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Midwest Pension Upheaval May Reverberate in Massachusetts

Posted by Christopher Geehern on Dec 5, 2013 2:15:00 PM

Two seismic developments from the nation’s heartland this week may expand the ability of Massachusetts and its cities and towns to address a looming crisis totaling $83 billion in unfunded pension and retiree health-care obligations.

DetroitFederal Judge Steven Rhodes ruled Tuesday that public employee pensions will not be protected as the financially struggling City of Detroit initiates a Chapter 9 bankruptcy. The ruling raised the prospect that emergency City Manager Kevyn Orr (right) may seek to reduce the pensions of 23,000 retirees in an effort to address an unfunded pension liability of $3.5 billion.

Several hours later, Illinois lawmakers approved an historic overhaul of the state's government-worker pension system that would raise the retirement age for many state workers and scale back the size of - and even skip - some annual cost-of-living increases. In return, the state would put a few hundred dollars into most workers' pockets by slightly reducing the amount of money they have to chip in from their paychecks.

Unions representing public employees plan to challenge both developments in court.

All this matters to Massachusetts because Bay State taxpayers are currently saddled with $37 billion in unfunded pension liabilities and $46 billion in unfunded health-care benefits. A report issued in October by the Massachusetts Taxpayers Foundation concludes that Massachusetts and its cities and towns have set aside just 43 percent of the money they need to pay benefits already promised to current employees and retirees.

“The troubling reality is that unfunded pension liabilities have grown over the past decade despite the  enormous sums that state and municipal governments have contributed to their pension funds,” the report states.

Employers concerned about the financial stability of the communities in which they operate have become increasingly alarmed at the largely hidden problem building underneath public retirement systems. The fear is that escalating pension funding requirements will eventually impede the ability of cities and towns to provide the key services – education, public safety, roads and bridges – needed to maintain economic growth.

Analysts believe the Detroit decision and Illinois vote are unlikely to touch off a rush of bankruptcy filings by municipalities, but will undoubtedly give cities and states newfound leverage in negotiating pension benefits outside of court proceedings. At the very least, it’s a rare opportunity to address an issue that few people want to talk about in a commonwealth where nearly one-third of all state, municipal and other retirement boards are less than 60 percent funded.

City Manager Orr in Detroit provides a sobering warning about the alternative: “There’s not enough money to address the situation no matter what we do.”

Topics: Massachusetts state budget, Municipal Reform

Senate Municipal Plan Design Language Falls Short – Undercuts Savings

Posted by John Regan on Jun 14, 2011 12:31:00 PM

describe the imageAssociated Industries of Massachusetts is asking lawmakers to adopt the House version of a bill giving cities and towns the power to control health insurance costs.

AIM said in a letter to budget conferees that the Senate version of the municipal health measure would undermine the estimated $100 million in savings promised by the bill.

AIM's concern about the Senate bill was confirmed this morning by a study showing that:  “Dozens of communities across the state would lose the benefits of municipal health care reform under the Senate’s provision requiring that municipal contributions for retirees be the same as for active employees, according to a preliminary analysis by the Massachusetts Taxpayers Foundation. The Foundation has identified 50 municipalities and regional school districts that would be impacted, with that number likely to be as high as 100 when all communities have been analyzed.”

Click here to read the MTF analysis.

AIM and Massachusetts employers generally support municipal health reform because the spiraling cost of health insurance is eroding the ability of city and town governments to deliver educational, public safety and other services upon which the economy depends.

Topics: Associated Industries of Massachusetts, Health Care Reform, AIM, Municipal Reform, Controlling Health Care Costs, Senate Budget

Massachusetts Senate Approves Budget with No Tax Increases

Posted by Brad MacDougall on May 27, 2011 1:40:00 PM

The Massachusetts Senate yesterday finalized a Fiscal Year 2012 budget that includes no tax increases and provides cities and towns the authority to manage their health insurance costs.  The Senate and House of Representatives will now negotiate the final budget proposal through a conference committee.

AIM commends Senate President Therese Murray and Steven Brewer, Senate Chair of the Ways and Means Committee, for taking steps to encourage job creation by passing a fiscally responsible budget.  Brewer indicated that lawmakers faced significant challenges as the economy continues its sluggish recovery.

