Savings Impact of Municipal Health Care Reform Exceeds Expectations
When MBAE embarked on our examination of how the foundation budget for education was working, the last thing we thought it would lead to was savings for cities and towns of over $100 million on health insurance costs. Yet, that is exactly what has occurred! After years of debate about municipal health insurance reform, legislative leaders took bold action to give municipalities the ability to join the Group Insurance Commission, or otherwise benefit from group purchasing for employer health insurance. MBAE’s report is credited in a column yesterday by Scot Lehigh of The Boston Globe with providing the evidence that was a catalyst for reform - the revelation “that soaring local health care costs were devouring dollars intended for education reform”.
A new analysis from the Massachusetts Taxpayers Foundation shows that savings for cities and towns from municipal health reform are exceeding the $100 million projected to be gained. Since the plan was first proposed a year ago, a dozen communities have negotiated changes through the traditional collective bargaining process that will save an estimated $30 million in the first year alone. The list of municipalities adopting the new approach and those with negotiations underway is growing. We are delighted with these results and confident that some of these funds will help avoid cuts to education and children will be the beneficiaries.
Municipal Health Insurance Reform – Massachusetts is not Wisconsin
No, this is not Wisconsin! Although labor leaders initially objected to giving cities and towns more control over health care plan design as an attack on collective bargaining rights, they ultimately worked with legislative leaders in Massachusetts and key stakeholders, including municipalities and employers, to craft a compromise that all could accept.
MBAE commends all involved in addressing the challenge of controlling exorbitant and unsustainable municipal health care costs. The reform provision included in the FY12 budget gives cities and towns the potential to save an estimated $100 million, which is desperately needed to maintain jobs and services.
Now that the dust has settled, it’s time to ask what made the debate more constructive here than it has been elsewhere? A few observations:
- Evidence-based Decision Making
The reforms adopted in Massachusetts were not driven by ideology. MBAE is proud to have played a role, albeit somewhat unexpectedly. We produced a report on the foundation budget, that was designed to see how it was meeting education needs after 17 years. What we found was that rising health insurance costs were not consuming education funds across the board, but were disproportionately affecting classroom expenditures. Legislators who had consistently funded education at “foundation” levels, had the facts they needed for constructive discussion of solutions. This report followed two others issued earlier by The Boston Foundation (which funded MBAE’s project) showing what could be saved if municipal officials had the authority to control health insurance costs and make decisions to join the state’s Group Insurance Commission’s plans - The Utility of Trouble – Leveling the Playing Field: Giving Municipal Officials the Tools to Moderate Health Insurance Costs and The Utility of Trouble – Municipal Health Care and the GIC: Success and Limitations. Indeed, the debate in Massachusetts was based on a series of analyses that gave House and Senate leaders the evidence they needed to take bold action. The Massachusetts Taxpayers Foundation provided critical analyses at several junctures, including Municipal Health Plans: Gilded Benefits from a Bygone Era, which outlined the discrepancies between municipal health benefits and plans offered by other sectors. Finally, the Boston Municipal Research Bureau’s The Real Cost of the Contract: An Analysis of Salary & Benefits of Boston Public School Teachers, gave a clear picture of the situation in the state’s largest district. In Massachusetts, data rather than rhetoric was able to drive much of the negotiations over how to provide the relief that cash-strapped communities and taxpayers need to prevent cuts in essential municipal and school services.
