Mayor Hopes to Save Millions Under Health Insurance Reform Law

The City Council is now poised to make a decision in just over two weeks on whether Peabody will adopt municipal health insurance reforms signed into law last year.

Mayor Ted Bettencourt, who has pushed for the city to adopt the law , argues the reforms make sense and are long overdue.

The law, he says, doesn’t remove collective bargaining from the process, as employee unions seem to fear; it just gives Peabody more options and the potential to save millions on escalating health insurance costs.

A major component of the law is a short, 30-day window for negotiations, which is at the discretion of the mayor, but can then be used to send the issue before a review panel for a binding decision after 30 days expire.

“This action is in no way a refusal to sit down and negotiate with union leadership,” Bettencourt said Thursday night, addressing the council but directing most of his remarks to the union members filling .

"I'm not trying to shove anything down your throat," Bettencourt said, but added that if he didn't pursue substantive healthcare reforms, he "wouldn't be doing his job."

"I don't relish being here asking for this...I understand the challenges you face," Bettencourt said. "The city stands to save millions by doing this and it is the responsible thing to do."

As of Feb. 1, 53 cities and towns had voted to adopt the law, and Bettencourt hopes Peabody will soon join them. Beverly, which adopted the act last summer, just recently reached a deal with its unions that should save $1.2 million.

According to an early estimate last fall from the firm the city uses to manage its health insurance, Peabody could save $4 million by joining the Group Insurance Commission plan used by state employees and some other communities. Under the reform law, however, the onus is on the city to find another option than the GIC that is at least 5 percent cheaper and thus avoid transferring employees to the state plan.

Figures from the Massachusetts Taxpayers Foundation say 21 communities have already achieved $60 million in savings under the reforms.

Bettencourt requested the council set up a committee meeting or special session at which he will make a full presentation on the procedures under the reform law and potential plan costs and schedules. A special council meeting will be held Feb. 28 and will allow union representatives an opportunity to speak on the issue.

Unions say bargaining greatly weakened under reform law

At least 100 city union members packed the auditorium Thursday, unsure exactly what action the council would take that evening.

Firefighters' union president Russell Lewis said the city's unions have come together in joint opposition of the law and met with Bettencourt the week before to simply ask for time to bargain in good faith, as they always have. He said they came away from that meeting with a positive impression, but still weren't sure what to expect last week.

"We want a seat at the table," Lewis said, adding the unions are open to considering health insurance reforms. He said 30 days for negotiations under the new law "is real short" and effectively removes true bargaining from the equation.

Lewis noted the unions came to an agreement on healthcare changes two years ago that bumped the employee premium contribution rate to 15 percent from 10 percent and also included modest increases on co-pays. All told, that saved the city $1 million and was achieved through traditional negotiations, although it did take more than two years to finally ink that deal, which included pay raises and other obligations.

"In the city of Peabody, we have always worked out our problems," Lewis said.

Except for the teachers' union, which is in mediation with the city, all other union contracts expire this summer from a one-year deal that contained no pay raises.

Bettencourt said he is ready and willing to talk with the unions to work out new contracts and even reached out to them first – union leaders, however, say they initiated discussions with Bettencourt even before he took office in January.

Bettencourt, who grew up in a union household, said he appreciates their concerns, but “one thing is clear: the current path we are on is unsustainable.”

He pointed out Peabody will likely be level-funded on state aid in the next fiscal year (based on the governor’s proposed budget), leaving the city to shoulder skyrocketing health insurance costs, once again. Those exact figures remain to be seen.

“Please understand that adoption of this [reform law] does not lock us into the GIC,” Bettencourt said. “I am ready and willing to look at all options on the table.”

“We all realize that escalating costs are concerning and we are willing to work with the [city] on this,” said teachers’ union president Bruce Nelson, but argues that before the city adopts any new law, there are plenty of other plan design changes to explore that would not negatively affect employees.

He said due consideration, for example, should be given to seeking competitive bids from insurance providers. Peabody, which uses Blue Cross Blue Shield, has not gone out to bid in 38 years, Nelson said.

He argues that even the threat of going out to bid has been successful in other communities at knocking off significant percentage points on annual rate increases. He added that Lynn recently made some structural changes in its insurance plans, outside of entering the GIC, which saved millions but did not unduly burden city workers.

The Lynn Item reported last summer that the new deal with Harvard Pilgrim saved at least $3 million and increased employee contributions and co-pays.

Nelson is wary of increasing deductibles and co-pays significantly, however, arguing they “are going to kill the average working [person].”

“The GIC is not a one-size-fits-all fix,” he said, but acknowledging that the reform law still allows the city to pursue options outside the GIC.

He said entering the state plan would mean co-pays and deductibles would double or triple for city workers, although those costs are far less than what most private sector employees pay.

He said it's not a fair comparison because, historically, public employees traded higher wages for better benefits and in better economic times, the private sector has greater and easier access to bonuses and pay raises.

City councilors share concerns of unions and mayor

City councilors on Thursday mostly refrained from commenting on the issue at hand other than to assure union members they heard their concerns loud and clear.

"I have received many of your phone calls and emails and I appreciate them," Council President James Liacos said, urging both Bettencourt and the unions to reach an agreement outside of the reform law.

Liacos said he hopes such an agreement can be reached before Feb. 28. Based on his own experience on the School Committee, all the important points of the deal come out in the last two or three days, he said.

“Hopefully we can get this all resolved before the twenty-eighth and you won’t even have to come back,” Liacos said, although he confirmed later that he still supports adopting the reform law.

Nelson said after the meeting that it's really only nine days unless they all agree to work 24 hours a day and weekends -- simply not enough time to arrive at an agreement.

"I agree that health insurance is unsustainable. We have had ten years of tax increases and if we don't do something, it will continue," said Ward 6 Councilor Barry Sinewitz, although he advocated for giving the unions more time.

Sinewitz suggested three months and then come back to the council for adoption of the law if nothing happened in that time. That suggestion was received with loud applause from the audience.

Sinewitz also said he doesn't want the state stepping in as a member of the review panel to have a final say on contracts.

At-Large Councilor David Gravel also asked for a legal opinion from the city solicitor on whether councilors who are on the city's health insurance plan can vote on the matter or must abstain.

The Gloucester City Council recently explored the same concern -- most of the council was on the city's plan -- and was told by legal counsel that normally members would have to abstain. But since the council is the only local body that can vote to adopt the law, the Rules of Necessity established by the courts allow members to vote after all if a quorum could not be had otherwise.