MMA Legislative Letter on Muni Health Care

Here is the letter of March 30th sent by the MMA to the State Legislature on municipal health care.

Dear Representative,

On behalf of the cities, towns and local taxpayers of Massachusetts, the MMA strongly urges you to
support H. 2964, legislation to provide communities with the tools to manage and control skyrocketing
municipal health insurance costs. Local officials and the MMA have been supporting and calling for reform for seven years, and, unfortunately, the problem has become worse with each passing year.The time for action has come.

We urgently ask you to support reform legislation to give municipalities greater control over their
health insurance costs. This vital reform would simply give local officials the same power the state has to shape employee health plans, and save taxpayers up to $100 million a year. This call for plan design reform has been embraced by municipal leaders from across the Commonwealth, and by leading organizations, including the Massachusetts Taxpayers Foundation, Associated Industries of Massachusetts, the Boston Foundation, the Greater Boston and local Chambers of Commerce, and many others. Every news organization that has editorialized on this issue has supported providing municipalities with full plan design control.

Total municipal aid is $416 million lower than what it was three years ago, and the Governor’s
budget proposes a further $65 million reduction. Communities are in fiscal crisis, and health insurance
reform offers meaningful relief that taxpayers deserve. We cannot afford to keep the unique and special veto power that municipal unions hold over health plan changes – this veto power is costing taxpayers millions of dollars a year, forcing cuts in essential municipal and school services that are crowded out by soaring health costs, and forcing the elimination of teachers, firefighters, police officers and other key employees. Without real reform, taxpayers will continue to pay millions more for health insurance than they should, which will force even more service cuts and layoffs.

The state has been able to moderate the cost of employee health benefits by implementing increases
in co-pays and deductibles, just as the federal government and private employers have done. But
communities have been blocked by the Chapter 32B bargaining mandate, and are trapped in outdated plans that are too costly. When municipal leaders ask for plan design authority, the purpose is to preserve services, protect local taxpayers and prevent the elimination of more police officers, teachers, firefighters and other key workers from local budgets.

H. 2964, sponsored by Rep. Stephen Kulik, would eliminate the double standard in state law, and
give cities and towns the same power the state has to implement necessary cost savings in municipal health insurance plans. This is a very focused and moderate proposal, offered in a spirit of compromise to find meaningful middle ground while achieving meaningful reform. Under the bill, municipalities would still negotiate any changes in the employee-employer premium share, giving municipal unions more bargaining authority than state unions. Municipalities would be able to modernize the health plan design outside of collective bargaining, with a guarantee that all municipal and school employees would still have health plans that are the same or better than what state employees receive, meaning no municipal plan would have higher co-pays or deductibles than the state. Any higher co-pays or deductibles would have to be approved in collective bargaining. The bill simply gives plan design parity to cities and towns.

In short, the legislation saves taxpayers money, protects municipal union jobs, guarantees equity with
state employee health benefits, and still leaves municipal unions with more bargaining power than state
unions. This is a balanced, meaningful, fair and transparent reform.

In the 2000s, the Commonwealth, the federal government and private employers increased co-pays
and introduced deductibles in order to reduce the cost of health plans. This happened without any collective bargaining. However, with cities and towns chained to Chapter 32B, Massachusetts municipalities have been forced to seek union approval to change co-pays and deductibles that were not negotiated in the first place. Any plan design changes that have been instituted at the local level have come at a great cost, in the form of higher pay increases or benefit enrichments that the state, federal and private employers did not have to offer or award. This unfair system has placed a huge burden on local taxpayers, and blocked reasonable efforts to right-size plan design features to match what all non-municipal employees receive. This is why cities and towns respectfully ask for limited plan design authority outside of collective bargaining, and strongly resist efforts to require sharing of any “savings” in the form of other benefit enhancements. Any money that communities save through plan design will be used to preserve services and prevent more layoffs. Job protection is the ultimate benefit of plan design reform.

Cities and towns are locked into overly expensive health plans because they cannot gain the required
union approval to implement cost-savings, while the state has exempted itself from this mandate, and
routinely implements basic decisions on health insurance outside of collective bargaining, such as increasing co-pays and deductibles to lower the cost of their plans. The state must end this double standard by giving cities and towns the same authority to design health insurance plans outside of collective bargaining. We estimate that most cities and towns would be able to lower their health insurance costs by 4-6%, or as much as $100 million statewide. This is fiscal relief that taxpayers deserve, and employees would share in this savings because the premiums they pay would be lower and their jobs would be protected.