2. Equity with State Employees – Fair and Reasonable Approach
The proposal was never about denying benefits or balancing budgets at employee expense. It was about paying for health insurance in a more efficient way. Municipal labor unions continue to have greater bargaining power than their colleagues in state government, and local plans will have to be at least equivalent to state employee plans. What changes is that cities and towns can opt for an expedited collective bargaining process to negotiate new benefit plans for employees. If municipalities and unions fail to reach agreement in 30 days, the case would be submitted to a three-person review panel for resolution. The panel would include a union appointee, a municipality appointee and an appointee selected by the Secretary of Administration and Finance (essentially appointed by the governor). The three-person panel would need to act within ten days. Municipalities can use this process to adopt copayments and deductibles and other cost-sharing health plan features that are no higher than those offered by the state-run Group Insurance Commission (GIC). Municipalities may also transfer employees into the state-run plan if it would result in at least a 5% savings compared to the local health care plan. The reform adopted allows a portion of savings to be returned to employees and includes protections for retirees and employees with existing health concerns who are likely to incur higher copayments,. This is a balanced and fair reform that will preserve municipal jobs and services.
3. Non-Partisan Leadership, not Political Grandstanding
Massachusetts may be criticized for conducting too much legislative business behind closed doors, but this example demonstrates that the system works. Communication was generally not conducted through the media but in honest and frank discussions, face-to-face. Credit has to go to House Speaker Robert DeLeo, Ways & Means Chairman Brian Dempsey and Vice Chairman Stephen Kulik; and in the Senate to President Therese Murray, Ways & Means Chairman Stephen Brewer, Vice Chairman Steven Baddour. Public Service Committee Chairs Rep. John Scibak and Sen. Katherine Clark, Conference Committee members and all Representatives and Senators who supported reform deserve recognition. At critical points, Governor Deval Patrick and his administration’s leaders made reasonable compromises to broker a solution.
Although this process included its contentious moments with examples of bad behavior, it generally demonstrated a productive and mature approach to problem-solving. Massachusetts should be proud of its ability to work constructively to serve the people represented by all constituencies in this debate.
Coalition Urges Governor to Sign Municipal Health Insurance Reform
When the House and Senate crafted a fair and reasonable compromise on municipal health insurance reform that was approved as part of the FY12 budget and sent to the Governor, we thought that this issue had been addressed in a very responsible way. So, we are concerned that the Governor has not embraced the compromise and MBAE has joined a coalition urging him to do so.
As we have pointed out in past posts and in testimony on this issue, municipal health insurance reform has become the ultimate education issue. MBAE’s report on the foundation budget showed that funds intended for kids in the classroom are being diverted by cash-strapped cities and towns to cover health insurance premiums. The proposal on the Governor’s desk does not put municipal employees at risk – it provides the same care and benefits that state employees receive. We applaud the work done by the House and Senate to craft a solution to this perennial concern and urge the Governor to sign it!
The Boston Globe has weighed in on this issue, taking the same position as the Coalition statement below:
In January of this year, Governor Patrick announced his plan to address the untenable increases in municipal health care costs, which would require all cities and towns to either join the GIC or institute a program of equivalent value and cost by the start of fiscal year 2012.
Last week, the Legislature sent the Governor a municipal health reform plan that provides a local option for large and immediate savings to fiscally strapped cities and towns. Municipal employees will continue to receive excellent health care, which at a minimum will be the same that state workers receive, and they will retain greater bargaining power than afforded state employees. The Legislature’s plan will achieve real savings within the next fiscal year, while preserving generous benefits for retirees and employees and ensuring labor a meaningful seat at the table.
We urge the Governor to sign this reform into law without amendments, and meet his commitment to provide cities and towns with the tools they need to save jobs, control costs, and deliver vital public services, while preserving labor’s significant role in the process.
Associated Industries of Massachusetts,
The Boston Foundation,
Boston Municipal Research Bureau,
Greater Boston Chamber of Commerce,
Massachusetts Business Roundtable,
Massachusetts High Tech Council,
Massachusetts Taxpayers Foundation,
Massachusetts Business Alliance for Education, and
Stand for Children
Three Budgets on the Table: Hopes and Concerns as the Senate budget debate begins
The Senate began its budget debate this week and there are several things we are watching. Of course, municipal health care reform remains a hot topic at the top of our list. With all three budget proposals featuring some authority for municipalities over plan design, cities and towns will finally gain the flexibility they need to save as much as $100 million statewide. The Senate leadership is to be commended for developing a responsible health care reform plan that provides cities and towns with the authority they need while retaining a strong voice for labor in health care plan decisions. As we have repeatedly emphasized, rising health care costs are crowding out spending on books, teacher training, and other budget items that have a direct impact on student learning. Controlling health care costs is the ultimate education issue and it has become absolutely necessary to reduce employee health care costs in order to preserve our education system.
