Blue Mass Group

Reality-based commentary on politics.

GIC or Bust

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It seems the road we’ve been traveling in mandating municipalities in using the Group Insurance Commission (GIC) to provide health care is going to reach it’s final showdown.  The Globe is reporting that Governor Patrick today in an address at the Massachusetts Municipal Association stated that they will need to cut unrestricted local aid to manage the budget deficit.  He did note that he would propose increases in state aid for schools, special education, and road repairs but let’s be honest here, cities and towns will on average get a 7% hit on local aid which will impact everything including schools.

The governor then cushioned the blow with a statement that he will propose health care changes that will more than offset the reduced municipal aid, emphasis mine:

The proposal, which would need legislative approval to take effect, would require all cities and towns to either join the state’s insurance program, the Group Insurance Commission, or put in place a similar plan of their own by the start of the next fiscal year, which begins July 1. The measure would also require municipalities to move eligible retirees into Medicare, which many still do not do, further driving up costs for taxpayers.

Pretty significant changes in mandating GIC and removing “health care for life” that a good amount of municipalities still provide.  Patrick is now putting the onus on the legislature to deliver on these requirements which is no small task.  But if ever there was a time to evaluate policies that pose a significant burden on municipalities it is now.

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  1. I also wonder if that means that Deval is seeking to free municipalities from their obligation to fulfill their contracts.  Sounds it at the moment, which generates the other question: what other laws is the governor planning on encouraging the government to break?

  2. Road repair local aid – aka Chapter 90 – is bond funded, and is not part of ordinary revenue collection.  In fact, even  when local aid was cut in the last couple of years, Ch. 90 was actually increased due to the fact that when you sell municipal bonds, you cannot then spend the proceeds on something else.  So it’s a nice fallback in local aid negotiations, since it HAS to be spent on that anyway.

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    p>Medicare – until recently, the state itself also left 65+ spouses of active employees on regular GIC.  Do they still do that?  At any rate, when a 65+ eligible retiree signs up for Part A and PArt B, they can then still get a supplement.  When you figure the new cost paid to Medicare out of SS check and the decrease in cost on regular plan, it’s pretty much a wash, so not all that bad for retiree/spouse in question.  In fact, since spouse can then move from family plan to single, it’s sometimes a little less.

    • I’m certainly no apologist for the HMO’s, and I have no personal experience with the GIC, but I’ve heard anecdotally, at least, that the GIC has significantly poorer coverage than traditional health coverage that has been negotiated for decades — which is why employees are so reluctant to move to GIC.  It would be nice to have some actual solid comparisons.

      • here.

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        p>Note: Rates are negotiated town by town through collective bargaining.

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        p>Any time you move a large group of families and retirees from one plan to another, there will be change, even of the new plan is comparable or better. People do not like change. You might have to change your doctor; copays might be greater; that sort of thing.

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        p>You also might get a better doctor, or not have to change; your copays could be balanced by more take-home pay, or other benefits your union negotiates, or even having a job, since cities and towns are laying people off to pay the HMOs.

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        p>Do you know any state employees? Ask them how they like their health plan, they are all on the GIC.

      • had much better coverage with GIC than we ever had with Harvard Pilgrim.  I will never forgive Harvard Pilgrim for denying me a stress test (which my previous doctor had approved) because “we only give stress tests now if we think that the patient may suffer another heart attack” (now I do have my yearly stress tests under GIC supplemental coverage to Medicare).

        • and I’m not here as an apologist for the HMO’s.  Their way of doing business is just outrageous.  As far as GIC goes, the anecdotes I’ve heard involve greater co-pays and less coverage.  Of course this varies with specific details and medical conditions, as it does in any case from HMO to HMO.  The bottom line, however, is that the cost savings seem to come from lower levels of service and higher costs.  (If not, any union would jump at the opportunity to join this.)

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          p>The only way to really get a handle on health care costs is to move to a single-payer plan, eliminating the roughly 30% of administrative overhead of the insurance companies.  That would be a positive move.  And it’s a move that our elected leaders, with a few courageous exceptions, have decided is just off the table.

          • The highest actual figure I ever encountered was the now-bankrupt Baystate HMO, which was 23%. And that was twenty years ago!   Most were in the 11 – 16 percent range.

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            p>Do you have a CURRENT backup for that 30% for companies writing in MA?

            • The short answer is no, I don’t have current figures.  I don’t know if anyone does, and I agree that it’s hard to come by these figures.  What I did rely on is this:  In 2009, the Sudbury Democratic Town Committee put out a paper (available on our web site SudburyDemocrats.org) titled “Single-Payer Universal Health Care — An Idea Whose Time Has Come”.  In that paper we stated,

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              p>”Approximately 31-35% of each dollar spent in the United States for health care actually goes to pay insurance company overhead.”  We referred for this statistic to a 2003 paper by Woolhandler et al., “Costs of Health Care Administration in the United States and Canada”, published in the New England Journal of Medicine, Vol. 349, pages 768-775.  (The paper used be available on-line, but the link seems no longer to work.)

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              p>The figure is not Massachusetts-specific.  I don’t know if there is any real difference between Massachusetts and the rest of the country.  (Nor do I remember this kind of consideration coming up when we were writing the paper — but perhaps there is a difference.  I don’t know.)

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              p>In considering this sort of statistic, one has to remember that there are two components to this overhead — the in-house administrative overhead of the insurance companies themselves, and also the overhead imposed on doctors in hiring people whose sole function is to handle insurance matters.  This is not a trivial cost.    

              • I used to design and sell self-insured health plans to small businesses.  Part of our selling point WAS administrative costs – and 30% is more than any commercial company I’ve ever seen.

