The state of Massachusetts, facing a multibillion-dollar budget gap, plans to cut $86 million from its health insurance spending this fiscal year by unilaterally raising the percentage of premiums paid by state employees.
Municipalities, under similar financial duress, are relatively paralyzed. They have to negotiate any health benefit reductions with their unions, a time-intensive and often costly process. Municipal leaders say they should have the same power the state has.
Mitchell calls health
care a “budget buster.”
“We’re being held hostage,” says Saugus town manager Andrew Bisignani, referring to the town’s unions. “The unions have way too much power as far as this issue goes.”
Saugus is one of 17 towns and cities that have joined the state’s health insurance pool, which negotiates coverage for state and some local employees and is managed by an 18-member committee called the Group Insurance Commission. Saugus saved money by joining the GIC, but Bisignani is still frustrated with the pay raise he had to give the town’s teachers so that they would give their assent. “I’m satisfied with it, but I think the plan is still — in today’s market — I still think it’s too generous,” he says.
Lowell’s chief financial officer, Tom Moses, complains that even the smallest adjustments in plan design are challenging or impossible under the current system. “We can’t raise the co-pay from five bucks to 10 bucks without negotiating it,” he says.
With health insurance costs rising as fast as 20 percent annually in Lowell and at similar rates in countless other municipalities, disproportionate spending on health insurance will continue to erode crucial services until municipalities cut costs.
Standard cost-cutting procedures include lowering premiums through raising employees’ out-of-pocket payments and instituting tiered networks that charge employees more for less-cost-effective care. Increasing out-of-pocket expenses is controversial because it tends to discourage preventive care, but municipal officials say they have to do something because they are paying too much.
“[Unions] are trying to maintain a system for themselves that has proven to be too costly, and the longer they hold out, the more that elastic band is going to snap back at them when we reach a breaking point,” Massachusetts Municipal Association executive director Geoffrey Beckwith says.
In what Beckwith calls an “exceedingly modest” proposal, the Massachusetts Municipal Association proposes that municipalities be allowed to use impact bargaining to negotiate with unions. In impact bargaining, municipalities and unions sit down and discuss the impact that changes in plan design would have on municipal employees. Under the MMA’s proposal, plan changes greater than those in comparable GIC plans would be subject to full collective bargaining, as would the percentage of premiums paid by employees.
“That keeps a lot of collective bargaining in place,” Beckwith says.
Not enough, says Massachusetts Teachers Association president Anne Wass. According to Wass, many unions have traditionally accepted lower salaries in exchange for better health insurance (an argument Beckwith calls a “myth”). In these municipalities, removing health insurance from full collective bargaining would be doubly injurious, Wass says.
Quincy Firefighters Union president Ernie Arienti shares Wass’s concern. “We have given up in the past to maintain what we have,” he says. “So now it’s a double jeopardy.”
Legislators continue to look for a middle ground between the demands of management and their unions.
In 2007, the state gave municipalities the right to join the GIC, an invitation they hoped would offer relief to towns and cities plagued by the soaring cost of health insurance. But only 17 towns and cities joined, in part because the law required municipalities to secure the approval of 70 percent of their union employees.
The most recent legislative proposal uses GIC savings as a measuring stick while pressuring municipalities and unions to work together on a local level. The initiative, part of a larger bill filed by the state’s Special Commission on Municipal Relief, gives municipalities and unions a timetable for cutting costs. Municipalities opting not to join the GIC would have 90 days to negotiate a plan with their unions that achieves savings equal to a benchmark based on GIC figures. If they failed to come to an agreement, a mediator would intervene to determine an appropriate plan. Municipal governments that reject the mediator’s plan would lose state aid.
State Sen. Stanley Rosenberg of Northampton, who co-chairs the special commission, says its proposal “seeks to find the balance between the interests of employees and management.”
But municipal leaders aren’t having it. “The real solution comes in empowering cities and towns,” Beckwith says.
In a June 3 letter to legislators, the MMA also takes issue with the proposal’s binding mediation provision and “totally unworkable” dollar benchmark system. Beckwith calls the special commission’s proposal “purely political.”
“The Legislature and the governor are inclined to try to accommodate the wishes of the unions — except when it’s going to cost them money,” Beckwith says. “This is not a political issue. This is an issue of policy where reform is needed.”
Rosenberg disagrees. “We consulted with everybody,” he says. “We negotiated for literally months. And it was really clear that management has only one answer to the question — put all the control in [their] hands.”
The MMA proposal is unfair to unions, Rosenberg says. Whereas the special commission’s proposal punishes both sides for failure to come to an agreement (no one wants a mediator), the MMA’s plan leaves management with the ultimate power to implement changes anyway.
“It’s not a balanced approach,” Rosenberg says. “Nobody plans to negotiate in bad faith, but they put proposals on the table that aren’t real and aren’t fair. Communities are under enormous stress.”
Wass says the MTA would support the special commission’s proposal with a few amendments, such as the mandatory inclusion of retirees in bargaining coalitions and the freedom to create more-generous health reimbursement accounts than are currently outlined in the proposal.
“Everyone’s aware of the fact that health care is high,” Wass says. “But we also can’t use this time of crisis to wipe out people’s rights.”
GIC executive director Dolores Mitchell knows health insurance is a “budget buster,” but she is somewhat of an agnostic when it comes to the current debate between municipalities and the state. She says the real issue is the delivery system. Health insurance is too expensive because health care is too expensive, she says, and no amount of “raising premiums, raising co-pays, raising deductibles, and instituting care management programs” will “slow the curve.”
A new Special Commission on the Healthcare Payment System, of which Mitchell is a member, hopes to do just that — slow the curve through statewide reforms that address quality, cost, and transparency.
Of the comparative merits of the Special Commission’s proposal, the MMA’s proposal, and her own GIC, Mitchell says, “Maybe there are three roads to heaven.”