There is a lot more in the fiscal year 2012 budget that will have an impact on education, and the following are some of our concerns:
- Closing the Achievement Gap – We’d like to see the Senate restore the Governor’s proposal for funds dedicated for this goal, although we realize there are many competing demands for funding. An investment in closing socioeconomic and racial achievement gaps will reduce state social services and other costs down the road.
- Accountability – We are concerned, as we have been in past years, that none of the budget proposals – from the Governor, House or Senate – provide sufficient funding for the Office of School and District Accountability. An effective statewide accountability system ensures schools and districts meet high standards of performance. But, since 2009, funding has decreased by approximately two million dollars. All three budget proposals have allocated approximately $940,000 to the accountability office for FY2012. This level of funding is insufficient to evaluate even 20 of Massachusetts’ 392 school districts.
- Vision Project – This is a comprehensive higher education initiative that emphasizes the importance of increasing college access, improving college completion rates, aligning degree programs to workforce needs, improving student academic achievement, and eliminating disparities between student groups. Commissioner of Higher Education Richard Freeland’s leadership has resulted in a plan that we think has the potential to build the highly skilled and educated workforce necessary for our state’s economic health in today’s global economy.
We encourage all employers to contact their legislators and urge them to support these critical investments in education!
A Voice but not a Veto – Senate Takes Action on Municipal Health Care Reform
There has been great anticipation about what the Senate will do with regard to municipal health care cost control. Today, the wait is over and we have the answer: a clear commitment to reform that matches the leadership demonstrated by the House and takes action to save an estimated $100 million annually for cash-strapped cities and towns.
The Senate has voted twice before for municipal health plan design reforms only to have its proposals rejected by the House. This year, the House took decisive action in its FY12 budget to give municipalities the authority, outside of collective bargaining, to join the state’s Group Insurance Commission, or choose health plans that would offer comparable savings. Co-pays and deductibles would still be subject to negotiation. Labor unions cried foul and countered aggressively to convince legislators that they should not infringe on any union rights to negotiate health plan design changes.
The Senate Ways & Means Committee responded with a budget plan that gives labor and municipal officials 30 days to negotiate co-pays and deductibles and “requires that a municipality collectively bargain with both employees and retirees who would be impacted by any savings proposal, and further requires that the municipality include a plan to mitigate or cap the impact of changes on employees, retirees, low-wage workers and heavy users of health care“. If no agreement is reached, the issue goes to a review panel (consisting of a labor, management and a mutually agreed-upon third member with appropriate expertise drawn from a state list). In both the House and Senate versions, municipal employees would have nothing less than their state counterparts who are not able to negotiate health benefits.
As I have written previously, this is an unlikely issue for MBAE’s attention as an organization concerned about public education. However, our findings that the cost of employee health insurance is diverting funds from education has thrust us into this debate. In fact, our analysis of the foundation budget, School Funding Reality: A Bargain Not Kept, has been cited by many legislators as the evidence that led them to cast that tough vote for reform..
In introducing its budget proposal today, the Senate Ways & Means Committee states that “the pressure that employees’ and retirees’ health insurance costs places on municipal budgets is not a new problem… and the continuing fiscal condition heightens the urgency of addressing the spiraling cost of health insurance for Massachusetts municipalities.”
We couldn’t agree more. We are thrilled that Beacon Hill appears to be united in their resolve to address this issue and hope that the final budget that comes out of the Senate, and ultimately the conference committee, will be consistent with what was crafted in the House to give labor a voice in health care design while cities and towns retain the right to make final decisions that will protect jobs and local services.