“The absence of $1.5 billion in federal stimulus funds and growth in non-discretionary costs leave us with a budget gap of $1.9 billion. Once again, we will utilize a balanced approach to address this shortfall, but deep cuts to services and programs cannot be avoided. We must continue to do more with less,” Brewer said.”

Broad budget agreement between the Senate and House virtually assures that the commonwealth will navigate its fourth year of fiscal crisis without a tax increase. The two chambers also agree on creating a trust for the state’s flagship worker training program, a signal that lawmakers agree with AIM and employers that the program should be removed from the uncertainty of annual budget deliberations.

“Placing the Workforce Training Fund into a trust will create the kind of predictability that employers need to improve the skills of Massachusetts workers. We are gratified that the Senate included this provision in its budget proposal,””said Richard C. Lord, President of AIM and chair of the WTF Advisory Board. 

Other key employer issues for the conference committee include:

  • Municipal plan design: Both House and Senate versions would leave cities and towns to continue negotiating with unions over the percentage of premiums paid by employees. Ultimately, the lawmakers estimate that both reform plans would save approximately $100 million per year.

  • The Senate budget does not include a provision of the House plan that would limit the onerous 2008 treble damages law to willful violations of the state wage and hour statute. AIM looks forward to continued discussions with the Legislature on modifying treble damages.

Lord said AIM will continue to review the House and Senate budget proposals and begin work with the members of the conference committee and leadership of both branches regarding the issue that impact employers.

 

Topics: Municipal Reform, Budget, Massachusetts senate

Senate Budget Includes Municipal Health Reform, No Tax Increases

Posted by John Regan on May 18, 2011 1:51:00 PM

The Massachusetts Senate unveiled a proposed Fiscal Year 2012 state budget this morning that includes no tax increases; moves the Workforce Training Fund into a trust; and makes modest changes to a House of Representatives plan to give cities and towns the authority to manage their health insurance costs.

Senate budgetThe $30.3 billion spending blueprint seeks to close an estimated $1.9 billion budget deficit through $1.5 billion in spending reductions - including a $65 million reduction in aid to cities and towns – coupled with $440 million in one-time revenues. The document eliminates 277 budget items and level-funds 221 others.

Amendments to the budget were due on Friday and AIM continues to review them. The association will communicate with members this week about any major issues contained in the amendments.

“As difficult as the recent budgets have been, the fiscal year 2012 budget presents a new set of challenges,” said Senator Steven M. Brewer, Chair of the Senate Ways and Means Committee.

“The absence of $1.5 billion in federal stimulus funds and growth in non-discretionary costs leave us with a budget gap of $1.9 billion. Once again, we will utilize a balanced approach to address this shortfall, but deep cuts to services and programs cannot be avoided. We must continue to do more with less.”

Broad agreement between the Senate budget proposal and the House blueprint approved two weeks ago virtually assures that the commonwealth will navigate its fourth year of fiscal crisis without a tax increase. The agreement on creating a trust for the state’s flagship worker training program also signals that lawmakers agree with AIM and employers that the program should be removed from the uncertainty of annual budget deliberations.

“Placing the Workforce Training Fund into a trust will create the kind of predictability that employers need to improve the skills of Massachusetts workers. We are gratified that the Senate included this provision in its budget proposal,” said Richard C. Lord, President of AIM and chair of the WTF Advisory Board.

The Senate plan for municipal health reform differs from the House version, which would allow municipal officials to set health-insurance co-pays and deductibles unilaterally after a 30-day negotiating period. The Senate proposes that if managers and employees cannot negotiate an agreement during that window, the health plan changes would be handed over to a three-person review panel made up of one labor representative, one management representative and a third mutually selected person from a list provided by the Secretary of Administration and Finance of professionals with expertise in dispute resolution, municipal finance, or municipal health insurance.

The review board would be required to approve any health insurance plan changes proposed by management that do not exceed the benefits received by state employees.

The Senate plan would also require more of any premium savings generated by health plan changes to go to municipal workers – one-third of savings in the first year versus 20 percent under unilaterally imposed changes in the House bill.

Both versions would leave cities and towns to continue negotiating with unions over the percentage of premiums paid by employees. They would also force all eligible retirees to enroll in Medicare.

