Saugus projects savings by leaving Group Insurance Commission

Six years after it helped blaze a trail for municipalities by joining the state health insurance system, Saugus plans to become the first community to leave the program in a move officials say will save the town and its employees over $1 million in its first year.

Saugus recently notified the Group Insurance Commission it is withdrawing effective July 1, 2014, when the town plans to switch to municipal Blue Cross Blue Shield of Massachusetts coverage offered through the Massachusetts Interlocal Insurance Association.

“The primary motivation in this decision is to find savings for the taxpayers in Saugus,” Town Manager Scott Crabtree said by e-mail. “This $1 million savings will help provide and maintain a full-service community for our residents.”


Saugus, which has 905 active and retired subscribers, estimates its insurance costs for fiscal 2015 at $10.48 million, $1.03 million less than it would pay if it remained in the GIC. For the second year, Massachusetts Interlocal has agreed to cap the increase to Saugus to the average increase charged to its other health insurance participants.

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For subscribers, monthly premiums for the regular HMO plan will be $58 for individuals and $152 for families, compared with the estimated $65 for individuals and $157 for families under the existing plan. For the PPO, they would pay $64 for individuals and $167 for families, instead of $70 for individuals and $172 for families.

An enhanced HMO would cost $91 for individuals and $239 for families.

A 2007 law opened the way for cities and towns and certain other public entities to join the GIC as a way of saving on health costs. One other group — the Wachusett Regional School District — withdrew on July 1.

Saugus was the first community to enter the GIC following passage of the 2007 law. Because of fiscal troubles, the town was allowed to join on Jan. 1, 2008, six months prior to the start date for other first-year entrants. Springfield joined in 2006 as a result of emergency regulations.


There are now 36 cities and towns in the GIC — 17 in this region. Many of the communities joined after the state adopted legislation in 2011 that allowed cities and towns to join the GIC or redesign their health plans to mirror the GIC without union consent. Three other communities, including Gloucester and North Andover, are joining Jan. 1.

“Municipal health care reform has changed the way communities negotiate their health insurance plans and helped cities, towns, and school districts stem the rising costs of health insurance to save jobs and deliver core local services,” Alex Zaroulis, spokeswoman for the state’s Executive Office of Administration and Finance, which administers the GIC, said in an e-mail.

“Since the reform was signed into law in July 2011, an additional 16 local government entities have joined the 27 cities, towns, and school districts already in the GIC, bringing the total to 43 communities and school districts representing over 45,000 municipal subscribers,” she said.

The decision by Saugus to opt out of the GIC was approved by the Public Employee Committee, a panel representing town unions and retirees that deals with insurance matters.

Crabtree, the town manager, said the town’s entry into the GIC was “the right decision at that time. There was quite a bit of cost savings that helped the town in that situation.” Crabtree said that most of the town’s share of the first-year savings would be placed in a stabilization fund to help cushion any future increases in health costs.


But with the town’s six-year agreement with GIC set to expire next July, town officials and the employee committee about six months ago began exploring other options that might offer further savings and similar or enhanced benefits, leading to the recent decision to join the Massachusetts Interlocal Insurance Association.

‘The primary motivation . . . is to find savings for the taxpayers.’

The nonprofit insurance arm of the Massachusetts Municipal Association maintains a trust that provides Blue Cross Blue Shield of Massachusetts health plans to 120 cities and towns and other municipal entities.

The new plans the town will offer include an HMO comparable to a Tufts Health Plan HMO the town currently offers through the GIC, with annual deductibles of $250 per person or $750 per family. But under the Massachusetts Interlocal plan, the deductible is waived if the subscriber uses hospitals in the Saugus area.

The town also will offer an enhanced HMO with higher premiums but no deductibles, and a PPO comparable to the town’s existing Harvard Pilgrim Health Care PPO that charges higher premiums but allows use of out-of-network hospitals.

Additionally, it will offer three plans for retirees that largely mirror existing options. The town would pay 90 percent of the premiums, except for the PPO, for which it would pay 85 percent.

Joe Callahan, marketing manager for Massachusetts Interlocal, said Saugus was able to access the relatively favorable rates and benefits because of its relatively low claims history the past few years. Unlike the GIC, Massachusetts Interlocal sets individual community rates based on their claim levels.

“It’s a wonderful opportunity because there are communities that are going to want Blue Cross Blue Shield products and are going to want to have rates reflect their own experience,” he said.

Bill Cross, chairman of the Public Employee Committee and president of the town’s firefighters’ union, said the committee unanimously approved the switch.

“We are getting the same coverage we had before, and the town and its employees are saving a million dollars. That’s what we like about it,” he said, noting that the union is particularly interested in controlling health care costs for its retirees on fixed incomes.

John Laidler can be reached at