House Protects Education Jobs with Health Care Reform Vote
You might not expect to see “health care costs” on the list of priorities for a business organization focused exclusively on education. And, we at MBAE didn’t expect to be involved in this debate either. That changed, however, when the findings of our report on the foundation budget, School Funding Reality: A Bargain Not Kept, made it clear that health care costs have become the ultimate education issue.
As I explained in a previous post, our analysis found that despite large increases in Chapter 70 state aid from 1993 to 2000 that brought districts up to foundation (targeted spending levels to meet specific programmatic goals), the dramatic increase in school employee health care costs since 2000 have swallowed these additional funds and crowded out funding for classroom expenditures that directly impact student learning.
When the House Ways & Means Committee unveiled its FY2012 budget proposal, MBAE’s report was cited repeatedly as providing critical evidence that education funds were being diverted to pay for insurance benefits (see April 13 post). Only two weeks later, the Massachusetts House of Representatives voted 113-42 to give cities and towns the flexibility required to control skyrocketing health care costs and protect hundreds of municipal jobs.
The House language lets municipal officials choose plan designs and set co-pays and deductibles outside of collective bargaining but would not affect negotiation with unions over the percentage of premiums paid by employees. The move has the potential to save $100 million statewide while maintaining high quality benefits for municipal employees that are at least equivalent to those state employees receive.
A recent study by the Massachusetts Taxpayers Foundation found that the average municipal family plan premium of $20,925 is $5,600 higher (37 %) than the average private sector family premium, 33 % more than the federal plan premium, and 21 % more than the state’s Group Insurance Commission plans.
The debate now moves to the Senate. Make sure your Senator has the facts from our report about the impact of school employee health care costs on school budgets. For more information about MBAE’s position, read Board Member Joe Esposito’s blog post and the release from the Massachusetts Municipal Association press conference where he spoke on this issue!
MBAE is working with business groups and other organizations to reform municipal health care and protect education jobs and funds. Click here to read the Coalition Statement and Press commending the House for its leadership and action.
Coalition Calls on House to Endorse W&M Municipal Health Insurance Reform
MBAE’s December 2010 study, “School Funding Reality: A Bargain Not Kept“, revealed that all of the $700 million in new Chapter 70 school aid from 2000 to 2007 was consumed by a $1 billion increase in health insurance costs over the same period. According to the report, “controlling the overall cost of health care in Massachusetts is now the ultimate education issue.”
The report’s findings illustrate why it is important for MBAE to join municipal leaders to support House leadership and the House Ways & Means Committee’s budget proposal giving cities and towns the flexibility they need for health care cost control, especially since a significant number of House members are now qualifying their support and indicating they are behind a union-backed alternative that does little to confront the cost controls needed. Nothing should surprise even casual legislative observers, but consider that 13 of the 26 Democrats on the Ways and Means Committee signed onto an amendment that undoes the proposal that the committee endorsed last week, even though none spoke against it on the day the budget was released and approved by the Ways and Means panel.
The MBAE report found that explosive growth in the cost of school employee health insurance has crowded out funding for the instructional portions of school budgets from teachers to books. Spending on classroom teachers, teacher professional development, and purchases of books, software, and other educational materials – areas of the budget that have the most significant impact on student learning – when adjusted for inflation has actually been falling since 2000.
Unless employee benefit cost issues are addressed, education cuts and layoffs will intensify over the next several years. To protect critical funding for public schools as well as other essential municipal services the state legislature should pass the municipal health insurance reform proposal included in the state budget that will debated by the House of Representative on Monday, April 25th.
House Ways & Means Budget Reforms Municipal Health Care
At a State House press conference today, House Ways & Means leaders cited the evidence in MBAE’s report on the foundation budget, School Funding Reality: A Bargain Not Kept, as an imperative for reforming municipal health care design.
