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State health plan saves towns money

Email|Print| Text size + By John Laidler
Globe Correspondent / January 20, 2008

Three area communities are helping to blaze a trail for other cities and towns seeking to ease soaring employee health insurance costs.

Groveland, Saugus, and Winthrop are among five municipalities that have taken advantage of a state law adopted last July that allows public groups to join the state's employee healthcare system as a way to save money.

The five communities - the others are Holbrook and Millis - along with four regional school districts, a charter school, and two regional planning councils, all met a first-year deadline last October to enroll in the Group Insurance Commission, the agency that administers the state's health insurance plan. One other community, Springfield, was able to join the insurance commission in 2006 because it was under a state financial control board.

With the exception of Saugus, the enrollments will become effective July 1. Because of its severe fiscal crunch, state lawmakers allowed Saugus to join Jan. 1.

Andrew Bisignani, Saugus town manager, said joining the insurance group is expected to bring modest long-term financial relief to the town, which has a $5 million budget shortfall this fiscal year, about $2 million of it caused by a deficit in its self-insurance program.

Bisignani said Saugus has been averaging 15 to 20 percent increases in its healthcare costs the last several years. With its much larger pool of subscribers - 285,000 compared with Saugus's 2,500 - the insurance commission has been able to limit its cost increases to 6 to 10 percent, he said.

Bisignani projects savings this fiscal year at about $300,000. Employees will save on average $6 a week in premiums for a family plan, depending on what plan they choose.

"What it does is stabilize the current fiscal year's costs . . . and it minimizes the increases in future fiscal years," said Bisignani, who estimated the town will save $600,000 in fiscal 2009.

While the state plan requires some higher copayments, Bisignani said most employees will save money by sharing in the overall cost savings. In Saugus, the town pays 90 percent of health insurance costs.

In Winthrop, Town Council president Thomas E. Reilly said, "The financial impact of this is enormous for the town."

"As with most communities, we have a huge problem with healthcare. Ours, given the size and claims history we have, was a particularly bad one," Reilly said, noting that annual healthcare increases have been in the "double digits and high double digits" in recent years.

He said preliminary estimates indicate the town will spend $250,000 less in healthcare next fiscal year than the current one, and $750,000 less than what it would have paid had it remained with its current insurer.

Joel Barrera, senior project director for the Metropolitan Area Planning Council, said the fact that only a handful have enrolled in the system to date is not surprising since the law did not pass until July 25, and communities had until Oct. 1 - later extended to Oct. 29 - to join.

Under the law, a municipality can enroll only if the option is approved by at least a 70 percent weighted vote of a committee representing its employee unions following a coalition bargaining process, where the municipality's chief executive negotiates with the multiunion committee.

"I think the real test is next Oct. 1," Barrera said, referring to the deadline for communities seeking to join the group in fiscal 2010.

Barrera said a number of other communities, including some in this region, have discussed joining.

He anticipates 30 municipalities and other entities will attempt the union negotiations needed to join the system, and that about 10 will end up enlisting by the deadline.

"The good thing is that this is a new option that communities have," he said. While not the only vehicle for cutting costs, he said it is a "solid one and the right one for some communities."

Dolores L. Mitchell, executive director of the Group Insurance Commission, said joining might not be in the best interest of those communities that are already aggressively moving to reduce health costs. "But there are some that would really save money, and I think they ought to give it serious thought. We will help in any way to make the transition work for them," she said.

For some communities, achieving the needed support from unions is proving a difficult or insurmountable hurdle. In Saugus, the town and the union were able to reach agreement, but Bisignani said it took considerable negotiation.

"We started negotiating probably in April and we finished in September," he said. "It was not easy. We had some very hard bargaining and we had to give back some benefits to the unions."

Reilly credits early and active discussions among town officials and union leaders for Winthrop's ability to achieve an agreement.

"The key to it was there was a great deal of cooperation and mutual respect between the town manager, the superintendent of schools, and the unions," he said. "As a result, they were able to put something together within the timeline."

Groveland finance director Greg Labrecque said the negotiations in his town went relatively smoothly because unlike in some larger communities, Groveland's employee contracts do not include any guarantees of copay levels or the selection of any particular providers.

He said that limited the issues on the table.

Labrecque said the town is pleased by the financial relief it stands to gain from taking advantage of the new law. Had Groveland belonged this year, he estimates it would have saved about $105,000 of its $400,000 in health insurance costs. He said the actual savings next fiscal year could be more significant since the town's premium, which had been rising 12 to 15 percent a year under its current insurer, could have climbed as high as 18 percent more.

"I think any law that gives us options is a good law," Labrecque said.

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