Rep. John Scibak (D-S. Hadley)

Recent Insurance & Pension Reforms May Lower Costs

APRIL 6, 2012: On Thursday, the Special Commission to Study Retiree Healthcare held the first of its seven scheduled meetings at the State House. With 9 of its 11 members present, the Commission heard from a series of experts who outlined the complex issues under consideration.

The Commission’s legislative mandate is to examine Retiree Healthcare benefits and long-term costs at both the state and local levels. At the conclusion of the process in late November, the Commission will file a report with the legislature outline potential reforms and/or cost control measures that might be implemented.

As members are aware, the Association is a member of the Commission, with Legislative Liaison Shawn Duhamel serving as our representative. He is working closely with retired Dracut Firefighter Andrew Powell, who is the AFL-CIO’s designee.

At Thursday’s meeting, Commission members heard a report from the actuarial firm AON Hewitt, which has been retained by the state to study its long-term health care liabilities that are required to be disclosed under the government accounting standards set by GASB.

According to AON, the Commonwealth’s unfunded retiree health care liability (as of 1/1/2011) stands at just over $16.5 billion. The reported annual cost of healthcare for retirees enrolled in Medicare A&B is $4,712. Non-Medicare retirees clock in at $10,147.

At the municipal level, officials with the Mass Municipal Association claim that local unfunded healthcare liabilities range from $25-$30 billion.

Representative John Scibak (D-South Hadley), House Chairman of the Joint Committee on Public Service, asked for updated figures that reflect changes resulting from the Pension and Municipal Health Insurance laws that passed last year.

“Pension Reform (Chapter 176) increased the retirement age for new employees. I imagine that this will reduce the number of so-called early retirees (pre-age 65) in the future and will help lower our healthcare costs,” said Scibak. “The same applies to the municipal reform law past last summer. We know it will reduce costs, but the question is to what degree?”

“We asked the actuaries and other research groups to rework the numbers to reflect the recent changes in retirement and health insurance laws, then report back to the Commission at the May meeting. It is important that we’re drawing conclusions from accurate reports that reflect the situation today, not one that existing two or three years ago,” explained Duhamel. “The other area that needs close consideration is what impact will healthcare payment reform have on the overall cost of benefits?

“Major reforms are taking place at the federal level, in terms of Medicare. Here in Massachusetts we have a payment reform bill making its way through the legislature this session, as well as a major payment reform initiative being undertaken by Blue Cross. All of these efforts are attempting to get at the root cause of healthcare expenses, rather than simply cost shifting between the employer and retirees.”

The next meeting of the Special Commission is scheduled for Thursday, May 31, 2012. Click here for more information regarding the Commission, as well as a listing of its 11 members.

Special Commission on Retiree Healthcare Gets to Work

Special Commission on Retiree Healthcare Gets to Work