Lawmakers estimate that both reform plans would save approximately $100 million per year.

AIM and Massachusetts employers generally support municipal health reform because the spiraling cost of health insurance is eroding the ability of city and town governments to deliver educational, public safety and other services upon which the economy depends. A recent report by the Massachusetts Business Alliance for Education found that virtually all of the increased state funding for schools during the past decade has been diverted from classrooms to pay for soaring health benefits.

Massachusetts’ 351 cities and towns spent $3.297 billion more on health insurance from 2001 to 2010 than they would have spent had they purchased coverage through the Group Insurance Commission, which buys insurance for state employees. The Commission limited annual premium increases to a modest 6.4 percent during that time because it is able to make plan design changes outside of collective bargaining.

The Senate budget does not include a provision of the House plan that would limit the onerous 2008 treble damages law to willful violations of the state wage and hour statute. AIM looks forward to continued discussions with the Legislature on modifying treble damages.

Topics: Associated Industries of Massachusetts, Municipal Reform, Budget, Massachusetts senate, Massachusetts Workforce Training Fund

Health Plan Design Could Have Saved Massachusetts Cities $3.3 Billion

Posted by John Regan on May 10, 2011 9:45:00 AM

Massachusetts cities and towns could have saved $3.3 billion on health insurance premiums during the past decade that could have been used for road construction, tax relief or retaining the jobs of some 66,000 teachers and police officers, according to a Massachusetts Taxpayers Foundation (MTF) report published this morning.

Municipal reformMTF reports that Massachusetts’ 351 cities and towns spent $3.297 billion more on health insurance from 2001 to 2010 than they would have spent had they purchased coverage through the Group Insurance Commission, which buys insurance for state employees. The Commission limited annual premium increases to a modest 6.4 percent during that time because it is able to make plan design changes outside of collective bargaining.

The report underscores the importance of legislation passed in late April by the House that would allow cities and towns the same ability as the state to manage plan design. Employers care about municipal health care costs because the more money that cities and towns must spend on health premiums, the less they spend on schools, public safety, roads, bridges and other services that impact the Massachusetts economy.

The full report is available on the Taxpayers Foundation Web site, www.masstaxpayers.org. The site allows visitors to review the potential savings for each city and town, as well as by Senate district.

“The results of the MTF report are staggering,” said Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts.

“Cities and towns are losing 6,600 jobs each year that they do not have to lose. It’s time to give municipal governments the same tools to manage health insurance costs that private employers take for granted.”

More than 90 percent of Massachusetts cities and towns saw health insurance costs grow at much faster rates than the Group Insurance Commission. Every Senate district would have realized at least $10 million in savings over that period.

Publication of the report comes two weeks after the Massachusetts House of Representatives included in its proposed Fiscal Year 2012 budget a provision that would give municipal officials the authority to set health-insurance co-pays and deductibles outside of collective bargaining. Cities and towns would continue to negotiate with unions over the percentage of premiums paid by employees.

The proposal also forces all eligible retirees to enroll in Medicare, a plan endorsed by AIM, Governor Deval Patrick and others.

Analysts estimate that the reform would save cash-strapped cities and towns approximately $100 million in the fiscal year that begins July 1.

The proposal is now pending before the Massachusetts Senate, where President Therese Murray has expressed some reluctance to reduce the ability of workers to bargain over their health care plans.

A recent report found that Massachusetts cities and towns spend 37 percent more to provide health insurance to their employees than the amount spent by private companies as measured by the AIM Benefits Survey.

The report by The Boston Foundation and MTF, entitled Municipal Health Plans: Gilded Benefits from a Bygone Era, concluded that municipalities face a deepening financial crisis because of generous health insurance benefits under which employees pay minimal co-payments or deductibles. The result: some cities and towns face significant layoffs because they must use more than 20 percent of their budgets to buy health insurance for employees and retirees.

Topics: Municipal Reform, Health Care Costs

House Vote Gives Massachusetts Cities, Towns Ability to Maintain Jobs

Posted by John Regan on Apr 27, 2011 11:05:00 AM

The Massachusetts House of Representatives voted last night to give Bay State cities and towns the ability to manage soaring health insurance costs that threaten the jobs of thousands of teachers, firefighters and police officers.