Committee Chairman Brian Dempsey thanked MBAE as one of the groups calling for the changes announced today and cited our report’s finding that health care has become the ultimate education issue. Calling the proposal “fair and reasonable”, Vice Chair Stephen Kulik said the “time has finally come to give cities and towns a management tool that will save money and preserve jobs…” Calling the budget proposal a “great accomplishment in these challenging times”, Assistant Vice Chair Marty Walz echoed her colleagues, adding that with this reform “we are able to keep our commitment to the children of the Commonwealth”.
The budget would give municipalities the authority to change copayments, deductibles and other health plan design features outside of collective bargaining, a condition that currently applies to state employees. A city or town could alter these design features as long as the cost did not exceed those in the largest subscriber plan offered by the state’s Group Insurance Commission (GIC). In addition, all eligible retirees would be required to enroll in a Medicare health plan. As a result of what we learned from our school finance report, MBAE called for these changes in testimony before the Public Service Committee last month.
I cannot overstate the significance of this proposal. As Representative Kulik said, this issue has been lingering for years and “the reform is a long time in coming.” In response to calls by public employee unions to share the cost savings with employees, the budget proposes setting aside 10% of cost savings or “avoided costs” in an escrow account that can be used for health related programs negotiated with a public employee advisory committee.
MBAE is pleased that our work on school finance has informed the policy recommendations in the budget and we applaud the House Ways & Means Committee for facing this difficult issue in a forthright and constructive manner.
Today’s budget announcement is only the first step in a long process that has historically taken months and been decided in the last minutes of the fiscal year. MBAE is working with a coalition of business groups to urge adoption of these reforms - MassReform First.org. We urge our members and others in the business community to learn more about the details of the budget and make your voices heard on this critical issue!
MBAE Weighs in on Municipal Health Care Reform
On Tuesday, March 8, the Massachusetts Business Alliance for Education will testify before the Joint Committee on Public Service. Although we are regulars at hearings of the Joint Committee on Education, it is somewhat unusual for us to be testifying on legislation regarding municipal health insurance reform.
We are doing it because health care costs have become an education issue. School Funding Reality: A Bargain Not Kept, a recent MBAE report that analyzes the Chapter 70 foundation budget, provides the evidence.
The analysis found that despite large increases in Chapter 70 state aid from 1993 to 2000 that brought districts up to foundation (targeted spending levels to meet specific programmatic goals), the dramatic increase in school employee health care costs since 2000 have swallowed these additional funds and crowded out funding for classroom expenditures that directly impact student learning.
- From 2000 to 2010, health care costs consumed two-thirds of the entire increase in state education spending. From 2000 to 2007, annual health care costs in school budgets grew by $1 billion, $300 million more than the increase in Chapter 70 aid.
- In contrast, spending on books fell by more than 50% from 2000 to 2007 and spending for teacher training fell by almost 25%.
- Spending on instructional materials fell by 11.3% per year from 2000 to 2007.
So, although the Legislature has consistently met its obligations for funding Chapter 70, we are not meeting the intended goals of the Education Reform Act of 1993. MBAE Board member Andre Mayer pointed out in an earlier post that Massachusetts municipalities and local public employee unions missed the opportunity to preempt legislative remedies when they did not meet the December 1 deadline to take advantage of reduced health care costs voluntarily by purchasing health insurance through the state’s Group Insurance Commission.
Absent a major change in the trend of health care costs, it is impossible to see how the state can keep all districts at foundation or cover the costs of the classroom resources promised in 1993. Even if a new source of revenue or significant change in employee health care costs or other expenses were to provide short term relief, these gains would be quickly lost if health care costs continue to rise at 10 percent or so each year.
MBAE will be supporting bills that give municipal governments authority for health care design outside of collective bargaining and that will require the transfer of eligible employees and retirees to Medicare coverage. Not our usual education topic – but one that has to be addressed if we are to achieve our goals to provide a high quality education to every child in Massachusetts.
