Uneasy times for retirees
Public-worker unions wary of bids to weaken health care benefits
As a retired public schoolteacher, Marie Ardito worries that state legislation to limit the power of municipal unions to negotiate health care costs will take an unfair toll on public sector retirees.
“There’s an awful lot of fear that people get as they get older,’’ said Ardito, 74, a coordinator of Massachusetts Retirees United, a Wilmington-based advocacy group with 1,700 members statewide. “We do not have negotiating powers . . . A lot of older people can’t afford to pay more for their health care.’’
State law does not allow public retirees to bargain health benefits. Most receive the same benefit levels as the municipal workforce. But since many are senior citizens living on fixed incomes, increases in copays, deductibles, and other elements of health plans can be tough medicine.
“People who have real serious health issues are the ones being hurt by this stuff,’’ said Ardito, a Burlington resident who retired 12 years ago from the Billerica school system. “A lot of people can’t afford to pay higher copays for an MRI or a CT scan.’’
The Massachusetts House voted last month to strip public employee unions of most of the authority to negotiate changes to health insurance.
House leaders said the measure, passed as an amendment to the House version of the new state budget, would save Bay State communities $100 million in the fiscal year that starts July 1.
House Speaker Robert A. DeLeo said the measure would allow communities to continue to fund services like education and public safety rather than laying people off to pay for retiree health benefits.
The House amendment is a local option, meaning a city or town would have to vote to adopt it before it could take effect. If it is adopted, a community would have 30 days to negotiate with a committee representing public employee unions. Retirees would have one representative. If agree ment is reached, 10 percent of the cost savings would be put into a special account, to be used for health-related programs, for the first year.
The amendment does require that “a percentage of the savings must address costs incurred by retirees,’’ but does not specify how much, and would only be for the first year. If no agreement is reached, a city or town could then implement changes to plan design, according to the legislation.
One retiree advocate believes the language does little to protect retirees’ interest. “There’s no safety net for retirees,’’ said Ralph White, president of the Retired State, County and Municipal Employees Association of Massachusetts, a lobbying group. “We’re in the same boat as employees.’’
It’s not certain the House’s budget version will stand. The state Senate still is developing its version of the budget. Any differences between the two versions will have to be worked about by a joint conference committee.
Governor Deval Patrick, who filed his own bill to overhaul municipal health care, ultimately must sign the budget.
Ardito noted that retirees across the state have already sacrificed for benefits won decades ago at the bargaining table. “What the public does not realize is that when retirees were active [employees], in order to get health insurance, most of the time we got very little raises,’’ she said.
But data show that retiree health care costs are a concern for Bay State municipalities.
A report released in February by the Massachusetts Taxpayers Foundation found that the state’s 100 largest communities collectively will have to pay $23 billion in health insurance benefits for current and future retirees over the next 30 years.
However, many communities do not have money set aside to meet these future obligations, making them unfunded liabilities. For some local cities and towns, the unfunded liability is estimated in the hundreds of millions of dollars, according to the report.
Haverhill’s responsibility is $299 million, Methuen $210 million, and Somerville $571 million, according to the report.
The amounts pose a threat to the long-term fiscal health of the communities, local officials said.
“We’re looking at a time bomb that hasn’t gone off yet,’’ said Mayor William Manzi of Methuen. “The numbers are pretty stark.’’
“This absolutely is going to hit us one day,’’ said Haverhill Mayor James Fiorentini. “The long-term future of municipal finance is very bleak.’’
Unlike with pensions, state law does not require a community to set aside money to cover their unfunded health insurance liabilities.
Only a handful of communities, including North Andover, have set up a fund to pay for future insurance costs. On June 7, voters at North Andover’s annual Town Meeting will be asked to put $92,000 from Medicare reimbursement payments into a trust fund to pay for retiree benefits. The town has a $115 million liability for retiree health care costs, according to the report.
Since most communities already are struggling to fund basic services, they can’t set aside millions of dollars to pay for retiree health care. Instead, most pay retiree health care as part of their yearly operating budgets.
“They can’t afford these benefits, so that’s why they can’t make contributions to a fund,’’ said Michael Widmer, president of the Massachusetts Taxpayers Foundation, which tracks state finances. “Their costs have just been exploding.’’
Communities have taken steps to curtail the growth of retiree health care costs. More have adopted a provision of state law that requires retirees who reach age 65 to go on Medicare, the federal health insurance program for senior citizens. Others have joined the state’s lower-cost group health insurance program. The move to cheaper health care plans, along with an increase in employee contributions, can be effective in cutting costs, officials said.
Peabody, for example, estimates that its unfunded liability fell to $301 million in 2009, from $420 million in 2006, the figure cited in the taxpayers foundation’s report. The lower number resulted after the city negotiated to change health insurance contributions paid by employees to 15 percent, up from 10 percent, said Patricia Schaffer, the city’s finance director.
“When you roll that savings over the life of the unfunded liability, it’s substantial,’’ she said.
In Lowell, health insurance liability soared to $690 million last year, compared with $433 million in 2008, the figure cited in the report. (Years vary in the report because communities complete their actuarial reports at different times.) “It went up because our rates had gone up,’’ said Tom Moses, the city’s finance director.
“It’s stunning, when you see a liability of almost $700 million and our annual budget is $300 million,’’ he said. “You can’t fund [the liability]. We’re struggling to maintain services as it is.’’
The city, which pays 75 percent of employees’ health insurance premiums, recently negotiated with most of its unions to move from the Blue Cross/Blue Shield Master Medical plan to a cheaper plan.
In exchange, most unionized workers will receive a $1,000 pay raise. Still, the change is expected to save the city $1 million next year, Moses said.
“It gives us some breathing room in terms of our costs next year,’’ he said.
The change will also aid some retirees. While they won’t receive a $1,000 pay increase, they will be covered by a $300,000 mitigation fund set up by the city to cover unanticipated costs that people may face as a result of the plan change.
A committee representing 14 labor unions negotiated the changes. Two members are Lowell retirees, although they were representing other labor groups on the panel. Still, their input about retirees was considered, said Lowell Police Sergeant Thomas Fleming, the lead union negotiator.
“We certainly listened to their opinions ,’’ said Fleming, a 30-year police veteran.
“We’re all going to be retired some day . . . I never would have served as [lead negotiator] for a group that would have harmed the retirees.’’
Kathy McCabe can be reached at firstname.lastname@example.org