Heatlh insurance costs savings, GIC Bill

On Wednesday, the Public Service Committee (a joint committee of the House
and Senate) held a lengthy hearing on the pending bills that would allow
municipalities to purchase employee health insurance through the state’s
Group Insurance Commission.

Through greater bargaining power and strong administration, the Group
Insurance Commission has been able to achieve much lower growth rates in
health insurance costs than most municipalities, and the state’s
per-employee costs now appear to be substantially lower than costs for many
municipalities. State employees nonetheless have a good range of options
for high quality health insurance plans.

My earlier concern about these bills, expressed in a previous post, was that
they might not do enough to move communities towards the GIC — reservations
on both the labor and management side about the bargaining mechanics would
hamper progress. However, I am convinced now that the absolute cost savings
are substantial enough that many municipalities will make the move and
achieve substantial benefits. There are many administrative details to be
addressed in each move, so it is not practical that every community move at
once anyway.

I am also convinced that the balance between labor and management bargaining
concerns which was struck by Representative Kaprielian, Senator Moore and
the others involved in developing the bill (the Governor’s bill is
essentially the same as the task force bill) is politically delicate and
that the bill has its chance of moving forward as is.

I listened to the full hearing on Wednesday and testified towards the end,
responding to some of the concerns raised during the hearing and expressing
strong support for the bill.

The text of my written testimony appears below.

As always, I appreciate questions and comments by e-mail or phone
(617-771-7274). Note that if you receiving this post as a member of the
education group, your reply to this e-mail will reach the whole group.

Best regards,

/w.

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I appear today to testify in support of House Bill 2601 introduced by
Representative Kaprielian, and in support of the Governor’s version of the
same bill. Both of these bills would enable municipalities to purchase
health insurance for their employees through the Group Insurance Commission.

I testify as a Selectman in Belmont and as the representative of the 24th
Middlesex District — Belmont, North Cambridge and East Arlington.

This legislation is important and useful and I urge the committee to report
it swiftly so that municipalities can begin to take advantage of it. Health
insurance is an exceedingly difficult management problem for most
municipalities.

The simplification of the bargaining and management of health insurance for
municipalities through this bill is a great practical benefit for
municipalities. It will allow municipal leaders to focus on managing the
cost-effective delivery of municipal services. Additionally, for many
municipalities it will allow substantial cost-savings.

The legislation represents a compromise between concerns of municipal
management and concerns of municipal unions. On the one hand, it requires
that the transition to the Group Insurance Commission occur through the
coalition bargaining process created by Section 19 of Chapter 32B. The
coalition bargaining mechanism is perceived by many municipal labor advisers
as unwieldy. As a result, it so far has been adopted by only a handful of
communities. Once a municipality votes its way into coalition bargaining,
it cannot withdraw or change plan terms without a vote of 70% the unions
(weighted by membership). Two or three larger unions will call the shots on
all health insurance changes in most municipalities. Additionally, under
coalition bargaining a municipality may not negotiate different agreements
with unions as to the share of the costs to be born by unions, which it may
do, as to HMO plans, outside the coalition bargaining framework.

On the other hand, by entering into the Group Insurance Commission
framework, unions lose the ability to negotiate co-pays and deductibles and
other features of plan design. In today’s world, outside the GIC framework,
these items are subject to collective bargaining for municipal employees.

In effect, by entering coalition bargaining, management gives up the ability
to further negotiate cost share (although some adjustments may be possible
during the negotiation to enter coalition bargaining) and labor gives up the
ability to control benefit specifics. I am concerned that in some
municipalities these reciprocal losses of control may prove unacceptable to
both parties.

However, the very substantial cost savings available through the Group
Insurance Commission may suffice to create the necessary conditions for a
successful transition for many municipalities. I can tell you that the
potential cost savings for the Town of Belmont are very substantial.

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