Insurance switch should save cash in 4 communities
As local officials struggle to maintain city services and overcome state funding cuts, four municipalities north of Boston are set to join the state's Group Insurance Commission, a move that should save the communities hundreds of thousands of dollars each year.
Since 2007, cities and towns have been allowed to join the GIC, which currently provides health insurance for some 300,000 state workers and retirees. But in the past two years, just 17 municipalities have signed up for the program, which offers those communities that are now either self-insured or have agreements with an HMO significant savings, because of both the large number of enrollees and the option of several different health plans.
Melrose, Swampscott, Wenham, and Stoneham will join the group insurance plan in July. City and town officials say communities haven't moved faster to join the GIC because a change in health insurance requires a 70 percent endorsement from each of its union workforces.
"It took us over a year, but the unions really stepped up to the plate," said Melrose Mayor Robert Dolan, who helped negotiate a deal with city unions that will allow for 1,000 employees, including teachers and retirees, to join the GIC on July 1.
Next fiscal year, Melrose plans to spend $12.3 million on health insurance - $1.4 million less than the $13.7 million it had anticipated under its current Blue Cross, Blue Shield plan. "It saved us," said Dolan. "I would have been closing schools and shutting fire departments."
Paul Toner, vice president of the Massachusetts Teachers Association and a GIC commissioner, said the association has been supportive of the GIC program. "Many of our unions have to go to their municipal leadership asking to at the very least look at the GIC," said Toner.
For communities such as Stoneham and Melrose, jumping to the GIC has prevented layoffs. Town Accountant Ronald Florino said Stoneham will save $900,000 when it joins the GIC in July. "I think it prevented quite a few layoffs and program cuts, and for the employees, it gave them a better selection of health plans," said Florino.
The $900,000 also will fill a gap created earlier this year when the state announced it would cut state aid to communities, Florino said. Stoneham will receive $900,000 less in state aid in fiscal 2010.
Florino said the switch to the GIC also would bring a sense of stability to health insurance premiums, which have increased by double digits annually for several years. "We've paid as high as 19 percent in increases," he said.
In Winthrop, where 565 employees and retirees began the GIC program in 2008, "the double-digit increase was the norm for us," said Michael Bertino, finance director and town accountant. From 2001 to 2006, health insurance costs doubled in the town, he said.
In Swampscott, Town Administrator Andrew Maylor said, the town has absorbed an 86 percent increase in health insurance costs over the last seven years. It was looking at a 10 percent increase next year, but in July, it will save $600,000 by joining the GIC.
Already hard hit by the downturn in the economy, the town is planning to lay off 17 employees in the coming months, including 11 teachers. "If we didn't have this $600,000, those employee eliminations would nearly double," said Maylor.
Wenham also has been hard hit by the economic slowdown, and during the last year department heads and other town workers took pay cuts amounting to $165,000. To further cut costs, Town Hall will close on Fridays beginning July 1, and the town also is cutting a police officer and a highway department worker.
Wenham made the decision last fall to join the GIC. Town Administrator Jeff Chelgren thinks the move was key in helping stabilize the town's finances. This year, the town is scheduled to spend $578,000 on health insurance. If it had stayed with its current insurer, it would have paid $618,500 next year. Instead, it will switch to the GIC in July and save more than $100,000.
"It prevented cuts in services, and additional layoffs," said Chelgren.
Not all communities have seen savings through the GIC. For decades, Revere's retired teachers have been part of the program, and earlier in the spring, Revere Mayor Thomas Ambrosino said he wanted to shift the 300 former teachers out of the GIC to the city's own insurance plan. Ambrosino said that move would have saved the city around $200,000 a year. The change was rejected by the Revere City Council.
"This would have cost the retirees much more," said George Rotondo, a Revere city councilor. Rotondo said each retiree would have received a premium increase of more than $600 a year if the city opted out of the GIC.
State Representative Paul J. Donato, who represents Medford and parts of Malden, said he plans to unveil a bill next week that would make it easier for municipalities to join the GIC. The bill would require cities and towns to negotiate health insurance changes with unions within a three- to four-month period, and would move to mediation or arbitration if the municipalities and unions can't agree on a new program.
"Healthcare is the biggest cost in these local communities, and if we can save them millions of dollars, then we're going to be providing them tremendous relief," Donato said.