Municipal Healthcare and the GIC

177 Milk Street • Suite 310 • Boston, MA 02109 • tel 617.570.9100 • www.bosben.com

Andrew Powell Analyst/Consultant

Boston Benefit Partners, LLC

Bridgewater-Raynham Education Association

October 5, 2010

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Healthcare Costs Steadily rising over the past decade +

Massachusetts has some of the highest costs in the nation– Best access to care– Aging population– Robust Bio-tech industry that drives technology– Teaching Hospitals

National Healthcare Reform – Reforms health insurance with access and mandates– Does not address cost problem

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Budgets vs. Healthcare Costs

Leaner budgets are squeezing everyone– Reduced local aid– Less revenues with bad economy– No real cost-reduction strategies

Unions are caught in the middle– Pressure to make changes– Protracted negotiations over salary and benefits– Has become a political battlefield

Boston Globe Mass. Taxpayers Foundation Boston Municipal Research Bureau

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Controlling Costs – Limited Tools

Plan Design Tools – immediate impact- Coinsurance- Deductibles- Co-pays- Premium contribution percentages

Non-plan Design Tools – long-term impact- Workforce wellness- Tiered or selective networks

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Plan Design - Copays

Traditional office visit copays increasing - $5 copays disappearing and $20 or $25 [or higher] copays are common

Separate, higher copays for specialist office visits

Higher copays for 3rd tier drugs and new 4th tier drug copays

New in-patient and out-patient service copays

New MRI/CAT scan procedure copays

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Insurance Product Innovations

Driven by employer cost concerns– Leaner budgets, reduced local aid– pressure to reduce premium trend

Move to the GIC …or create a plan with similar benefit design?– GIC plan design options– Municipal Blue products from Blue Cross– High deductible and tiered network products from

Harvard Pilgrim or Tufts

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Sample BCBS Plan

Blue Options Plan = Tiered Networks

Tiered Copays for PCP- Tier 1 - $15- Tier 2 - $25- Tier 3 - $45

Specialists - $45

$100 Emergency Room Copay

High End Imaging/MRI, CAT, PET Scans

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Sample BCBS Plan

Blue Options Plan = Tiered Networks

Tiered Hospital Copays/Admission- Tier 1 “Enhanced” $250- Tier 2 “Standard” $500 - Tier 3 “Basic” $1,000

Prescription Drugs- Retail - $15/$30/$50- Mail Order - $30/$60/$100

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Sample BCBS Plan

Blue Value Plan = Higher Copays

$20 PCP and Specialist Copay

$75 Emergency Room Copay

$50 High End Imaging/MRI, CAT, PET Scans

$500 Inpatient Hospital Copay

$250 Outpatient Copay

Prescription Drugs- Retail - $15/$30/$50- Mail Order - $30/$60/$100

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Be Afraid…Be Very Afraid if…

You are offered a plan that uses the following words:– Value plan– Rate Saver plan– Best Buy plan

These plans are good for management; not necessarily good for employees

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What is the Group Insurance Commission (GIC)

Established in 1955 by State Legislature

Purchases Health Insurance for more than 350,000 state and municipal employees, retirees, and dependents

Quasi-Independent State Agency Governed by 15 Commissioners

– Appointed by the Governor – 4 Labor seats, 1 Retiree, 10 Industry, Management

July 2007 – MGL 32B, Section 19 Amended to allow Municipalities into the GIC

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Why is GIC so Attractive to Municipal Management?