Municipal Health CostsHouse members voted 113 to 42 to give municipal officials the authority to set health-insurance co-pays and deductibles outside of collective bargaining. Cities and towns would continue to negotiate with unions over the percentage of premiums paid by employees.

AIM and the Massachusetts employer community strongly support the House vote, which is expected to save cash-strapped cities and towns approximately $100 million in the fiscal year that begins July 1. Municipal leaders are expected to use that savings to maintain jobs in critical areas such as schools, public safety and public works.

The proposal also forces all eligible retirees to enroll in Medicare, a plan also endorsed by AIM, Governor Deval Patrick and others.

The House action underscores a new economic reality for organized labor - unions can no longer hold onto gold-plated insurance benefits while the commonwealth struggles with a persistent fiscal crisis and private-sector workers and employers face the choice of managing costs or going out of business.

“The Massachusetts House has provided a breath of fresh air by taking a courageous vote to help cities and towns provide the services upon which we all rely. Every employer and citizen who cares about the financial stability of her or his community owes a debt of gratitude to Speaker Robert DeLeo, Ways and Means Chairman Brian Dempsey and every member of the House who voted for this measure,” said Richard C. Lord, President and Chief Executive Officer of AIM.

The municipal health insurance reform will move to the Massachusetts Senate as part of the Fiscal Year 2012 bill expected to be finalized by the House this week. Senate President Therese Murray has expressed some reluctance to reduce the ability of workers to bargain over their health care plans.

The House passed its reform with two concessions to public-employee unions.

First, workers would have 30 days to discuss proposed health-insurance changes with municipal officials, though cities and towns could still impose the changes unilaterally at the end of that period. The reform also increased from 10 to 20 percent the share of savings from health care changes that will go to union members for one year.

“This issue is about protecting services, protecting jobs and protecting quality health care for municipal employees and this reform achieves all of those goals,” Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, told State House News Service. He noted that municipal employees would still retain a greater degree of collective bargaining power than state employees enjoy in the Group Insurance Commission.

A recent report found that Massachusetts cities and towns spend 37 percent more to provide health insurance to their employees than the amount spent by private companies as measured by the AIM Benefits Survey.

The report by The Boston Foundation and the Massachusetts Taxpayers Foundation, entitled Municipal Health Plans: Gilded Benefits from a Bygone Era, concluded that municipalities face a deepening financial crisis because of generous health insurance benefits under which employees pay minimal co-payments or deductibles. The result: some cities and towns face significant layoffs because they must use more than 20 percent of their budgets to buy health insurance for employees and retirees.

The report’s findings:

  • The average municipal family plan premium of $20,925 is $5,600 higher (37 percent) than the average private sector family premium, 33 percent more than the federal plan premium, and 21 percent more than the state’s Group Insurance Commission plans.
  • In the municipal plans, the average co-payment for a visit to a primary care physician (PCP) is $11. State, federal, and private sector employees on average pay almost twice as much for visits to a primary care physician. Specialist visits averaged $14 for municipal workers, while the co-pays were a minimum of $20 in the GIC plans, $30 for federal workers, and averaged $20 for private sector HMO plans.
  • Municipal employees pay less for generic prescriptions than other employees.
  • Nine of the 14 communities had no co-pays for most other medical services, including high-tech imaging, outpatient surgery, and inpatient hospitalization. The other five communities have no co-payments for high-tech imaging but have co-payments averaging $128 and $228 for outpatient surgery and inpatient hospitalization. State, federal, and private sector workers pay at least $75 for high-tech imaging, $150 for outpatient surgery, and $250 for an inpatient hospitalization.
  • No municipal plan studied includes a deductible. In the other public and private plans, members are responsible for a minimum deductible of $250 for individuals and $700 for families.

 

Topics: Associated Industries of Massachusetts, Municipal Reform, Health Care Costs, Massachusetts House of Representatives

Generous Health Plans Strangle Massachusetts Cities, Towns

Posted by Eileen McAnneny on Apr 5, 2011 10:06:00 AM

Financially strapped cities and towns in Massachusetts spend 37 percent more to provide health insurance to their employees than the amount spent by private companies as measured by the AIM Benefits Survey, according to a report released this morning.

