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City, town health plans most costly, report says

By Sean P. Murphy
Globe Staff / April 5, 2011

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Health insurance plans to cover city and town employees cost 37 percent more than similar plans for workers at private companies, mostly because municipal employees pay minimal copayments or deductibles when they get care, according to a new statewide survey.

The 20-page report from the Boston Foundation and Massachusetts Taxpayers Foundation concludes that cities and towns must substantially increase the amounts their employees are required to pay in out-of-pocket expenses for medical office visits and other services and to significantly increase their deductibles. Otherwise, municipalities will see insurance eat up an ever-increasing share of their budget.

“The issue is cost-sharing, and right now the cost-sharing of municipal employees is minuscule,’’ said Bob Carey, author of the report. “Cost sharing must go up. It’s way out of synch with the rest of the employer market.’’

Taking the report’s advice would force tens of thousands of municipal employees statewide to pay hundreds or even thousands more annually for health care. The rising costs, in turn would probably influence those employees to choose less costly insurance plans and medical services and, in some cases, to forgo some services, the report says.

Currently, the average annual family health insurance premium in municipalities is 21 percent higher than the state plan, 33 percent higher than the federal government employee plan, and 37 percent higher than in the average private sector, the report says. The cost of these premiums is paid jointly by employers and employees. However, in many municipalities, the government pays 60 to 85 percent of the premium.

The report, which focused on 14 municipalities, found that city and town workers typically pay only $11 to see their primary care physician, half the amount typically paid by workers in the state, federal, and private sectors.

The report also found that nine of the 14 municipalities studied charge no copayment for most other medical services, including high-tech imaging such as an MRIs, outpatient surgery, and inpatient hospitalization, the three largest drivers of medical cost increases, the report says.

By contrast, private workers pay $75 for high-tech imaging, $150 for outpatient surgery, and $250 for inpatient hospitalization, the report found.

In addition, the report found that municipal workers paid no up-front share of their health costs each year, called a deductible.

“Amazingly, no municipal plan includes a deductible,’’ the report says. “In the other public and private plans, members are responsible for minimum deductibles of $250 for individuals and $700 for families.’’

The report calls on the Legislature to pass a law that would allow municipalities to change plan copayments and deductibles without getting the approval of municipal unions.

Currently, state law requires mayors and town managers to bargain with the unions if they want to change office-visit charges or any other aspects of their health insurance benefits.

Unions have for years resisted such changes, saying municipal employees earned those benefits over the years in collective bargaining by giving up wage increases.

But the rapid escalation of health care costs, an average 10.8 percent increase annually since 2001, has left some cities paying more than 20 percent of their budget for health insurance.

Governor Deval Patrick’s newest budget proposal squarely takes on the municipal health care issue. Patrick included a provision that would force municipalities to join the state’s less expensive health insurance program or create less expensive plans on the local level.

Yesterday, Ed Kelly, president of the state firefighters union, said unions are willing to take on more of the financial burden of health insurance, noting that public unions have steadily made concessions on health insurance since 2005.

But, he said, “it is imperative that unions continue to have collective bargaining rights to give a voice to workers and working families.’’

Jeffrey D. Nutting, Franklin town manager, said his town is still facing unsustainable health care costs, even though employees there have made such concessions three times in the last six years.

“Every dollar we spend on health care insurance is a dollar we don’t spend on jobs,’’ he said. “This is all about saving jobs. When insurance costs go up I have cut police, firefighters, or teachers.’’

Nutting said about 10 percent of the town’s $88 million budget now goes to health care costs, and he is facing a double-digit increase for next year.

In Medford, Mayor Michael J. McGlynn said the city’s public union leaders have shown little interest in even talking about changes in health insurance benefits.

“But now I give the unions credit,’’ he said yesterday. “Now, they are saying, ‘Let’s sit down and talk about it.’ They are very much aware of the seriousness of the situation.’’

The report echoes a series of stories published in the Globe last year. The Globe survey of 25 communities found that they devoted, on average, 14 percent of their budget to health care, up from 8 percent a decade ago.

The report compares the most popular plans of 14 cities and towns with two plans offered by the Group Insurance Commission, the federal government’s Federal Employees Health Benefits Plan, and Massachusetts private employer-sponsored plans, according to a survey that was conducted by Associated Industries of Massachusetts.

Carey, a former manager for the state commission and the Commonwealth Health Insurance Connector Authority, found that “municipalities provide employees with far most costly and generous health care benefits than those offered by other employers in both the public and private sectors.’’

Besides low out-of-pocket expenses, many municipal employees enjoy more generous cost splits with the employer, compared to other public and private sector employees.

Most cities pay 80 percent or more of premiums in some plans, with Boston, Peabody and Somerville covering up to 85 percent of some plans’ premiums. At the other extreme, towns such as Marshfield covered as little as 50 percent of costs.

The commission’s plans included in the report require the state to pay 80 percent of premiums, while the federal employee plan requires 68 percent government funding. Private employers typically paid 71 percent of premiums, the report says.

Sean Murphy can be reached at smurphy@globe.com.