Premium costs tend to be lower

More plan choices

No bargaining over plan design, unions lose ability to negotiate

Reduces school district’s administrative burden

Media and some politicians have called the GIC a “panacea to costs”

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GIC Plan Options

Active Employees & Non-Medicare Eligible Retirees– Regional HMOs (11.5% based on 2009 enrollment)

Fallon, Health New England, Neighborhood Health Plan

– Statewide, Limited Network HMOs (New as of 7/1/2010 Tufts Spirit and HPHC Primary Choice

– PPO Plans (55% based on 2009 enrollment)Tufts, HPHC, Unicare Plus & Choice

– Indemnity (21.5% based on 2009 enrollment)Unicare Basic with CIC

* 80% of municipal subscribers to date have selected a GIC PPO plan

GIC Health Insurance Plans

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GIC Health Insurance Plans

GIC Plan Options

Active Employees & Non-Medicare Eligible Retirees Choose from:– 4 Statewide PPO Plans– 2 Statewide, limited network HMO Plans (new option)– 4 Regional HMO Plans – 1 Indemnity Plan

Medicare-Eligible Retirees:– Retirees must join Medicare if age 65 and Eligible for

Medicare (Self or Spouse)– Choose from 6 Medicare Supplemental Plans

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GIC Plan Options

Medicare Supplement Plans– HPHC Medicare Enhance– Tufts Medicare Complement– Tufts Medicare Preferred– Fallon Senior (Worcester Area)– Health New England MedPlus (Western

MA)– Unicare Indemnity Medicare Extension

OME

w/ CIC (90% of current enrollment)

GIC Retiree Health Insurance Plans

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GIC Plan Types INDEMNITY

– No networks necessary– National coverage with no referrals– Best suited for outside of New England retirees and

residents

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GIC Plan Types PPO

– No PCP referrals necessary– Regional networks of physicians limited to New

England– Provides an out-of-network benefit

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GIC Plan Types HMO

– Requires use of a Primary Care Physician– Referrals necessary for specialty care– Coverage only available within HMO’s network – Tufts Spirit plan does not require a PCP referral

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Sample Plan - PPO

Plan Design Options TUFTS NAVIGATOR PPO

  In-Network Out-of-Network

Primary Care Physician Office Visit

$20 copay 20% after deductible

Specialist Office Visit $25 Tier 1$35 Tier 2$45 Tier 3

20% after deductible

Calendar Year Deductible $250/$750 $400/$800

Emergency Room $100 $100

Inpatient Hospital Care $300 Tier 1$700 Tier 2

Per admissionMax of 4/ calendar year 

 20% after deductible

Outpatient Hospital Care $150 copay/4 per year  20% after deductible

Prescription Drugs    

  RetailMail Order (90 day)

$10/$25/$50$20/$50/$110

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Sample Plan – Limited Network HMO

Plan Design Options Tufts Health Plan Spirit

Limited Provider Network, No PCP Referrals

Primary Care Physician Office Visit $20 copay

Specialist Office Visit $25 Tier 1$35 Tier 2$45 Tier 3

Calendar Year Deductible $250/$750

Emergency Room $100

Inpatient Hospital Care $300 Tier 1$700 Tier 2

Per admissionMax of 4/ calendar year 

Outpatient Hospital Care $150 copay/4 per year

Prescription Drugs  

  RetailMail Order (90 day)

$10/$25/$50$20/$50/$110

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Sample Plan – Regional HMO

Plan Design Options Fallon Select HMO

Regional Provider Network PCP Referrals Necessary

Primary Care Physician Office Visit $15 copay

Specialist Office Visit $25 Tier 1$35 Tier 2$45 Tier 3

Calendar Year Deductible $250/$750

Emergency Room $100

Inpatient Hospital Care $250Per admission

Max of 4/ calendar year 

Outpatient Hospital Care $125 copay/4 per year

Prescription Drugs  

  RetailMail Order (90 day)

$10/$25/$50$20/$50/$110

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Municipal Employees May Not Participate in GIC Dental, Vision, Life or LTD programs.– Lawrence will continue to offer Altus Dental plan

Each Member Must Provide Birth and Marriage Certificates for Dependent Coverage

New Hires are Eligible First of the Month after 60 Days

Retirees over Age 65 on Medicare with Younger Dependents have Special Enrollment Rules

GIC – Eligibility Rules

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Medicare Eligible Retirees

If 65 and Medicare Eligible

Retiree Enrolls in Medicare Supplement Plan– If Retiree has Spouse and 1 Dependent under 65,

they enroll in two single GIC plans (Example with Tufts/HPHC)

– If Retiree has Spouse and 2 or more Dependents under 65, they enroll in Family GIC plan (Example with Tufts/HPHC)

GIC – Eligibility Rules

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The GIC OptionAdvantages Disadvantages

Lower premiums Higher out-of-pocket expenses

Moderate premium increases Lose right to negotiate co-pays

*Retiree Protection No Blue Cross products

No GIC Life, Vision or Dental

* Why do retirees acquire protection under the GIC? . . .

