1. Municipal Health Plans: Gilded Benefits from a Bygone Era Bob Carey RLCarey Consulting

2. 2 Unsustainable Health Care Costs Municipal health care costs are increasing at an alarming rate—an average of 10.8 percent annually since 2001—which is crippling local budgets and forcing layoffs. –By comparison, the GIC has averaged 6.4 percent growth over the same period. Local officials are limited in their authority to enact cost saving changes to plan design. This is the first study to compare specific municipal plans with other employer-sponsored plans in the state.

3. 3 Methodology Selected 14 small, mid-sized, and large communities that are economically diverse –For each community included the most popular plans among employees for fiscal year 2011 GIC plans that cover majority of active employees Federal plan that covers most federal employees in MA Private sector plans –Findings from AIM’s 2010 employer benefits survey

4. 4 Methodology Comparison of total premium costs Comparison of plan designs –Member cost-sharing for services that account for vast majority of health care utilization and costs Office visits, prescription drugs, high-tech imaging, outpatient surgery, inpatient hospitalization, and deductibles

5. 5 Findings Municipal plans have the highest premiums in the state. –Average premium for family coverage for municipal plans is $20,925 21% more costly than the GIC’s PPO plans 33% higher than federal government’s PPO plan 37% more expensive than MA private sector plans These disparities are even more striking because the majority of municipal plans are HMOs, which are normally less expensive than PPO plans.

6. 6 Findings Excessive premiums are driven by overly generous benefits that include almost no cost sharing. State, federal, and private sector plans use cost- sharing to: –Manage annual premium increases; –Encourage members to use services wisely; and –Encourage members to obtain quality care from less costly providers and facilities.

7. 7 Annual Premiums for Individuals Premium Municipal Average Exceeds by: Municipal Plans, Average$7,785- State GIC Plans, Average$7,0989.7% Federal (FEHBP), $6,94312.1% Standard Option PPO Plan AIM 2010 Employer Survey, Average$5,59239.2%

8. 8 Annual Premiums for Families Premium Municipal Average exceeds by: Municipal Plans, Average$20,925- State GIC Plans, Average$17,28521.1% Federal (FEHBP), $15,683 33.4% Standard Option PPO Plan AIM 2010 Employer Survey, Average$15,32436.6%

9. 9 Co-Payments for Physician Office Visits

10. 10 Co-Payments for Prescription Drugs

11. 11 Co-Payments for High-Tech Imaging, Outpatient Surgery, and Inpatient Hospitalization

12. 12 Plan Deductibles

13. 13 Conclusion Municipal health plans are outdated, excessively generous, and far too costly. Municipalities need to take urgent action or continue with severe and painful cuts. Local officials need the power to adjust plan design outside of collective bargaining—the same authority the state has with its employees.