State Insurance Deal Remains Unused By Mass. Towns
by Sayce Falk, News Asst. Editor on November 14, 2009 in News
Despite the crushing burden imposed on local governments by state budget shortfalls – Massachusetts has already decreased funding by $90 million to its 351 cities and towns within the last year – one of the largest money-saving measures available remains largely out of reach to many communities in the Boston area.
The Group Insurance Commission (GIC), a health insurance system for state public employees created in 1955, was opened to local governments to enter their employees in 2007. Yet only a tiny majority of eligible towns have entered into the agreement. There is no indication that they are any closer this year, despite the enormous shortfall in state aid.
“This is the biggest savings state government could give them,” said Representative Stephen Kulik, assistant vice-chair of the State House Ways and Means Committee. “But unions have inaccurately framed this as being an assault on the very basic principles of collective bargaining.” Massachusetts municipal governments face major problems as they try to balance their budgets. They are limited by state law from raising property taxes by more than 2.5 percent a year. Under the original proposal, the state agreed to provide more local aid in exchange for such a limitation, but that promise has been repeatedly broken, under governor Mitt Romney in 2001 and Governor Deval Patrick earlier this year.
In contrast with the limited growth in revenue, the cost of medical care has been rising rapidly – the Boston Municipal Research Bureau found that Boston’s employee health costs leapt 92 percent from 2001 to 2007. Yet Boston and other local communities do not retain the independence and flexibility of many other public sector employers. In particular, the Massachusetts state government, which enrolls its employees under the GIC, does not have to negotiate the details of the plan with each union before they make the change. State law requires that local governments include such details in its collective bargaining negotiations.
The result is evident in the state’s response to the economic crisis last summer – the legislature increased the premiums paid by state workers from 20 to 25 percent. That kind of swift reaction to changing economic circumstances is virtually unheard of at the local level.
The GIC keeps costs down in a variety of ways – strict requirements for documentation, the spreading of risk over a large pool of enrollees, and purchasing power as a result of its size – which largely mirror the policies of other successful private and public health insurers.
Yet less than 10 percent of eligible communities have been able to opt into the program. One of the chief reasons is that the GIC requires 70 percent of all employees to agree to a change before it can go into effect – which means governments must deal simultaneously with multiple unions.
Most unions are loathe to relinquish such an important negotiating chip, argued John Dunlap, Boston’s director of labor relations. The well-known ability of teacher, police, and firefighter unions to muster state-level support to block any statutory changes has also kept the issue from being resolved. Another worry is that the cost savings are a proxy for cuts in the quality of care.
“The GIC is not a good insurance plan,” said Tom Ross, secretary-treasurer for the Somerville firefighter’s union. “It’s not a good deal for the firefighters and it’s not going to have the same level of care for firefighters.”
Cities and towns in the Boston region have been dealing with the GIC in different ways. Some, like Boston itself, have been pressing the state to allow them the greatest degree of independence – devising their own health care plan, similar to but separate from the GIC, without union interference.
Dunlap has pressed for such flexibility, pointing out that the city would gain the benefits of greater flexibility but still allow some input from Boston unions. “The unions are in a strange place. They want to keep [health care negotiations] on the table, but some recognize that the Boston position is a compromise between what we have now and the GIC.”
Other communities, like Brookline and Somerville, have continued to press their unions to remove health care from the negotiating table, but without much to show for it. “There’s been no new urgency in GIC negotiations yet,” said Harry Bohrs, the chair of the Town of Brookline’s Advisory Committee.
Though little progress has been made to date, the budget crunch is far from over for Massachusetts. Governor Patrick is currently considering how to close an additional $600 million hole in the state’s budget, and many communities expect that means even more cuts to local aid.
“The moment has not yet come,” said Kulik, referring to union recognition that GIC entry is necessary to forestall layoffs, “but it could happen as early as the end of this legislative session in July 2010.”
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