The GIC & Mass. Cities and Towns…
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A few weeks ago, the Mass. Taxpayer’s Foundation issued a report that said that cities and towns in Massachusetts could save a fortune on health insurance premiums - BILLIONS OF DOLLARS - if they joined the state’s Group Insurance Commission, which administers health insurance benefits for state workers and retirees, and their families. I’m not sure I’d go that far.
The GIC does a great job on behalf of its enrollees, but a big piece of the health care costs of any group is a function of the size and relative health of the group. That’s why I think the GIC can be a great idea for smaller communities that don’t have enough healthy people to offset the costs of a few who are very sick, and don’t have the time to invest in managing their health plan benefits full-time, while larger communities may have the talent and the size to make it work on their own.
I’m not sure where the cut-off point on this would be, but let’s call it 500 lives. If a community has 500 or fewer covered lives, they should be taking a good hard look at joining the GIC RIGHT NOW. Between 500 and 1,000, it’s probably a function of individual circumstances, town expertise, and time – and now would be a good time to check this out. If a community has over 1,000 lives, or is part of a cooperative group that has over 1,000 lives, I’m not sure it’s worth it - but as I said before – every case is a bit different.
If a community wants to pursue this option for 7/1/08, they need to have all their paperwork in and done by October 1st. That’s days from now, and there’s a lot to do. The first move requires securing the support to make this change from labor unions representing at least 70% of the membership of the town’s union employees. Why? Because right now, each local union has the ability, by majority vote of the membership, to sign off on any material change in their health benefit plans. The 70% requirement retains some piece of their existing position, but moves it from each union on its own to representational status across the town instead. For example, the teachers’ leadership vote represents whatever share of the town’s workforce is made up of teachers. If the teachers make up 50% of the unionized workforce, then the vote of the teachers’ leadership represents 50% of the union votes. If the teachers vote “yes,” then each town would need another 20% of the town’s union membership – via their leadership – to sign on. If the teachers vote “no,” well – there’s no way to get to 70% if 50% says “no.”
In addition, the GIC offers many different benefit plan designs. It’s a very big purchaser (more than 280,000 covered lives, including its retiree population). Simply figuring out what the specific, detailed differences between all the available GIC plan designs and every interested city or town’s benefit plan designs might be is a major task. The GIC has made a major effort to inform interested parties and also has information about this available on its website at www.mass.gov/gic.
Folks like Harvard Pilgrim are more than happy to work with any community - and any union in any community - that would like to do the work required to explore this option. But again - we/they need to start now if we/they are going to meet the October 1st deadline established by the Commission for signing up. Is this all doable? Yes, of course, and for the towns with less than 1,000 lives, I would argue it’s imperative that they take a hard look at it starting today. And for what it’s worth, Harvard Pilgrim stands ready to help. But time’s a wastin’.
Charlie - What will this do to the bottom lines of companies like HPHC, Tufts and especially BCBS that currently insure the towns and cities that would be joining the GIC at these much lower premiums? Currently, towns and cities have deals largely with the local insurers (like the City of Boston with HPHC) and if they move into the GIC they will choose from many offerings at lower premiums. I would think there is the possibility that plans like HPHC would end up covering many of the same people at much lower premiums which would cut into your already very thin operating margins. These new GIC members will end up getting largely the same amount of healthcare at a lower premium cost and the plans may be footing the bill. I agree it is not billions but it is a significant amount.
Sean - I’m not sure it’s that big an issue for us within the GIC if we’re just talking about smaller communities. If you put a few 500-1,000 life groups into the GIC’s 280,000 member risk pool, the net/net effect on those of us who already do business with the GIC is pretty small - for three reasons. First, a small group of people - unless they’re all incredibly expensive - is not going to change the over-arching medical expense of a really, really big group like the GIC. That’s, in many ways, the primary opportunity in this for smaller communities. Second, it does cost the plans more to maintain operating relationships with four or five groups than it costs to manage one. We will save something, on the margin, by having individual groups join an existing account - like the GIC. Third, While the GIC offers a set of relatively complex products, offering one complex product to the GIC is probably less complex for the plans administratively than offering five - or six - or ten different plans to five or ten different customers.
As far as the financial impact of accounts migrating into the GIC is concerned - and how that affects the carrier who has the existing account on a stand-alone basis - I really think that’s a case specific issue. I can tell you that I believe most of our municipal business is with larger communities - and as I said in my posting, I’m not sure they’d save much by moving into the GIC. They get a pretty good deal from us already. Does that sound too self-serving?
As a Quincy teacher should I promte the GIC to my people? Thank You!
Two problems with the new law enabling cities and towns to join the GIC: it takes a very high percentage of the union votes to approve, and the town must first accept coalition bargaining. This law is set up (by design) to guarantee that acceptance of the GIC by the city or town will be very expensive in terms of other concessions given up at the bargaining table. No one at the state level really speaks for the cities and towns–and we wonder why local finance is so dismal.