Methuen has reached agreement with its municipal unions on health plan changes that officials say will mean lower costs for the city and employees.
The city until now offered a single health plan, Tufts Advantage PPO, to its employees and retirees. It is now introducing a second, alternative plan, Tufts Spirit, that offers lower premiums and deductibles in return for higher co-pays and a more limited medical network.
The shift of subscribers to the lower-cost new plan – officials expect about 10 percent will opt for it – coupled with a recent drop in claims, will save the city about $700,000 in insurance costs next year, according to city auditor Thomas J. Kelly. He said it will also mean lower premiums for all employees, including those who remain on the current plan.
Subscribers to the existing plan will see their premiums drop $151 per year for a single person and $545 for a family. Those who switch to the new plan would see a reduction of $371 per year for an individual, and $771 a year for a family.
“I think this is a great outcome. It’s a positive for the city,” Kelly said.
Methuen joins a growing number of cities and towns that have negotiated cost-saving health care changes since the state last July passed a new law empowering municipalities to revamp their health plans without union agreement.
The local option law sets out a process for municipalities to either join the state’s Group Insurance Commission, or to make changes to their deductibles, co-pays, or other health plan features that are comparable to those offered by the GIC.
As of March 19, 127 communities and regional school districts statewide had taken steps to adopt the law or to use traditional collective bargaining to achieve savings in their insurance, according to a report by the Massachusetts Taxpayers Foundation.
Shortly after taking office as Methuen’s new mayor in January, Mayor Stephen N. Zanni asked the City Council to adopt the law. But the council opted not to do so, preferring to see the city and the union panel, the Public Employees Committee, first try to reach an agreement without using the law, according to Kelly. Those talks resulted in the agreement.
While Zanni’s goal was to have Methuen join the GIC, the unions opposed that route, and the mayor said he was satisfied for now with the changes.
“I think in the future we still have to keep our eyes on the GIC, but I think overall this was good for the employees and also good for the city,” Zanni said.
Donna Gogas, president of the Methuen Education Association and chair of the Public Employees Committee, said she is also content with the outcome. Her union represents the School Department’s teachers, secretaries, and program assistants.
“We were satisfied with the negotiating process this year. We think it benefitted both parties — the city and the employees,” Gogas said. “And we’ve gotten good feedback from our members.”
“This was a much better outcome than we’ve had in the past, especially where we can now offer an HMO with significantly [lower] deductibles,” she said, referring to the Tufts Spirit plan. “It just gives our members . . . more choices.”
Gogas said the agreement also avoids having the city join the GIC. “Once you do that,” she said of switching to the state system, “you are giving up the right to the plan design, and the employees aren’t ready to do that.”
As a self-insured community, Methuen maintains its own health insurance trust fund generated through premiums, 62 percent of which are paid by the city and 38 percent by subscribers. Tufts provides the city the use of its plans and its provider network, but Methuen pays for all claims through its fund.
The recent agreement follows another deal the city and its unions struck two years ago, in which the unions made significant concessions, according to Kelly.
That agreement came after Methuen was forced to absorb a $3 million deficit in its insurance fund due to a costly claims year in fiscal 2010, Kelly said. Under it, the city replaced its then low-deductible Blue Cross/Blue Shield plan with the current Advantage plan, which has an annual deductible of $1,000 for individuals and $2,000 for families.
After the city began to realize savings from the change — and in view of the 10 percent pay cuts unions had taken in fiscal 2010 to avoid layoffs — then-mayor William M. Manzi III agreed to have the city in fiscal 2012 cover the first $350 of the annual deductible for individuals and the first $700 of the deductible for families, Kelly said.
As part of the most recent deal, the city has agreed for the next fiscal year alone to increase that subsidy to the first $400 of the deductible for individuals and the first $800 for families.
The city plans to fund the overall cost of those subsidies next year by tapping a surplus in its insurance fund. Kelly said that will trim another $500,000 from the amount the city needs to allot from its general budget for health insurance next year.