Municipal Healthcare and the GIC

Municipal Healthcare and the GIC • Andrew Powell Analyst/Consultant Boston Benefit Partners, LLC Bridgewater-Raynham Education Association October 5, 2010 177 Milk Street • Suite 310 • Boston, MA 02109 • tel 617.570.9100 • www.bosben.com

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

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

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

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

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

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

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

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

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

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

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”

GIC Health Insurance Plans 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 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

GIC Retiree Health Insurance Plans 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 Plan Types • INDEMNITY • No networks necessary • National coverage with no referrals • Best suited for outside of New England retirees and residents

GIC Plan Types • PPO • No PCP referrals necessary • Regional networks of physicians limited to New England • Provides an out-of-network benefit

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

Sample Plan - PPO

Sample Plan – Limited Network HMO

Sample Plan – Regional HMO

GIC – Eligibility Rules • 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 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)

The GIC Option Advantages 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? . . .

Section 19, Coalition Bargaining What is Section 19 Coalition Bargaining?

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.

Section 19 Coalition Bargaining The Process: How does a municipality get intothe 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

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.

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.

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.

Municipal Insurance Legislation • Two concepts in play • Senate/Special Commission on Municipal Relief • House/Massachusetts Municipal Association

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.)

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

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

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.

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

Q & A Andrew Powell Boston Benefit Partners, LLC 617 – 570-9100 extension 224

Municipal Healthcare and the GIC