Insurance Moratorium Set To Expire

Association Seeks Two-Year Exentention On Retiree Premium Percentages

MAY 2014 VOICE: For the past three years, retired teachers and municipal workers have been protected from unfair increases in health insurance premium contribution percentages. Alarmingly, the legal protection expires on July 1, 2014!

Association officials are calling on the legislature to extend the retiree protection for two-years, through July 1, 2016.

The moratorium on increasing retiree contribution rates came as a result of intense advocacy by our Association during the municipal healthcare reform debate in 2011. Legislative leaders and Governor Deval Patrick agreed to place a restriction or moratorium on municipalities to prevent them from increasing insurance contribution percentages on retirees.

Members will recall that the 2011 municipal insurance reform law (Chapter 69) allowed cities and towns to unilaterally increase copayments and deductibles to the levels charged by the state’s Group Insurance Commission or have the ability to enroll in the GIC plan. Chapter 69 then placed the premium moratorium on any municipality that chose to implement the new law.

Unlike most active employees who are protected by collective bargaining agreements, retirees have no such protection. Contribution rates for municipal retirees, including most teachers, are established by the city or town. Rates can legally range from 99% to 50%, with the statewide average now resting at 75/25.

“In 2011, part of the rationale was that it would be unfair to raise both out-of-pocket costs and monthly premium percentages on existing retirees,” explains Association Legislative Liaison Shawn Duhamel. “It was also decided that time was needed to allow for the various local, state and national healthcare reform laws to take effect. These new policies do not have an immediate impact overnight. Years are needed to fully weigh the effect.”

For state retirees, the Commonwealth’s policy has been to keep retirees at the percentage contribution  rate at which they retired. This has held true for the past 20 years, through four Republican and one Democrat governor.

State retirees now contribute at three different levels, depending on the date of retirement. Pre-July 1, 1994 retirees contribute 90/10, those from 7/1/94 to 10/1/09 at 85/15 and after 10/1/09 at 80/20.

More Time Needed

One of the key findings of the 2012 Special Commission on Retiree Healthcare was the recommendation to hold retirees harmless from increases in insurance contribution percentages. The Commission recommended, with the support of Governor Patrick and Treasurer Grossman, a permanent change in the law that would prohibit percentage rate increases on current retirees.
Under the recommendation, which is now part of Patrick’s proposed H59, cities and towns would be able to increase rates on future retirees, but not on those already retired. This is modeled after the state’s own policy for state retirees.

However, with immediate action on H59 appearing less likely before the formal legislative session ends in July, Association officials have asked for a temporary extension of the law.
An extension would continue to protect municipal retirees, including teachers, from sharp increases in healthcare premium payments, while granting time for the legislature to properly address the issue of retiree healthcare.

In addition, the Massachusetts Healthcare Cost Containment Law (Chapter 224, Acts of 2012) is just entering its second year of existence. More time is needed for the law, which is aimed at naturally lowering healthcare costs across the state, to fully take effect and the results to be known.

At the federal level, debate continues over the long-term impact of the Affordable Care Act (aka “Obamacare”).

Finally, cities and towns are still measuring the effect of the last round of healthcare and pension reform laws, which are lowering local taxpayer costs dramatically, but have increased costs on retirees and employees.

“More time is needed for the legislature to address the next phase of retiree healthcare reform, as well as to allow the impact of the previous reform measures to fully be realized. We know that Chapter 69 is now saving cities and towns over $200 million a year,” stresses Association President Frank Valeri. “But those savings were born by increasing costs on retirees and employees. Loading up retirees with additional costs is not only unfair, but also not affordable to many of our members.

“We simply can’t continue to look at shifting more and more costs onto retirees and survivors who cannot afford it.  First, the state needs to measure the results of the Cost Containment Law, the ACA and all of the steps now being taken by the insurers and medical providers to lower costs across the system. And let’s not forget that the genesis of this problem is the cost of the product itself, not how much is being paid by the participants!”