipal and community leaders, and over a dozen civic organizations over the past several years. The Board of Directors and staff of the MMA extend their deep appreciation to all those who have fought for reform and made this victory possible.
MMA OVERVIEW OF THE FINAL MUNICIPAL HEALTH INSURANCE REFORM LAW
Overall, the municipal health insurance reform act is a strong reform law that is fair and balanced for all parties. It provides real reform and savings for communities, while giving municipal unions a voice in the process.Â
• The process is streamlined and clear: In cities, City Councils vote once to accept the statute, and in towns, Boards of Selectmen also vote once to accept the new law.Â
• After local acceptance, the appropriate municipal authority (generally the executive) can make health insurance plan design changes or transfer communities into the GIC following a structured process.Â
• The executive develops the proposed plan design changes (no plan could have higher co-pays, deductibles, tiered network co-payments or other cost-sharing plan features that exceed the dollar amounts in the most subscribed plan in the GIC), or a proposal to transfer subscribers into the GIC, and estimates the first-year savings that would result.
• The executive then notifies the Insurance Advisory Board of the total estimated one-year savings resulting from the plan design changes or transfer to the GIC, and provides documentation to the IAC.
• After discussion with the IAC as to the estimated savings, the executive convenes a meeting of a new public employee committee (PEC) which is composed of a representative of every union (bargaining unit) and a retiree representative. Each participant has an equal vote, except the retiree representative, who shall have a 10% vote.Â
• The executive provides notice to the PEC detailing the proposed changes, the analysis and estimate of its anticipated savings, and a proposal to mitigate, moderate or cap the impact of the changes on subscribers, including retirees, low-income subscribers and subscribers with high out-of-pocket costs who would otherwise be disproportionately impacted.
• The executive and the PEC would have 30 days from the date of notice to negotiate over the proposed plan design changes and the executive’s plan on how to share a portion of the first-year savings with employees, especially with retirees and those most impacted by the changes. A majority vote of the PEC is required to reach an agreement. Â
• If there is a written agreement by the end of the 30-day period, the community would be able to to implement the plan as agreed.Â
• If there is no agreement after 30 days, the matter would be referred to a “municipal health insurance review panel†composed of a municipal and labor representative and an impartial third member chosen from a list of individuals with professional experience in dispute mediation and municipal finance or municipal health benefits provided by A&F. If there is no agreement on the third member after 3 business days, the A&F secretary would choose the third member.Â
• If the proposed plan design changes do not exceed the GIC benchmark, the panel must approve the community’s immediate implementation of the changes. If the community is seeking to join the GIC, the panel must approve the transfer if the community can demonstrate that the savings would 5 percent greater than the savings that could be achieved by implementing plan design changes to current plans.
• The panel would have 10 days to: 1) confirm the estimated monetary savings, to be substantiated by documentation provided by the executive; 2) review the proposal to mitigate, moderate or cap the impact of the changes on subscribers, including retirees, low-income subscribers and subscribers with high out-of-pocket costs who would otherwise be disproportionately impacted; and 3) concur with the community that the proposed mitigation plan is sufficient.
• The review panel may determine the mitigation proposal to be insufficient, and may require additional savings to be shared with subscribers, however, the total cost of any mitigation plan developed by the panel (such as establishing an HRA or other similar steps) could not exceed 25% of the total first-year premium savings (the municipal and employee savings combined), even if the mitigation plan is in place more than one year. The panel is prohibited from imposing any change to contribution ratios.
• Once the mitigation funds are expended, all mitigation plan obligations on the part of the community will expire.
• The decisions of the municipal health insurance review panel would be binding.
• Regional and joint purchasing groups would clearly be allowed to establish a common plan design structure, although participating communities would each go through the steps above to notify unions and retirees of the estimated savings, and follow the 30-day negotiation process and 10-day review panel process regarding the plan design changes and structuring the mitigation plan.
• The Secretary of Administration and Finance will promulgate rules and regulations regarding the administrative procedures for the 30-day negotiation period and the municipal health insurance review panel, and issue guidelines in evaluating which subscribers would be disproportionately affected by plan design changes or transfer to the GIC.
• The plan design changes or enrollment in the GIC could be implemented immediately, following the above-described process, except in communities that have collective bargaining agreements or Section 19 agreements in place that set specific co-pays and deductibles that are different from the new plan. In those cases, communities must wait until the initial term of the CBA or Section 19 agreement has expired to implement changes for those bargaining groups that have such agreements in place.
• For fiscal 2012, the reform plan would give cities and towns three opportunities to transfer subscribers to the GIC during the year (on January 1, April 1 and July 1), after a 4-month notification to the Commission. After that, enrollment in the GIC would occur each July 1, with notification by the previous December 1. The contribution ratios for employees entering the GIC will remain the same, but any future changes in the contribution ratios would have to be approved through full collective bargaining.
• Importantly, the final bill deleted a Senate-voted section that would have forced dozens of communities to increase the municipal contribution to retiree health plans, and instead replaced it with a reasonable provision that delays any change in the contribution ratios paid by retirees for a three-year period for any community that uses the reform act to implement changes. Communities making such changes 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.
• As previously announced the new law would require all eligible retirees to be enrolled in a Medicare health plan (governmental units shall pay any federal penalties associated with a transfer to Medicare Part B).
GOVERNOR SIGNS KEY LOCAL AID ITEMS IN FISCAL 2012 BUDGET, INCLUDING SUPPLEMENTAL ONE-TIME LOCAL AID PROVISION
Governor Patrick supported a number of the MMA’s major budget priorities when he signed the fiscal 2012 state budget into law earlier this morning:
• The Governor signed a special MMA-backed budget provision that should provide a one-time supplemental local aid appropriation of $65 million to cities and towns by October 2011. The provision requires that 50 percent of any “aggregate balance of appropriations,†(unused appropriations in state budget accounts) not to exceed $65 million, be distributed to cities and towns not later than October 31, 2011. The final allocation determinations will be made when the state closes the books on the fiscal 2011 budget, a process that could take two to three months. At the budget signing ceremony yesterday morning, Secretary for Administration and Finance Jay Gonzalez stated that he expects the final distribution amount to be $65 million. The MMA will be monitoring the implementation of this provision very closely.
• The Governor approved an $80 million increase in the Special Education Circuit Breaker program, bringing the account up to $213 million.
• The Regional School Transportation reimbursement account is funded at $43.5 million, a $3 million increase over fiscal 2011 levels.
• The Payment-in-Lieu-of-Taxes (PILOT) account is funded at $27.3 million, a $1 million increase over fiscal 2011 levels.
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