city of lowell adoption of section 18a mgl chapter 32b public hearing february 9, 2010
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![Page 1: City of Lowell Adoption of Section 18A MGL Chapter 32B Public Hearing February 9, 2010](https://reader033.vdocuments.us/reader033/viewer/2022061518/56649d7f5503460f94a62b2d/html5/thumbnails/1.jpg)
City of LowellAdoption of Section 18A MGL Chapter 32B
Public Hearing
February 9, 2010
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Overview
MGL 32B, Section 18A
What is Medicare?
Lowell Statistics & Health Costs
Retiree Health Insurance
Why Adopt Section 18A?
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MGL 32B, Section 18A
MGL 32B governs municipal health insurance Sections 18 & 18A: Acceptance requires
transfer of all eligible retirees to Medicare Part B (physician insurance)
“18A” applies to future Medicare eligible retirees only Emergency legislation – passed Nov ’08 Local acceptance statute Requires adoption by City Council
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Section 18 Communities
Springfield Worcester Billerica Burlington Chelsea Dedham Fall River
Haverhill Needham Salem Framingham Arlington Waltham West Springfield
140+ municipalities have adopted Section 18 including:
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Before Section 18A
Upon acceptance of Section 18: City would be required to locate & enroll all
Medicare eligible retirees City would be required to pay the Medicare
waiver fine to federal government for unenrolled
Upon acceptance Section 18A: City enrolls only Medicare eligible who
retire after provision adoption with no penalties due
No effect on current retirees
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What is Medicare?
Federally provided medical insurance coverage for: Retirees/Spouses 65+ years Disabled < 65 years End-stage Renal Disease
Part A-Hospital Insurance Available premium-free if you are 65+, and you or
spouse paid Medicare Tax for at least 10 years Part B-Medical Insurance
Available to Part A holders for a current monthly premium of $110.50
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Medicare Eligibility
Eligibility is determined by the Social Security Administration
Municipal Employees were not eligible for Medicare coverage until 1986, when the Federal Government required employees hired after April 1, 1986 and employers to contribute 1.45% of salary with employer match of 1.45%
Not all city “retirees” qualify for Medicare: “Early” retirees under age 65 Retirees 65+ hired before 1986
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Medicare Premiums
Non-Medicare Eligible retirees stay on active employee plans – pay no Medicare premium
Penalty paid by Medicare eligible retirees for late enrollment: 10% per year for each year not enrolled
No penalties for future retirees w/18A Future Medicare eligible retirees accept Parts A &
B through SSA upon reaching eligibility
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Medicare Supplement Plans
City of Lowell offers: Medex & Carve-Out A & B
Supplements Medicare A & B to provide coverage that is actuarially equivilant to active employee indemnity plans
Monthly premium: $121.50/month Managed Blue for Seniors (New)
Supplements Medicare A & B to provide equivalent coverage to Network Blue HMO
Preventative Care Wellness Benefits Monthly premium: $107/month (estimated)
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How Will Section 18A Help?
Need to reduce costs where possible Improves OPEB liability & bond rating Provides for long term savings NO IMPACT on existing retirees NO IMPACT to future non-Medicare retirees
Non-Medicare eligible stay in active plan NO PENALTIES to Retirees or City Long-term strategy
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Health Insurance Costs
Limited ability to control health costs Unsustainable rate increases
MA has highest medical costs in US Costs increase as revenues decrease
Impact employees, retirees & taxpayers Affect hiring & delivery of public services
More $$ for benefits = Less $$ for salaries Fewer laborers, firefighters, police, teachers
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Health Insurance Costs FY01-10
(RoundedIn millions) FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Health Expenses 13.1 18.4 21.9 25.6 23.5 31.4 3.16 30.8 34.9 39.3
Operating Budget 259 275 270 266 273 285 296 309 319 309
% of Operating Budget 5.1% 6.7% 8.1% 9.6% 8.6% 11% 10.7% 10% 11% 13%
Over the Last 10 years: Annual costs: $13.1M to $39.3M (200%) 5% of Operating Budget in FY01 13% of Operating budget in FY10
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Health Insurance Statistics
$56 Million in claims per year 8,300 members 4,500 plans: 2,000 Retirees 2,500 Employees
45%Retirees (2,013) 55%
Employees(2,479)
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Lowell’s Retiree Group
2,000 Retirees in our group health Insurance: 66% in Medicare supplements
34% in Active/non-Medicare plans
689 Retirees remain in Active Plans :
“Early” Retirees under age 65
Spouses, Dependents, Survivors
Non-Medicare eligible 65+
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Cost of Retiree Benefits
Cost of Post Employment Benefits
OPEB Liability is $433 Million
Impacts Bond Rating – effect of growing health care costs on City’s financial stability
Pension costs
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Retirees in Medicare Plans
1,300+ in Medicare Supplements 91% voluntarily choose Part B already
Medicare Eligible Retiree ContractsPart A Only - No Part B
91%Medex &
Carve-Out A & B (1,200)
9%Carve-Out A
Only(124)
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New Option: Managed Blue for Seniors
City proposes new Managed Care Supplement Plan for Medicare Retirees:
Preventative Care: Routine Physicals, Screenings, Vision/Hearing exams, $10 co-pay
Tiered prescription coverage Wellness Benefits (Fitness, Weight Watchers) Coverage available through Blue Cross
Network Monthly retiree premium estimated at $107
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Financial Impact - City
Annually - Based on current/single plan coverage
Plan Coverage:
Active Plans:
Master Medical
Blue Care Elect PPO
Network Blue HMO
Medicare Plans:
C/O A&B or Medex
Medicare Part A
Medicare Part B
Medicare A&B Total:
25%
Employee
Contribution
$2,497
$2,219
$2,046
$1,462
$0.00
$1,326
$2,788
75%
City
Contribution
$7,491
$6,657
$6,138
$4,386
-
-
$4,386
Premium
Savings To City
per Retiree
$3,105
$2,271
$1,752
Per
Medicare
Retiree
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Section 18A Impact on Retiree Benefits
No change in the current indemnity plan’s benefits for subscribers who enroll in Carve-Out A & B or Medex plans.
Must present Medicare card in addition to Blue Cross Blue Shield card to providers.
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Adoption of 18A is the Fiscally Responsible Choice
Since 1986, the City and new employees each began contributing to Medicare taxes. We’ve been paying in but not receiving full benefit
Soon all employees will be Medicare eligible
Cost-shifting from City to the Federal Government
80% of qualified medical claims will be paid by Medicare instead of the Health Trust
City can budget with guarantee that retirees will accept Part B when eligible
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Adoption of 18A is the Fiscally Responsible Choice
Most Medicare Eligible retirees are already enrolled in Medicare – 91%
Medicare plus Medicare supplemental plans are equivalent to active employee plans
Prospective - NO impact on current retirees
No risk of future penalties for Retiree or City
Health cost control a necessity
Immediate reduction in OPEB liability