Entering State Health Plan Could Save City Up to $15M Over 4 Years

Peabody is now poised to enter the state's Group Insurance Commission health plan for a windfall in savings.

Mayor Ted Bettencourt and union leaders announced Tuesday they have reached an agreement to enter Peabody into the state's Group Insurance Commission, a move they expect to net the city between $10 milion and $15 million in savings over the next four years.

"This change will...help stabilize a key area of the city budget in both the short-term and long-term. This agreement will continue to ensure top quality, affordable health insurance for our current city employees, retirees and their families," said Bettencourt.

Teachers' union president Bruce Nelson and Police Capt. John DeRosa, who represented a coalition of the city's unions, both commended Bettencourt for working with the unions and upholding the bargaining process itself, rather than doggedly pursuing the state healthcare reform law.

, which would have given the city more control on choosing an overall health plan and instituted just a 30-day window for bargaining if the mayor chose. , however, in favor of negotiating with the unions, but said all along that he was prepared to return to the council if the talks were not fruitful.

"Mayor Bettencourt immediately established himself in our eyes [as willing] to work with the unions to craft an agreement that not only benefits the city and its taxpayers, but also gives ample protection to the municipal employees," said Nelson on Tuesday.

He said the Peabody Public Employee Coalition sees the deal as a win for the city, saving millions over the next four years, and also a win for city employees, who will have broader choices on healthcare providers now. He added that employees will also save on premium payments and will recoup some of highest payments to the GIC through a mitigation fund.

"Perhaps most importantly, the employees can see very clearly through this agreement that the mayor and this city respects each of them and values their service to the city," said Nelson.

"I couldn't force GIC on the unions nor did I think it was appropriate to do that," said Bettencourt. "It quickly became apparent to me that we were going to be able to work out an appropriate deal for the city."

Both sides met about a dozen times during those four months to hash out the new deal.

Finance Director Patricia Schaffer said 2,176 city employees receive health insurance now via Blue Cross Blue Shield -- 68 of them are retirees.

Bettencourt said he took a lesson from Boston Mayor Menino, who didn't just doggedly pursue healthcare reform law, but instead worked with the unions to come up with an agreement outside of pushing through the law.

The city's unions initially fought against the city adopting the reform law, arguing that it would mean entering the GIC. Nelson said it would ratchet up costs for employees and possibly cause them to seek out new doctors because Blue Cross Blue Shield is not one of the eight providers participating in the state health program.

Nelson and DeRosa said Tuesday, however, that the new agreement does help control costs and employees should be able to retain their current doctors under most of the plans available.

Nelson, who as a retired teacher has been covered under the GIC for several years, had only positive things to say about the GIC at this point. "It's terrific...quality healthcare," he said, noting he has not had to change any of his doctors.

He said employees will realize savings in their paycheck based on which plan they enroll in.

"Change is difficult to swallow...but he's given us the opportunity to swallow a bitter pill without a problem," said DeRosa, commending Bettencourt for clearly stating his intentions from the start and listening to the unions' concerns.

DeRosa characterized the agreement as simply a reflection of the economic reality Peabody is now faced with.

The exact savings for the city will not be known until employees are able to choose which plan they want to enroll in. And that may not happen until next July, unless Gov. Deval Patrick signs pending legislation allowing cities and towns to enter the GIC mid-fiscal year.

Bettencourt expects to save $3 million - $5 million annually, however, on health insurance.

"As I spoke about during my campaign for mayor, the increased costs of our current health insurance program were not sustainable, and the burden for these increases were falling in our taxpayers," he said. "A change needed to be made. Accordingly, these negotiations in this critical area was one of my first priorities upon taking office."

Bettencourt reiterated that without any additional state aid coming for Fiscal 2013 and a 5 percent spike on health insurance costs for the city, that burden would fall squarely on taxpayers. This year's budget contained just over $28 million for health insurance expenses.

Bettencourt, Nelson and DeRosa all described the last four months of negotiations as cooperative and candid, despite any disagreements either side had during that time. They characterized it as "a spirit of cooperation."

"He was very transparent with what he wanted," DeRosa said of Bettencourt, who informed the unions from the start he was looking for at least $2 million in savings annually.

Nelson agreed with that sentiment, adding there wasn't a moving target on the city's goal, as he felt there has been in the past.

Under the GIC, municipal employees can choose to enroll in plans provided by Fallon Community Health Plan, Harvard Pilgrim, Health New England, Neighborhood Health Plan, Tufts and UniCare State Indemnity Plan. In most cases, each provider offers two plans and subscribers are able to go with either an HMO or PPO.

In general, the costs for any of those plans are less than what the city pays now with Blue Cross Blue Shield for individual or family plans; however, employees will now have to pay deductibles and higher co-pays, along with other differences to the existing fee structure with BCBS.

Blue Cross Blue Shield 2012 Rates Family Individual Blue Care Elect $26,469 $9,960 HMO Blue $20,980 $7,815 Harvard Pilgrim 2012 Rates (GIC) Independence Plan (PPO) $19,116 $7,834 Primary Choice (HMO) $15,293 $6,267 Tufts Health Plan 2012 Rates (GIC) Navigator (PPO) $17,275 $7,084 Spirit (HMO) $13,820 $5,667

* Figures are for Fiscal 2012

A mitigation fund, paid for with a portion of the city's savings to come on health insurance, will also be in place now to offset some of the highest co-pays employees will have to face.

Bettencourt and Schaffer said the premium rate split with employees remains the same: 85 percent to the city and employees pick up 15 percent.

In order for the city to enter the GIC, the City Council must agree to adopt a relevant section of state law that allows Bettencourt to enter into a coalition agreement that would in turn allow the city to enter the GIC. Bettencourt is asking the council to do that on Thursday and said he's not anticipating any opposition on that front.


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