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What is Section 19

Coalition Bargaining?

Section 19, Coalition Bargaining

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Section 19 Coalition Bargaining

● The Law:- Mass General Laws Chapter 32B Section 19- Allows a city/town (or regional school district) to

negotiate with all of the town (or district) unions at one bargaining table over the issue of health insurance.

● Section 19 amended in July, 2007– Allows cities and towns to opt into the GIC Pool 1

rates through Section 19 coalition bargaining.– Allows for impasse resolution procedure.

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Section 19 Coalition Bargaining

The Process: How does a municipality get into the GIC?

● Local governing body (Selectmen, City Council, Regional School Committee) votes to adopt Section 19 of MGL ch.32B. Acceptance may be contingent on eventual entry into GIC.

● Municipal representatives meet with the Public Employee Committee to negotiate a Section 19 / PEC Agreement. Either party may force other party to meet with 30 days notice.

● Bridgewater-Raynham is already Section 19

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Section 19 Coalition Bargaining

The Process: (cont.)

● Negotiations focus on:- Premium % contribution split- Medicare Part B % contribution- Impasse resolution procedure- Duration – must join for three or six years (GIC only)

● The Agreement must be finalized before December 1, 2010 in order to get into the GIC for July 1, 2011!

● No agreement can take place unless accepted by the local governing body and 70% of the union coalition weighted vote.

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Section 19 Coalition Bargaining

The Public Employee Committee (PEC)

● PEC includes reps from each collective bargaining unit and a retiree designated by the Retired State, County and Municipal Employee Association (RSCMEA).

● Retirees have 10% vote.

● Remaining 90% vote is weighted, based on number of employees eligible for health insurance.

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Municipal Insurance Legislation

Last year we were told - There will be changes.

Governor wants change.

Senate Leadership wants change.

House Leadership wants change.

Municipal leaders want change.

Cost of Active and Retiree Insurance are overwhelming municipal budgets.

The economy is not getting better.

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Municipal Insurance Legislation

Two concepts in play

Senate/Special Commission on Municipal Relief

House/Massachusetts Municipal Association

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Municipal Insurance Legislation

Senate/Special Commission GIC determines its average cost per subscriber of

health insurance. Municipal employer calculates its average cost

per subscriber. If municipal cost is less than or equal to GIC –no

action required. Mandatory Medicare (Special Comm.)

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Municipal Insurance Legislation

Senate/Special Commission (cont.) If municipal cost exceeds GIC by xx%, triggers

process to bargain changes Section 19 convenes

All unions (PEC) in one process with municipal employer Unions use weighted voting – 70% standard Retirees have 10% vote – get protection

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Municipal Insurance Legislation

Senate/Special Commission - Parties can

- Agree to go into GIC (health insurance only)- Agree to plan that meets GIC cost benchmark- Go to arbitration

Some penalties may apply- If municipal employer does not meet GIC cost- If agreement on insurance not meet benchmark- Penalty – loss in local aid

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Municipal Insurance Legislation

MMA Municipal employer granted unilateral right to alter

plan design. Limits on out of pocket costs to participants based

on similar GIC plans. Bargain on premium contribution splits only –

impact bargaining. If exceed GIC plan o-o-p, then have to bargain.

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Municipal Insurance Legislation

Has become a focus in Gubernatorial race

Likely to be addressed on floor in winter 2010

MMA is lobbying heavily

The insurance companies are ready for either option or no change

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Q & A

Andrew Powell

Boston Benefit Partners, LLC

617 – 570-9100 extension 224