Municipal Health Insurance

Bargaining Options

Rising Costs – The talk of the town

The cost of receiving care in Massachusetts is the highest in the country!

Government Response:◦ Legislative reforms focusing on shifting cost to plan subscribers

Carrier Response:◦ More aggressive provider negotiations◦ Consumer driven plans ◦ New plans with smaller, more focused networks

Employer Response:◦ Shifting cost with higher premium splits◦ Raising copays and deductibles◦ Reducing or eliminating retiree plans

Plan users are often left out the problem-solving equation, but they too are stakeholders!

Health Care Cost Trends

Average Single Premium 1999 = $2,196 Average Single Premium 2010 = $5,049 11 Year Increase = 129.9% Average Family Premium 1999 = $5,791 Average Family Premium 2010 = $13,770 11 Year Increase = 137.8%

11 Year CPI Increase = 31%

Sources: Kaiser Family Foundation; Bureau of Labor Statistics

Health Care Cost Trends

January 2001 to December 2010◦ All Workers - Wage Growth = 28.8%◦ State & Local - Wage Growth = 29.9%

◦ All Workers - Benefit Growth = 41.8%◦ State & Local - Benefit Growth = 60.8%

Source: Bureau of Labor Statistics, Employment Cost Index, March 2011

Health Care Cost Trends

◦ Demand for health care services remains high, and will remain high as population ages

◦ Continued growth, development and utilization of new [and expensive] medical technologies, including pharmaceuticals

◦ Price for medical services continues to rise much faster than the price for other goods and services

◦ Massachusetts economy largely driven by the healthcare and bio-tech industry

M.G.L. – 32B

Section of General Laws that provide for public employee and retiree benefits◦ Establishes premium benchmarks◦ Determines plan types that must be offered: HMO,

PPO, Indemnity◦ Provides alternative bargaining options

Section 19, GIC, Municipal Reform Act◦ Mandates Medicare for eligible retirees◦ Affirms the obligation to negotiate benefits for

active employees

Four Models to Negotiate Health Insurance

Traditional 150E bargaining

Informal Coalition Bargaining

MGL 32B, Section 19, Formal Coalition Bargaining

MGL 32B, Sections 21-23, Municipal Health Insurance Reform

Options For Health Insurance Bargaining

Negotiations take place during individual unit negotiations

Plan Design and Contributions MGL 32B allows:

◦ HMO – Units can negotiate different contributions and plan design

◦ Indemnity – 100% of employers bargaining units must agree to any changes (design / contributions) before changes can be implemented

Healthcare is part of overall compensation package negotiated and written into CBA’s

Options For Health Insurance Bargaining: 150E

Form of interest-based bargaining◦ Recognition that collaborative problem solving is needed

Stakeholders ◦ Management◦ Representatives of each bargaining unit and retirees

Parties work cooperatively to reach on agreement on healthcare changes

Terms of any agreement are drafted into a detailed M.O.A. that is recognized by 150E

Signed by management and unions Incorporated into the body of individual CBA’s to make binding Expedites the bargaining process Coalition dissolves at the conclusion of an agreement

Options For Health Insurance Bargaining: Informal Coalition Bargaining

Formal form of Coalition Bargaining Replaces traditional bargaining with a Public Employee

Committee (PEC)◦ One representative from each bargaining Unit◦ Retiree◦ Voting is weighted based on eligible pool per unit ◦ 10% guaranteed vote

Bargains a comprehensive agreement covering all employees/retirees

Modified in 2007 to provide for bargaining into the GIC PEC agreements replace existing CBA language on employee

benefits Used successfully in over Fifty cities, towns, and regional school

districts◦ Has lowered costs by formalizing the partnership between stakeholders

(employer / employees)◦ Provides streamlined negotiations by bargaining with PEC rather than individually ◦ Engages employees to understand costs, drivers, and necessity for change

Options For Health Insurance Bargaining: MGL 32B, Section 19

Options For Health Insurance Bargaining: MGL 32B, Sections 21-23 Municipal Insurance Reform Act Two new options under MGL 32B

◦ Section 22 – Mandates Copays / Deductibles benchmarked against commonwealth’s GIC

◦ Section 23 – Mandates everyone to GIC health plans after satisfying specific cost savings benchmark

◦ Limits collective bargaining compared to current system to a 30-day window of time

◦ Law allows public employers to lower their costs and shift them the plan user

◦ Complicated implementation regulations◦ Disengages employer / employees as equal

stakeholders