The GIC and Health Care Reform…
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In response to one of my other posts, Kevin D. - a MA-based broker - asked two questions that deserved a broader response. The first one was about state legislation in Massachusetts that would make it possible for local communities that currently purchase health insurance on their own to join the Group Insurance Commission (GIC), the health insurance purchasing authority for state government employees and retirees and their families. He asked if anyone has done an actuarial analysis to determine if cities and towns would save money joining the GIC, or if the presumed savings is simply based on differences in the health status of various employer groups (i.e., a city or town with sicker employees and retirees might have higher costs than the GIC-and then have the same costs if they were part of the GIC).
I think the answer to this question is no. No one has done an actuarial analysis that proves that cities and towns that join the GIC will save money. However, there are three other reasons why many cities and towns will probably save money if they join the GIC and have their health insurance purchased for their employees and retirees through this authority. First of all, the GIC is very big - one of the largest employer groups in the state-so if someone in the GIC gets really sick and incurs hundreds of thousands of dollars in medical expenses, it’s a non-issue financially. The same cannot be said for many cities and towns, in which a few hundred people carry the significant expense of a handful of very complex clinical cases. Cities and towns with a few hundred people would not be rocked financially by one or two very sick employees, the way they can be under the current system, if they joined the GIC. Second, the state has many different plans to choose from and uses the flexibility it has in plan design to offer a variety of provider networks and benefit plans to its enrollees. Most cities and towns aren’t big enough to be that flexible in their plan designs. Third, as a large purchaser, the GIC gets as good a deal financially from its participating insurance plans as anyone else in the market. Better than Boston? No, probably not, but certainly better than many smaller communities, where the financial impact of one high-cost claimant can be very significant - for the health plan and for the town.
This presumes, of course, that the legislation that makes it possible for cities and towns to join the GIC is straightforward and uncomplicated. It won’t be - and the impact on communities that join the GIC will be a function of the details in that bill - which won’t be known for months - if it passes at all.
Kevin also asked about the responsibilities municipal governments have as employers under the new health care reform law in Massachusetts. In particular, he asked about the filing of Section 125 plans with the state’s new Connector Authority, and the coverage options for the employees who work for cities and towns, but don’t meet the eligibility guidelines for coverage (because they work less than, say, 20 hours a week).
I don’t want to get in the habit of responding to alot of technical questions about the new law, but here’s what I think. The Section 125 mandate does apply to municipalities. So, if the employees who work less than 20 hours per week are not eligible for benefits, the municipality will need to have a way for these employees to purchase coverage using a pre-tax payroll deduction using a Section 125 plan, unless they fall into one of the exceptions in the regulation (e.g. work less than 64 hours per month on average). The easiest way for a municipality to do this would be to amend its existing Section 125 plan (or adopt a second one for their non-benefit eligible employees), and then sign up with the Connector. The municipality will be responsible for making the pre-tax payroll deduction and remitting the premium to the Connector. Check out the Connector Web site for more information. Hope that’s helpful.
Charlie - One point you miss in all of this is the fact that many cities and towns have seen huge healthcare premium increases due in no small part to the pressure from unions to maintain $5 copayment plans and BCBS indemnity plans while everyone in the real world has taken on an ever increasing share of the increased costs in the form of much higher copayments and large deductibles. It is no coincidence that “health insurance costs” are mentioned every time the discussion of increased property taxes comes up. If they have signed deals there is no way the unions will allow a city or town to fold into the GIC plans. It would be interesting to know what percentage of total costs (employer and employee) that the towns and cities are carrying compared to private sector businesses. I would argue that the people that work on behalf of the residents of a city or town should not have better benefits than the people who pay for their benefits by way of ever increasing property taxes.
Charlie,
I realize that the Connector Authority has the main task of providing health insurance to all; however, given the scope of this monumental task, wouldn’t availability of doctors (expanded visiting hours to cut back on ER visits) go hand in hand with this project? Controlling the escalation of health care costs is not the Connector’s agenda at this time, but it does appear that the entire cost issue is the main issue. Is there any way for this entity to influence the general accessibility of providers? There are ongoing studies with respect to telephone consultations with doctors, etc. and whether or not care can be improved if doctors are rewarded for simply being more available to patients. I am aware of regional differences regarding evening and weekend office hours, and we all know that the need for health care doesn’t stop at 4:30 p.m. If there is a regional shortage of primary care doctors, how can practices be encouraged to stagger hours? If the Connector Authority is able to find out the cost of ER visits which could have been handled by primary care physicians if they were available (i.e. 7 - 9am, 5 -8 pm, & Saturday mornings), that could be a starting point for a wider discussion of this topic.
Charlie,
Two other major points that deserve mention with regard to potential savings to a municipality by joining the GIC.
1. Mandatory Medicare for retirees that are eligible for Medicare but don’t participate.
Far too many municipalities don’t require their Medicare-eligible retirees to participate in Medicare. By carrying the full cost of these retirees, municipal governments are leaving tens of millions of federal dollars on the table, and are unnecessarily increasing the cost to both taxpayers (primarily) and employees/retirees. The requirement that state retirees enroll in Medicare if they’re eligible and then choose a Medicare plan from the GIC offerings saves tens of millions of dollars each year and helps reduce the overall premium paid by both active employees and retirees because the Medicare-eligible retirees are rated separately and their premiums are largely funded by the federal government.
Making Medicare participation mandatory for all cities and towns in the Commonwealth is a no-brainer, and should be done regardless of the GIC-related legislation.
2. The decisions regarding co-payments and other types of cost sharing/benefit design rests with the Commission, and are not subject to collective bargaining. Whereas the GIC can increase co-payments from $10 to $15 with the approval of the Commission, under the current statutory construct most cities and towns must negotiate even the smallest co-payment changes with each of their unions. This severely restricts the ability of cities and towns to manage the benefit design, thereby driving up monthly premiums. Boston, from what I understand, is still fighting with some of its unions over a $5 increase in co-payments that occurred years ago.