As part of my recent ranting about the escalating costs of health insurance for our Massachusetts municipal employees and the state and local governments' inability to do anything about it, I contacted the Richard Reed, Town Manager for the Town of Bedford where I live. In about 24 hours I received a personalized, thoughtful and detailed reply about where Bedford stands on this issue. And, the reply was sent at 11:15 PM! I copied the entire reply to the end of this post, but here are the highlights.
- Bedford has worked hard with its unions to keep health care costs more manageable. Health care costs for all town employees comprise 7.9% of the town budget vs. the 14% in the Boston Globe survey.
- The details are in the full email, but for its HMO plan, Bedford pays 68% of the insurance premium vs. the 80-90% that most other towns pay. This is slightly below the average in the private sector.
- As Bedford is a small town, we have very few elected officals who are compensated. Most of the elected positions are unpaid or only eligible for a small stipend. No former elected officals in Bedford receive health benefits.
- Since the state allowed it 5 years ago, Bedford has required retirees to go on Medicare instead of being covered by the town plan.
- Although it still has an unfunded health care liability of $62M, Bedford has started putting money aside to fund this which is one reason why it has the highest possible bond rating (AAA).
- Mr. Reed agrees with me that a state law should be passed that allows cities and towns to change its health insurance plans without being subject to collective bargaining, as long as the benefits don't drop below what the state offers its employees. This law is going nowhere in the legislature and is one that every Massachusetts citizen should be calling their state senators and representatives about.
I was impressed with the timelinees and professional nature of Mr. Reed's response to me. Of course, as a citizen, I should expect this level of response, but we've all been conditioned to expect much worse from our elected officials, unfortunately. More importantly, Bedford's example shows that it's possible for a town to strike a reasonable deal with its unions and to force municipal retirees onto Medicare. Officials from other towns should follow this example to get their financial houses in order.
As a Massachusetts taxpayer, I am still going to focus on this issue with my state legislators. Although Bedford is in relatively good shape, if other towns go bust, the state will end up bailing them out. We need to get ahead of this issue.
The full text of the email I received from Richard Reed, Bedford Town Manager:
Good evening, Mr. Feinstein –
I have read the articles that appeared in the Boston Globe yesterday and today. As is to be expected, an article about municipal health insurance programs, when taken from a state-wide perspective, paints a negative picture. Taken from the individual perspective of this Town, the picture is much better as follows:
The article states that many municipal health insurance programs cover 80% to 90% of premium costs and that the average in the private sector is about 70%. In Bedford, family coverage for our HMO plan (a restricted network) is 61% and individual coverage is 83%; when the premium dollars are combined, the average for the HMO yields a 68% premium contribution from the Town. We also offer a PPO plan that gives the option to employees to go outside of the network; the PPO plan is covered at 50% of the premium for both individuals and families. When employees go outside of the network, they must pay 20% of the cost for the service provided. Bedford does not offer its employees and retirees a traditional indemnity insurance plan; employees who want the freedom of choice must opt for the PPO plan and absorb the 20% co-pay if they go out of the network. In sum, Bedford’s contributions are less than average, even in the private sector. As a percentage of the overall operating budget, health insurance will be 7.9%, as compared to the 14% average referenced in the Boston Globe article.
Contrary to the experience in other municipalities, no former elected officials receive health insurance from the Town. This is due in part to the fact that the Selectmen are the only elected officials in Bedford who receive a very minor annual stipend for their service. In order to receive heath insurance as a retiree in Massachusetts, you must have been compensated and be eligible for retirement. Since most of Bedford’s elected officials are not compensated, the majority cannot qualify for retirement health insurance benefits.
The Town of Bedford accepted the Massachusetts law that forces retirees off the Town’s health plan onto the Medicare program. This decision was made approximately 5 years ago and has resulted in avoiding the substantial expense of carrying these retirees on the regular Town health plan.
All communities are now required under governmental accounting standards to show on their audited financial statements what their unfunded liability is. Bedford regularly reviews its post retirement health benefits obligations, but had a practice of doing so much earlier than the effective date of the requirement. As mentioned in the article, very few communities (Wellesley, Needham and Boston) out of the 351 cities and towns in Massachusetts have begun to address this liability. For some reason they did not mention the one or two other communities that are doing this. Bedford is one of the communities that have begun to address this. In fact, we have more than $2 Million set aside for this future liability in a trust fund. There is still a quite a distance to go in this regard because the Town’s last study showed a liability of about $62 Million, without applying the $2 Million already set aside. Adjusting for the fact that we already have $2 Million set aside, our liability would be reduced several million over time. This matter of continuing to address this liability is something that current Town officials discuss quite often. In fact, at this year’s Annual Town Meeting, another $150,000 will be appropriated towards the liability, assuming voters approve. This may not seem like much, but Bedford is probably ranks first in the state in terms of the percentage of the liability funded. This progress made by Bedford is one of the reasons that the Town’s municipal bond rating was upgraded to AAA (the highest possible rating) a few years ago.
Since 1981 when Proposition 2 ½ came into effect, Bedford has never attempted a general override to raise additional tax revenue. Thus, until at least this point in time, we have been able to avoid a need to increase property taxes over the Prop 2 ½ limit for the purpose of covering health insurance expenses. We are actively looking at ways to minimize the increases of health insurance costs and hope to continue to be successful in that regard. Of course, the cost for health insurance continues to rise nationally and all governments and private employers are challenged by this circumstance.
The one thing that would be most helpful to Massachusetts municipalities like Bedford would be for the Massachusetts legislature to change state law so as to allow local governments to make changes in co-pays and deductibles without having to bargain the changes with unions. The state government is free to change these items without bargaining with their unions. Private business is not regulated in this regard. Why shouldn’t local governments be given the same ability? I see on your blog that you do agree and that you have contacted our state senator and representative encouraging them to grant this authority to local governments. Such legislation has been proposed for a few years now, but not approved by the legislature. If more like you would let them know what you think, hopefully they would listen.
Lastly, on your blog you mention the possibility of union’s striking. Strikes in the public sector are illegal in Massachusetts.
In summary, I do think that health insurance benefits are at a reasonable level in Bedford; that being said, my senior staff and I continue to work to keep these costs in check. I hope you find this responsive to you message.
Very truly yours,
Richard T Reed
Bedford Town Manager