Health insurance saps local budgets

As they draft spending plans for the upcoming fiscal year, local politicians are finding that revenues will likely fall short of expenses. And the fastest growing expense on their list of bills? It's not union-negotiated salaries or even public education. It's health insurance.

"We're expecting a 15 to 20 percent increase in our health insurance costs" for fiscal 2005, said Melrose Mayor Robert Dolan. "It's the second biggest line item on the city budget. To put it in perspective, we believe we'll bring in about $850,000 in new revenue in fiscal '05; the increase in our health insurance costs will eat up $650,000 of it."

Gloucester is expecting to see its health insurance costs rise 8 percent. In Malden, a double-digit increase is likely. And in Peabody, health premiums will probably balloon by about 15 percent.

In Groveland, where fewer than 20 municipal employees are enrolled in a town health plan, the taxpayers' share of those expenses will jump 6.6 percent, to roughly $268,000 in fiscal 2005, which begins July 1.

"It's not too bad," said Greg LaBrecque, Groveland's finance director. "The rates are set based on experience. Luckily, there were no surgeries last year, and no children born. Still, a family plan costs the town about $12,000 and that adds up quick."

In an attempt to rein in municipal health care expenses, the Metropolitan Mayors Coalition is trying to persuade legislators on Beacon Hill to give them the tools they need to get a handle on insurance costs.

"Health care costs continue to be an issue," said Malden Mayor Richard C. Howard, vice chairman of the coalition. "They are spiraling out of control, without an end in sight."

The mayors coalition, which also counts among its members Dolan, the mayors of Revere and Everett, and Chelsea's city manager, is hoping to win from legislators the right to negotiate with individual unions regarding health benefits, rather than going through a collective bargaining process. Failing that, coalition members would like Beacon Hill lawmakers to set a 75 percent cap on a community's share of health insurance costs. Currently, many communities cover 85 percent or more of municipal employees' health insurance premiums.

"The high price of health insurance is one of the biggest budget-busters in all cities and towns," said Thatcher Kezer, a project manager at the Metropolitan Area Planning Council who facilitates the mayors coalition on behalf of the regional planning agency. "Finding a solution is the coalition's number one priority."

The coalition last year filed a bill that would have allowed municipalities to pay a smaller share of their employees' health care costs. The bill made it through the Senate, but died in the House.

"Something needs to be done," said Peabody Mayor Michael Bonfanti. "Over the last six years, the city's health care costs have skyrocketed 138 percent. In fiscal '05, we expect those costs to go up again, by about 15 percent, bringing the dollar cost to the city to $19.4 million out of a budget of $116 million. The hardest part is that we have little control over those expenses -- we're dealing with union contracts."

Communities that have tried to trim the costs of health insurance premiums have faced resistance and legal action. In Andover, an Essex Superior Court judge last month ordered the town to continue paying 65 percent of the health insurance premiums for 80 town employees, barring the Board of Selectmen from cutting the town's share to 50 percent, at least through April.

The selectmen last month notified employees enrolled in its Blue Cross Master Health plan that their share would more than double, from $90 to $200 per month, starting Feb. 1. The Massachusetts Teachers Union, the Andover Police Patrolmen's Union, and the Andover Fire Fighters' Union asked for an injunction. A hearing has been set for tomorrow. .

Despite such legal wrangling, local leaders are optimistic. Several continue to negotiate with employees in hopes of winning a concession.

In Malden, Howard is meeting with department heads about the issue. And in Melrose, local leaders have been meeting with the city's insurance advisory committee for nearly four years, trying without success to hammer out an agreement that would reduce the city's share of health insurance costs.

"We have proposed a variety of different options to reduce costs -- at least 35 -- and they have not been interested," said Marianne Long, the Melrose human resources director. Melrose taxpayers spend about $6 million on health benefits for the nearly 700 public employees enrolled in health plans.

As he reflected last week on the budget he is crafting, Bonfanti said with a sigh: "You can do what [California Governor Arnold] Schwarzenegger did and roll health care costs into long-term debt. Or you can raise the regressive property tax. Or you can cut services or beg Mr. Romney for help, or all of the above."

The tack the Peabody mayor is taking this year is a familiar one. Together with other local leaders, he is urging state lawmakers to restore the state income tax rate to 5.95 percent, where it stood in 1999.

Increasing the tax rate would raise about $1 billion, according to the Massachusetts Budget and Policy Center.

A similar effort failed last year.