Municipal Health InsuranceThe report by The Boston Foundation and the Massachusetts Taxpayers Foundation, entitled Municipal Health Plans: Gilded Benefits from a Bygone Era, concludes that municipalities face a deepening financial crisis because of generous health insurance benefits under which employees pay minimal co-payments or deductibles. The result: some cities and towns face significant layoffs because they must use more than 20 percent of their budgets to buy health insurance for employees and retirees.

The study urges state lawmakers to support moves to allow municipal officials to negotiate health insurance plan design outside of collective bargaining. AIM has filed a bill that would permit those negotiations, while Governor Deval Patrick and other have filed slightly different reform proposals.

“Employers care about municipal health care costs because the more money that cities and towns must spend on health premiums, the less they spend on schools, public safety, roads, bridges and other services that impact the Massachusetts economy,” said John Regan, Executive Vice President of Government Affairs at AIM.

The new report compares health insurance benefits in 14 Massachusetts municipalities with two plans offered to state employees, the Federal Employees Health Benefit Plan and statistics on private coverage taken from the 2010 AIM Benefits report, Trends and Practices Among Massachusetts Employers. Among the comparisons:

  • The average municipal family plan premium of $20,925 is $5,600 higher (37 percent) than the average private sector family premium, 33 percent more than the federal plan premium, and 21 percent more than the state’s Group Insurance Commission plans.

  •  In the municipal plans, the average co-payment for a visit to a primary care physician (PCP) is $11. State, federal, and private sector employees on average pay almost twice as much for visits to a primary care physician. Specialist visits averaged $14 for municipal workers, while the co-pays were a minimum of $20 in the GIC plans, $30 for federal workers, and averaged $20 for private sector HMO plans.

  • Municipal employees pay less for generic prescriptions than other employees.

  • Nine of the 14 communities had no co-pays for most other medical services, including high-tech imaging, outpatient surgery, and inpatient hospitalization. The other five communities have no co-payments for high-tech imaging but have co-payments averaging $128 and $228 for outpatient surgery and inpatient hospitalization. State, federal, and private sector workers pay at least $75 for high-tech imaging, $150 for outpatient surgery, and $250 for an inpatient hospitalization.

  • No municipal plan studied includes a deductible. In the other public and private plans, members are responsible for a minimum deductible of $250 for individuals and $700 for families.

Topics: Municipal Reform, Health Care Costs, Health Insurance

AIM Testifies at Packed Hearing on Municipal Health Costs

Posted by Christopher Geehern on Mar 8, 2011 12:46:00 PM

AIM Associate Vice President Brad MacDougall testifyed at a packed Beacon Hill hearing today in favor of an AIM bill that would allow municipal officials to negotiate health insurance plan design outside of collective bargaining.

The hearing at Gardner Auditorium drew some 300 spectators to comment on competing proposals to help the 351 cities and towns of Massachusetts manage the crushing cost of providing health insurance for employees and retirees. Governor Deval Patrick, the business community, municipal government officials and organized labor have all proposed strategies to address the crisis.

Absent meaningful reform, cities and towns will find themselves swallowed by accelerating health care premiums that are already diverting scarce money from the schools, police, fire, roads and bridges upon which business depends. Rising health premiums consumed two-thirds of all increases in state spending between FY 2000 to FY 2010 and are also diverting desperately needed state education funding from the classrooms where the future of our economy now sits.

"Health care costs are unsustainable," Salem Mayor Kim Driscoll told the hearing minutes ago.

AIM’s Brad MacDougall is at the hearing. Follow his updates on Twitter @aimbusinessnews.

Topics: Associated Industries of Massachusetts, AIM, Municipal Reform, Health Care Costs

Business Backs Municipal Officials in Bid to Control Health Costs

Posted by John Regan on Mar 7, 2011 10:45:00 AM

The spiraling cost of health insurance that threatens the economic future of Massachusetts is simultaneously eroding the ability of city and town governments to deliver educational, public safety and other services upon which that economic future depends.

Municipal Health ReformThat’s why Associated Industries of Massachusetts will testify at a legislative hearing tomorrow in favor of a bill we filed - H.2457, An Act Relative to Municipal Health Insurance Reform – that would allow municipal officials to negotiate health insurance plan design outside of collective bargaining.  AIM and a coalition of business groups called Mass Reform First believe that H.2457 provides meaningful short-term relief and long-term cost stability for municipal governments working to provide affordable and accessible care for their employees and retirees.

