Report: Lynn could save $10.4 million with switch to different health insurance plan

LYNN — The metropolis could see a finances financial savings of $10.four million this 12 months if officers switch to the state’s group health insurance plan, in accordance to the findings of a brand new report really helpful to the mayor and City Council by Lynn’s state fiscal stability officer, Sean Cronin.

Cronin has stated worker health insurance is likely one of the main elements town wants to deal with so as to stability its finances. It’s one of many important contributors that landed Lynn in monetary bother a number of years in the past as town was purposely underfunding its worker health insurance, he stated.

Although there can be a discount in health insurance premiums with the switch, the brand new plan could lead to elevated out-of-pocket bills, or a internet improve in health care prices, for energetic and retired metropolis staff who want to use their health insurance extra typically, in accordance to Cronin, senior deputy commissioner of native companies for the Department of Revenue, who oversees town’s finances.

The report’s findings come as metropolis officers are confronted with a projected fiscal 12 months 2020 finances deficit of $5 million, whereas tasked with negotiating a couple of dozen union contracts, that could lead to vital elevated bills by quite a few potential raises for metropolis staff.  

The metropolis wanted to borrow $14 million by laws to stability its FY18 and FY19 budgets.

“It is critical that this report be carefully reviewed by the mayor, City Council, employees, retirees and taxpayers, as the potential savings are very significant and could play a major role in improving the city’s financial outlook,” wrote Cronin in a correspondence to Mayor Thomas M. McGee and the City Council obtained by The Item by a Freedom of Information Act request.  

The report, obtained by The Item and accomplished by Marsh & McLennan Agency, a advisor enlisted by town on Cronin’s suggestion, discovered that Lynn could see $13 million in health insurance financial savings if officers had been to switch to a brand new plan, specifically the commonwealth’s Group Insurance Commission (GIC).

With town, or taxpayers, selecting up about 85 % of worker household insurance plans and about 81 % of particular person insurance plans, that might lead to a finances financial savings of $10.four million with the remaining $2.6 million stability representing staff’ financial savings, in accordance to Cronin.

The $13 million represents a possible 22 % financial savings from town’s whole health insurance value of $60.four million in FY19, $48 million of which was town’s share, in accordance to Cronin.

Lynn’s present plan for energetic staff is Harvard Pilgrim HMO, but when town had been to switch to the GIC’s most subscribed plan, Tufts Navigator, prices can be 17 % much less for particular person plans and 25 % much less for household plans, in accordance to the report.

The whole annual for town’s HMO household plan is $28,889 and $10,789 for people. With a switch, utilizing a comparable plan, annual insurance prices for every worker is lowered to about $21,742 and $eight,922 respectively, in accordance to the report.

The cut up, relating to the share of what town and staff pay for health insurance prices, is up to town and unions to negotiate by collective bargaining. The metropolis could choose to improve its share or attempt to shift extra of the share from the taxpayers to metropolis staff.

When the Municipal Health Insurance Reform was handed in 2011, Cronin stated the laws allowed municipalities to go into the GIC, however not many communities took benefit of potential decrease charges.

When communities enter into the GIC, Cronin stated staff find yourself netting a mean financial savings with lowered premiums, which implies their paychecks improve.

But for some staff who could have to use their health insurance extra typically, comparable to for an sickness or visiting medical doctors typically, the rise in out-of-pocket prices, comparable to larger co-pays, might not be offset by the discount in premiums, which means they might nonetheless pay extra, Cronin stated.

The metropolis can attempt to mitigate these circumstances of elevated health insurance prices by taking a few of the projected health care financial savings and placing the funds right into a Health Reimbursement Arrangement (HRA), an employer-funded account that helps staff pay for certified medical bills not lined by their health plans.

“I know these discussions are difficult,” Cronin stated. “Discussions round health insurance understandably scares some folks. I’m hoping this report, the magnitude of financial savings might be understood and negotiations could be had to see what number of staff can be affected by elevated out-of-pocket prices and town could have a look at how to mitigate that.

“The numbers are too large to ignore. That frees up money to do other important things for the city.”

All of town’s labor contracts have expired and there was no funding included in final 12 months’s finances for raises. If there’s a want to improve wages within the new contracts, Cronin stated, capability have to be discovered and health insurance financial savings is a manner to present a few of these funds.

Currently, town doesn’t have the power to stability its finances, spend money on its infrastructure and keep aggressive by rising worker pay to sustain with the price of residing, he stated.  

The GIC has facilitated long-term monetary stability for quite a few Massachusetts municipalities over the previous decade, Cronin stated, with its charges remaining properly beneath rising market traits.

He referred to as town’s present health insurance mannequin “unsustainable,” and if left unaddressed, it “could further imperil the city’s future financial stability.”

The metropolis’s whole health insurance expenditures have risen 35 %, or almost $16 million since FY13. Over that very same time interval, the property tax levy has grown by roughly $27 million, in accordance to Cronin.

With town’s approximate 80 % share of that $16 million equating to $12.5 millon, shut to 50 % of all new property tax have gone towards funding development within the metropolis’s share of health insurance, Cronin stated.

As of Wednesday, Cronin stated he has not acquired a response to his correspondence from the mayor or City Council.

Through a spokeswoman, McGee declined touch upon the report.

City Council President Darren Cyr stated he had no remark as health insurance is a part of collective bargaining and he was warned commenting on ongoing negotiations can be an unfair labor observe.

“While they’re in negotiations, I can’t really talk about any of the proceedings,” Cyr stated. “It’s up to the mayor and his team, or the unions, to respond. I would believe both parties are looking at whatever they can do to save money wherever they can and also to be able to look at something fair.”

Sheila O’Neil, president of the Lynn Teachers Union, declined remark, saying it could be a violation of the labor legislation and Richard Germano, president of AFSCME Local 1736, which represents metropolis employees, didn’t return cellphone calls in search of remark.

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