Town workers paid to drop health coverage

As cities and towns continue to wrestle with health care cost pressures, some officials are trying to save money by giving employees cash bonuses to drop their coverage with the municipality and go on their spouse’s plan.

Brookline looked into health insurance opt-outs three years ago and put a program in place in 2008. The plan offers a $2,500 annual payment to an employee who has worked for the town at least a year and opts out of the family plan. Individuals receive $1,000 a year for dropping their coverage.

Since the Brookline program began, 57 people have opted out of family plans and 29 out of individual plans, saving the town more than $1 million. In fiscal 2011, the town expects to spend $20 million (10 percent of its total $200 million municipal budget) on health insurance for about half of its 1,850 employees.

Saugus launched an opt-out program this spring, offering employees on family plans $3,000 a year to drop their coverage, saving the town about $11,000 on these plans. Individuals receive a bonus of $1,200 annually, but that saves the town more than $5,000 in premium payments. Employees have to be enrolled in a municipal health plan for a minimum of two years to receive the money.

Some private companies offer employees financial incentives to drop health insurance coverage, but it’s a relatively new practice at the municipal level. In addition to Brookline and Saugus, Boston and Cambridge offer opt-out programs. According to Geoff Beckwith, the executive director of the Massachusetts Municipal Association, there are a number of communities that are offering this type of incentive. However, MMA does not currently collect this data.

 “Clearly this is an area where local officials are taking a look at this incentive to [get employees to] choose health insurance somewhere else in response to the fact that their costs are going up dramatically,” said Beckwith.

The bonuses typically go to employees who drop their municipal health insurance and take coverage from their spouse’s employer. Individuals can drop their municipal health plan and pocket the bonus if they get married to someone with their own health coverage.

Both Brookline and Saugus have also joined the Group Insurance Commission, which allows cities and towns that secure union approval to enroll employees, their families, and retirees in the state-run health care program that offers coverage at a lower cost to municipalities.

Municipal officials also pushed this year for a legislative proposal that would have allowed them to make health insurance plan design changes independently of the collective bargaining process with unions. The measure failed to make it into recently passed municipal relief legislation.

But offering bonuses for municipal workers to drop their health coverage doesn’t make all employees happy. In Brookline, long-time workers who never enrolled in town insurance plans grumbled that there was no incentive for them. About 15 of those employees later enrolled in the town health insurance program and later withdrew just so they could get the bonus, according to Kathy McGinnis, the Brookline benefits supervisor. The town still saved money, however. “The policy is the most unpopular thing that I have to administer,” she said.