Absent meaningful reform, the 351 cities and towns in Massachusetts will find themselves swallowed by accelerating health care premiums that are already diverting scarce money from schools, police, fire and the maintenance of roads and bridges. Rising health premiums consumed two-thirds of all increases in state spending between FY 2000 to FY 2010 and are also diverting desperately needed state education funding from the classrooms where the future of our economy now sits.

Several communities have even taken the nearly unthinkable step of borrowing money to meet their health insurance obligations.

H.2457 proposes two important legislative reforms to help local governments control the cost of health insurance and preserve essential services:

  • Give local officials the power to design their health insurance plans outside of collective bargaining.
  • Require by statute that all eligible local retirees enroll in Medicare as their primary source of health insurance coverage.

The potential savings from these two changes dwarf those from all other municipal relief proposals.

The business community supports our municipal communities in this matter because employers realize that the financial underpinnings of the health care system must change to ensure the survival and growth of both private and public sectors. Four years after the passage of the landmark Massachusetts Health Reform Act, virtually everyone agrees that the Massachusetts health care market is unsustainable without fundamental changes to the way companies and consumers purchase medical services.

No one knows that better than the Massachusetts employers struggling to provide decent health insurance coverage to their workers in the face of 20 percent, 30 percent and 40 percent annual premium increases. A staggering 97 percent of AIM member employers who responded to a recent survey identified the cost of health care as the primary impediment to economic growth and opportunity in the commonwealth.

AIM commends the Legislature for addressing this issue early in the legislative session.  We also credit the governor for adding a sense of urgency to the issue and affirming our shared goal of lowering health care costs.  The time is now to offer relief and we cannot let the fact that the solutions are hard to implement or disruptive of the status quo be an excuse for not forging ahead to resolve the health care cost crisis.

Topics: Massachusetts Legislature, Associated Industries of Massachusetts, AIM, Municipal Reform, Health Care Costs

Escalating Health Costs Leave Towns Borrowing to Pay Medical Bills

Posted by Brad MacDougall on Jan 5, 2011 2:05:00 PM

Cities and towns that face escalating health insurance costs and a lack of flexibility to design health insurance plans have reached a crisis point that is forcing some to borrow money to cover their medical bills, according to an article by State House News Service published today in the Boston Globe.

Municipal Health InsuranceThe article reports that Governor Deval Patrick is weighing a bill to permit Orange, a western Massachusetts town of fewer than 8,000 residents, to borrow $445,000 to cover health care claims and pay the money back over the next five years. The bill, passed by lawmakers last week, would spare Orange further cuts to its $16 million budget, said the town’s state representative, Christopher Donelan. He added that local officials opted to borrow rather than cut the budget because residents recently endorsed a property tax increase to support the town’s landfill and library.

The plight of Orange and other communities underscores the importance of two AIM priorities in 2011: controlling the cost of health insurance and providing municipal leaders with the tools they need to manage the rising premium costs that are draining money from education, public safety and other public services. AIM is leading a coalition of 35 business organizations and chambers of commerce that support giving municipal officials the ability to develop efficient health plan designs outside of collective bargaining.

Municipal health insurance costs have increased at double-digit rates since 2000, more than five times the rate of inflation. Premiums will grow from just 6 percent of municipal budgets in 2001, to a projected 20 percent by 2020.  The failure to realize projected savings through tools such as plan design will inevitably result in layoffs and cuts in local services such as education.

Massachusetts House Speaker Robert DeLeo and Senate President Therese Murray both indentified municipal health insurance reform as a priority during their initial legislative speeches today. Speaker DeLeo said he favors forcing cities and towns to join the state Group Insurance Commission.

 “The reality is that municipal employee health insurance is a budget-buster which puts untenable strain on municipal services. Unless cities and towns can find health insurance at the same or lower cost than the GIC, we should force them to join -- bringing them under the more efficient and cost effective state system,” he said.

Topics: Associated Industries of Massachusetts, AIM, Municipal Reform, Health Care Costs, Health Insurance

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