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Reforms pay off as city saves $45m on new health plans

Speaker Robert DeLeo and President Obama can both take some quiet satisfaction in news that came out of Boston City Hall last week. With little fanfare, Mayor Walsh and municipal unions announced an agreement Tuesday that will hold down the city’s bills, freeing up millions in city funds that would otherwise be devoured by rising employee health insurance costs. It’s the direct result of a state law pushed by DeLeo in 2011 and of the health care overhaul signed by Obama — and further evidence that those reforms are working, despite continued criticism.

The accord allows the city to reduce the number of plans offered from six to three, potentially saving on administration costs. It will also raise copays by $5 per office visit, raise employee contributions to premiums slightly, and make other adjustments. Multiplied over 15,000 current employees and 14,000 retirees, the Walsh administration expects savings of at least $45 million over the next five years.

Walsh deserves credit for reaching a negotiated settlement with the city’s unions, without the clashes that sometimes typified his predecessor. Yet the mayor also had plenty of extra negotiating leverage. The 2011 state law gave towns and cities the ability to move municipal employees into the Group Insurance Commission, the system for state employees that is generally less expensive than municipal plans. As a result, many cities and towns have saved millions. Boston has not moved its employees to the state system. But the mere possibility has motivated unions to negotiate savings; even before the law passed, Mayor Menino was able to capitalize on its coming to achieve a previous round of savings. This time, everyone around the table knew that the GIC card was in Walsh’s pocket if the city couldn’t achieve needed savings through negotiation. While the municipal health reform law continues to encounter occasional resistance, it’s more than proved its worth.

Walsh also had the Affordable Care Act backing him up. Beginning in 2018, the Obamacare law will levy a so-called “Cadillac tax” on very expensive health plans, defined as plans costing more than $10,200 a year for individuals. The fact that the city had to worry about hitting that limit in the first place hints at how expensive the plans offered to municipal employees have been. Cities have responded to the Cadillac tax by seeking cheaper plans that don’t trigger the tax. The point of the Cadillac tax was to create an incentive to control costs, and the city’s agreement provides an example of how it’s working in practice.

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Boston employees will still have access to excellent health insurance that would be the envy of many private-sector workers. But the big picture is that the city — with the help of the state and federal governments — has taken an important step to safeguard its financial stability.

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