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                p>And state-specific DOES make a difference.  Congress enacted laws that prohibit health insurance companies from selling across state lines (That’s why Blue Cross/Blue Shield isn’t one company nationwide, but 50 franchises with differing levels of benefits and costs).  Consequently, all such estimates can be is an ‘average’ of costs in various states, and things like that are impacted by things like cost of living for employees in those states, wage and benefit requirements which vary from state to state and so on.  Congress went out of its way to ensure that apples could only be compared to oranges in this regard.

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                p>I didn’t see the Sudbury white paper, or the study you based it on, but it would seem that the backup is a little insufficient for a blanket assertion.

                • Large corporations with offices in multiple states can self insure and skip the mandated state benefits which have driven costs higher in Massachusetts than in other states.

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                  p>BTW – great state to state comparison is available at Kaiser Family Foundation

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                  p>

                • As far as I know, that article is well-respected.  It’s not a slipshod piece of research by any means.  And I think it does accurately reflect the general way in which money was being spent on health care as of or shortly before 2003 — and probably still today.

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                  p>(The term “administrative costs”, by the way, is often used in different ways.  The insurance companies spent outrageously huge amounts of money opposing the recent health care legislation.  I don’t know if that was referred to as an “administrative cost” or not.)

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                  p>In any case, however, the point that our paper was making was that in comparison to just about every other industrialized country (and some not-so-industrialized ones as well), we in the United States have a lower quality of health and of health care and we pay a lot more for it.  There are a number of reasons for this, of course.  But one of the major ones is that most other countries have some form of single-payer universal health care that effectively eliminates the middle-man and leads to greater efficiencies — not to mention more humane decision-making.

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                  p>And as far as overhead costs go, we can look further into local and national costs to be sure — but no matter what we find, we won’t find anything comparable to the costs of Social Security and Medicare, which are in the single digits — generally the low single digits.

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                  p>So I agree with you that more and more specific information would be a good thing to get.  But I am also sure that it would in no way affect the conclusions that we drew in 2009, and would certainly draw again today.

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                  p>       Regards,

                  <

                  p>       Carl Offner

    • In which case workers will move to it out of self-interest, and this type of illegal compulsion is unnecessary.

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      p>Or maybe it doesn’t, but rather admit to their screw-ups on managing pensions and putting together  contracts, politicians will continue to insist that workers pay the price for their cowardice and incompetence.

      • Sab I think this line of argument is not worthy of you. It’s like saying that if global warming were real people would be taking it seriously.

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        p>The benefits offered through the GIC are as good as anywhere except maybe Congress. They are also a matter of public record. You don’t have to speculate about what they “may be.”

        • Because there are many unions that don’t enroll.  Do you think it’s because they hate having better benefits?

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          p>I know of several associations in my area who compared their current plan to the GIC, found their current plan had better benefits, and did not want to enroll.  Either they are all lying, they all want worse benefits, or the GIC isn’t as good as some people want to believe it is.

          • Unions are often paid a commission on plans they adminsiter.  There is sometimes a profit motive for the union to offer a particular plan.

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            p>Find out from the union – DO they receive any recompense from the carrier they choose?

            • None of the associations and locals with which I am familiar get a cut.  They just take care of their members, behavior which is only acceptable for corporate boards now.

  4. When I was a State employee, even with the changes over the years, GIC coverage was perhaps the best coverage I have ever had.  Moved to the feds and although many more plans the cost is higher and coverage slightly less quality but still very good.  As comparison, I paid about 160 a month in 2008 family plan for Tufts Nav with state.  Now I pay about 220 a month for BC BS basic with feds.  I pay more in copays and ded etc than under GIC but these are cheap rates. No complaints.

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    p>In my opinion the state should have gone to the staggered premium system years ago…make less than X pay 15% of premium, more than X but less than Y pay 25%, more than Y 35%.  Thats fair.

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    p>Now lets move locally.  Local premiums employees shares are all over the place from 5% to the max 50%.  25%-30% is fair in my mind and no plan should ever be above that. My town has worked diligently over the years to adjust coverages and premiums and plan components to keep costs down for everyone.  We offered FSA plans to help employees save money and it was rejected until last year.  Unions have been by and large cooperative except one which grieved changes that actually saved them premiums last year and as a result everyones premiums went up when we had to settle with them.

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    p>We changed from a disastrous self funded system 8 years ago to fee based…it was ok for a couple years then skyrocketed, so we went with MIIA…it was ok for a few years until we fought for a lower increase last year.  This year we are looking at 6%-14% increase.  Anything over 8% is going to result in large negative impacts.  GIC??  May be what we look at after we see this years rate increases for MIIA.  Historically our MIIA increases were less than the average GIC increases up until the last 2 years.  We adopted the medicare rules quite a while ago.

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    p>Frankly, one system would be welcomed by our community.  We have never negotiated in the best interest of the Town without looking at the best interest of employees.  Not sure about other communities but health coverage is very high on our priority list…just cost prohibitive at this point.

    • (see my comment above) said that the GIC took too many people on at once and screwed up their liability, which  the higher costs of the GIC.

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      p>I’m fuzzy on this stuff, so if anyone understands what I’m trying to say better than I do, please speak up. I think the general idea was that the GIC accumulated a bunch of sick people at once and increased costs.

  5. I’m often frustrated that people consider them as distinctly as they do.  The idea that wages should fall into this range and co-pays in that range and employer contributions into this other range boggles my mind.

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    p>I don’t know the tax implications, but I could imagine a situation where it’s better [for both employee and employer] to get more bennies and less salary due to taxes, or the reverse.  For a state/fed government employee the balance might change a bit due to employer taxation implications, but the idea is the same.

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    p>

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    p>This is just a general comment, not referring specifically to a post above or to the diary itself…

    • Everything is bargained together, for the most part.

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      p>I think you are right that many people outside the process tend to discount that.

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