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Worcester City Manager Fights “Ballooning” Healthcare Costs

Monday, February 20, 2012

 

Health care costs are still rising. Photo: Flickr, Images_of_Money

The City of Worcester has cut back bloated spending on healthcare benefits for City employees and retirees over the past 8 years, but it may not be enough to save taxpayers from exponentially growing costs.

“The City Manager has been reining in healthcare costs since he took his position in 2003,” said City Manager Michael O’Brien’s Chief of Staff, Christina Andreoli.

In January 2011, O’Brien issued a letter citing City employee care benefits as the most expensive line item. City employee care costs made up 16% of the city budget for the 2012 Fiscal Year, according to the City Chamber of Commerce. That number has doubled from 8% in 2000.

Working with unions

O’Brien has taken extensive measures to curb the cash flow, most notably moving police and teacher unions to his 75/25 co-pay system last May, (city government/employee). Those unions were the last stand-offs against the co-pay system. In 2004, the co-pay ratio was 90/10.

The City Manager has slashed administrative fees and third-party costs, and moved more retirees into federally-funded Medicare plans through Section 18. His administration has also created an agency similar to the state’s GIC (Group Insurance Position), which gives the them the ability to change insurance deductibles and premium payments, saving further costs.

Healthcare costs were growing annually at rates as high as 20% in 2004 - O’Brien slowed that rate to 4% between 2006 and 2010.

More changes still needed

Although many of O’Brien’s healthcare reforms have been unpopular with constituencies, Andreoli said they “have resulted in tremendous savings for the taxpayer.”

That doesn’t necessarily mean taxpayers will be getting that money pack in their pockets.

“Those savings, though it might not be a check back to the taxpayer, allow us to redistribute funds to other areas that benefit the taxpayers, like public schools, and public works,” said Andreoli.

Furthermore, the new federal health care bill mandating coverage for dependents 26 and younger under their parents’ insurance will alone cause a 3% increase in City healthcare costs. Currently, the average single family pays $500 of their $3,301 property tax bills on City employee healthcare.

The Massachusetts Taxpayers Foundation, a nonprofit research organization, made Worcester a chief focus in their January 2012 report, “The Crushing Burden of Municipal Retiree Healthcare Liabilities.” The Foundation concluded, “As the Worcester experience shows, despite the opportunity for significant reductions in liabilities created by municipal health reform, that step alone will not solve the retiree healthcare challenge. The Legislature must address the problem directly by tightening eligibility standards and giving municipalities the flexibility to curtail costs.” 

 

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