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

2. 2 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

3. 3 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

4. 4 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

5. 5 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 3 rd tier drugs and new 4th tier drug copays New in-patient and out-patient service copays New MRI/CAT scan procedure copays

6. 6 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

7. 7 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

8. 8 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

9. 9 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

10. 10 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

11. 11 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

12. 12 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”

13. 13 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

14. 14 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

15. 15 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 Retiree Health Insurance Plans

16. 16 GIC Plan Types INDEMNITY – No networks necessary – National coverage with no referrals – Best suited for outside of New England retirees and residents

17. 17 GIC Plan Types PPO – No PCP referrals necessary – Regional networks of physicians limited to New England – Provides an out-of-network benefit

18. 18 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

19. 19 Sample Plan - PPO Plan Design Options TUFTS NAVIGATOR PPO In-NetworkOut-of-Network Primary Care Physician Office Visit $20 copay20% after deductible Specialist Office Visit$25 Tier 1 $35 Tier 2 $45 Tier 3 20% after deductible Calendar Year Deductible$250/$750$400/$800 Emergency Room$100 Inpatient Hospital Care$300 Tier 1 $700 Tier 2 Per admission Max of 4/ calendar year 20% after deductible Outpatient Hospital Care$150 copay/4 per year 20% after deductible Prescription Drugs Retail Mail Order (90 day) $10/$25/$50 $20/$50/$110

20. 20 Sample Plan – Limited Network HMO Plan Design Options Tufts Health Plan Spirit Limited Provider Network, No PCP Referrals Primary Care Physician Office Visit$20 copay Specialist Office Visit$25 Tier 1 $35 Tier 2 $45 Tier 3 Calendar Year Deductible$250/$750 Emergency Room$100 Inpatient Hospital Care$300 Tier 1 $700 Tier 2 Per admission Max of 4/ calendar year Outpatient Hospital Care$150 copay/4 per year Prescription Drugs Retail Mail Order (90 day) $10/$25/$50 $20/$50/$110

21. 21 Sample Plan – Regional HMO Plan Design Options Fallon Select HMO Regional Provider Network PCP Referrals Necessary Primary Care Physician Office Visit$15 copay Specialist Office Visit$25 Tier 1 $35 Tier 2 $45 Tier 3 Calendar Year Deductible$250/$750 Emergency Room$100 Inpatient Hospital Care$250 Per admission Max of 4/ calendar year Outpatient Hospital Care$125 copay/4 per year Prescription Drugs Retail Mail Order (90 day) $10/$25/$50 $20/$50/$110

22. 22 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

23. 23 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) GIC – Eligibility Rules

24. 24 The GIC Option AdvantagesDisadvantages Lower premiumsHigher out-of-pocket expenses Moderate premium increasesLose right to negotiate co-pays *Retiree ProtectionNo Blue Cross products No GIC Life, Vision or Dental * Why do retirees acquire protection under the GIC?...

25. 25 What is Section 19 Coalition Bargaining? Section 19, Coalition Bargaining

26. 26 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.

27. 27 Section 19 Coalition Bargaining The Process: How does a municipality get into the 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

28. 28 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.

29. 29 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.

30. 30 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.

31. 31 Municipal Insurance Legislation Two concepts in play Senate/Special Commission on Municipal Relief House/Massachusetts Municipal Association

32. 32 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.)

33. 33 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

34. 34 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

35. 35 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.

36. 36 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

37. 37 Q & A Andrew Powell Boston Benefit Partners, LLC 617 – 570-9100 extension 224