Municipal Health Plans:Gilded Benefits from a

Bygone Era

Bob CareyRLCarey Consulting

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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.

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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

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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

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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.

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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.

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Annual Premiums for Individuals

 Premiu

m

Municipal Average

Exceeds by:

Municipal Plans, Average $7,785 -

State GIC Plans, Average $7,098 9.7%

Federal (FEHBP),

$6,943 12.1%Standard Option PPO Plan

AIM 2010 Employer Survey, Average $5,592 39.2%

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Annual Premiums for Families

 Premiu

m

Municipal Average

exceeds by:

Municipal Plans, Average $20,925 -

State GIC Plans, Average $17,285 21.1%

Federal (FEHBP),$15,683

33.4%Standard Option PPO

Plan

AIM 2010 Employer Survey, Average $15,324 36.6%

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Co-Payments for Physician Office Visits

Primary Care (PCP)

Co-Payments

Specialist

Co-Payments

Municipal Health Plans, Average $11 $14

State GIC, $25 – Tier 1

Tufts PPO Plan $35 – Tier 2

$45 – Tier 3

State GIC, $20 – Tier 1

HPHC PPO Plan $35 – Tier 2

$45 – Tier 3

Federal (FEHBP), $20 (Preferred) $30 (Preferred)

Standard Option PPO Plan 35% (Participating) 35% (Participating)

Private Employers,

AIM 2010 Survey, HMO Plan

Private Employers,

AIM 2010 Survey, PPO Plan

$20 $20

$19 $19

$20

$20

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Co-Payments for Prescription Drugs

Tier 1 Tier 2 Tier 3(primarily

generic)

(preferred

brand)

(non-preferred

brand)Municipal Health Plans, Average $8 $16 $31 State GIC, Tufts PPO Plan $10 $25 $50 State GIC, HPHC PPO Plan $10 $25 $50 Federal (FEHBP),

Standard Option PPO PlanPrivate Employers,

AIM 2010 Survey, HMO PlanPrivate Employers,

AIM 2010 Survey, PPO Plan

$13 $28 $49

$13 $28 $47

20% 30% 30%

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

Hospitalization High-Tech

Imaging

Outpatient

Surgery

Inpatient

Hospitalization

Nine Municipalities, Average None None None

Five Municipalities with Outpatient/

Hospitalization Cost Sharing, AverageNone $128 $228

$300 – Tier 1

$700 – Tier 2

$250 – Tier 1

$500 – Tier 2

$750 – Tier 3

Federal (FEHBP), 15% – Pref. 15% – Pref. $250 – Pref.

Standard Option PPO Plan 35% – Par. 35% – Par. $350+35% – Par.

Private Employers,

AIM 2010 Survey, HMO Plan

Private Employers,

AIM 2010 Survey, PPO Plan

State GIC, Tufts PPO Plan$100 $150

State GIC, HPHC PPO Plan $100 $150

$94 $273 $483

$75 $199 $372

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Plan Deductibles

Individual

Coverage

Family

CoverageMunicipal Health Plans, Average $0 $0 State GIC, Tufts PPO Plan $250 $750 State GIC, HPHC PPO Plan $250 $750 Federal (FEHBP),

Standard Option PPO PlanPrivate Employers,

AIM 2010 Survey, HMO PlanPrivate Employers,

AIM 2010 Survey, PPO Plan

$914 $1,897

$744 $1,618

$350 $700

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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.