Municipal Union “Framework” Falls Short – No Reform and Little Taxpayer Relief
Earlier this month, several municipal unions wrote to you claiming that they were offering a proposal
to address this issue. Unfortunately, their effort is nothing more than a repackaged framework that includes no new proposals and little in the way of reform or taxpayer relief. Their framework would retain full collective bargaining over plan design changes through “Section 19” coalition bargaining, require at least 50 percent of any savings or avoided costs to be redirected to increase health or other employee benefits, impose binding arbitration that would allow an outside unaccountable arbitrator to impose costs and health plans on cities and towns, even though the voters repealed binding arbitration as unaffordable in 1980, and then sunset the entire framework after 3 years and place all future health insurance matters in full collective bargaining.

Here’s how their “proposal” falls short:

• Section 19 coalition bargaining is a flawed process that has helped to create this problem – the
coalition bargaining requirement has made it impossible for many communities to join the GIC, and
has blocked common-sense proposals to update co-pays and deductibles to match what the
Commonwealth of Massachusetts offers its employees. A voluntary Section 19 model has existed for
many years, but only a few communities opted in because it gives one or two unions the power to
block any change. Those who opted in have had a considerably mixed experience and most are very
unhappy. For example, the Town of Framingham has a home rule petition to escape from Section 19
coalition bargaining because it has been impossible to achieve relief, and the community pays more
for insurance than nearly any other city or town.

• Further, a Section 19 mandate would be exceedingly harmful to those communities that participate in
successful regional purchasing groups. Approximately 150 communities have joined regional groups
(such as the Hampshire County group in western Massachusetts, the West Suburban group in the
Metrowest area, the Mayflower group in Plymouth County, the Cape Cod group and others), and any
measure to require that participating communities engage in Section 19 coalition bargaining regarding plan design changes would be impossible to implement – imagine 40 communities in one region trying to reach an identical agreement with over 200 different unions.

• We ask that you reject the demand for diverting any portion of the savings to other benefits. Because health care costs are rising every year, most of the taxpayer relief will come in the form of avoided cost increases, and will not generate revenues or money that can be used to pay for additional benefit enhancements – besides communities will direct the financial relief to protecting municipal jobs and services, and diverting this savings to other benefits would only increase layoffs. That’s why the
state has never bargained over or offered additional benefits or wages as part of any GIC plan design
changes.

• And please don’t be misled by the modest-sounding description of a “neutral individual” who would
make the final decision on plan design changes and other benefit enhancements that the unions seek.
This is binding arbitration. Binding arbitration was repealed by the voters as part of Proposition 2½ because it was unaffordable for taxpayers. Even voluntary binding arbitration carries great risk, as
evidenced by the outrageous decision last year in the Boston firefighter contract dispute. Binding
arbitration allows an unelected, unaccountable person to impose costs on local taxpayers – a failed
system that should not be imposed on local government.

• Further, the municipal unions’ plan also sets a dollar benchmark for health plans that would block
reform and relief in many parts of the state, such as western Massachusetts, the south coast and other regions where hospital and medical costs are below greater Boston levels. The only real benchmark that is viable and will lead to real reform is based on the co-pays, deductibles and other benefits of the health plans – making sure that the plans are comparable.

• We also oppose the demand that would outlaw mid-year plan changes by the Commonwealth’s GIC,
and give labor 50% of the vote on the GIC board, essentially handing over the power to block any
change or recommendation regarding state employee health plans. This element of their proposal would impose unprecedented management restrictions on the Commonwealth.

The bottom line is that the framework is not a compromise, and it does not offer the necessary reform. The proposal would actually expand union leverage in health insurance bargaining, would not provide local taxpayers with the relief they need, and would force communities to cut services or lay off employees to fund the added benefits and costs.

Communities are experiencing extreme fiscal distress. This is the time for real reform and real action. This is the time to pass plan design reform – the most flexible, transparent, and effective way to immediately achieve meaningful and lasting reform and savings. Further delay will only serve to hurt taxpayers, municipal employees and the public. We ask you to support this straightforward and necessary measure.

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