BOARD OF SELECTMEN POLICY WORKSHOP
MEETING AGENDA
NOTE LOCATION:

Jr. High School Library
July 27, 2009
7:00 PM

I. PUBLIC HEARINGS AND APPOINTMENTS
1. 7:00 BUILDING DEPARTMENT FEE INCREASE DISCUSSION
2. 7:05 HEALTH INSURANCE
II. SELECTMEN’S BUSINESS
III. CONSENT AGENDA
3. ORDER OF TAKING, EASEMENT DOCUMENTS, MAIN STREET, BREWSTER CONANT
Enclosed please find materials in the subject regard
IV. EXECUTIVE SESSION
None Required
FUTURE AGENDAS
To facilitate scheduling for interested parties, the following items are scheduled for discussion on future agendas. This is not a complete agenda.
AUGUST 10 & 24 SEPTEMBER 14 AND 21

MINUTES PENDING VOTES
May 18 and June 8 & 22 and July 13
PENDING COMMITTEE APPOINTMENTS
Michael Kreuze, BOH His application has been sent to VCC for interview to be scheduled
Dore’ Hunter - CPC, Application has been sent to VCC for interview
Maya Minkin - Historic District Commission - Her application has been forwarded to VCC for Interview
Ronald Rose - Historic District Commission, Design Review - his application has been sent to VCC for interview
David Baratt, Application for Historical Commission has been forwarded to VCC for an interview to be scheduled (VCC has been unsuccessful in contacting Mr. Barrat for an Interview)
Dara Mitchell, EDC, her application has been returned for BOS Action

xxxxxxxxxxxxxxxxxxxxxxxxxxxx

BOARD OF SELECTMEN POLICY WORKSHOP
MEETING MINUTES
Jr. High School Library
July 27, 2009
7:00 PM

Present: The Board of Selectmen, Chair Paulina Knibbe, Lauren Rosenzweig, Peter Berry, Terra Friedrichs, and Mike Gowing, Town Manager Steve Ledoux and Recording Secretary Maryjane Kenney
Finance Committee: MaryAnn Ashton, Steve Noone, Herman Kabakoff, Bob Evans, Pat Clifford and Brandy Brandon
School Committee: John Petersen, Jonathan Chinitz, Terry Lindgren, Mike Coppolino, Sharon McManus and Superintendent Stephen Mills

PUBLIC HEARINGS AND APPOINTMENTS
BUILDING DEPARTMENT FEE INCREASE DISCUSSION
Chair Knibbe called the meeting into session at 7 p.m. Selectman Berry moved that the town delay the implementation of the building fee increases until September 1st to allow the board to discuss the issue of building fees at a regularly scheduled Board of Selectmen meeting. Selectmen Rosenzweig seconded. Motion was approved 4 to 1 with Selectmen Friedrichs voting no.

Selectmen Rosenzweig moved that we approve the consent calendar. Selectmen Berry seconded. Motion was approved 4-1 with Selectmen Friedrichs voting no. Selectmen Friedrichs expressed her concern that the public present at this meeting was not paying attention to the meeting.

HEALTH INSURANCE
Total Compensation
Town Manager, Steve Ledoux, started the Policy Workshop with an overview of total compensation. The compensation package consists of salaries and benefits - primarily health insurance. When looking at how other towns compensate their employees you need to look at both pieces of compensation. For example, Concord has much higher salaries but the town contributes less to the health insurance benefit. When you look at the two together, Concord pays slightly more in overall compensation. Acton is currently in negotiations with most of its employee unions. Details of the negotiations are confidential at this point.

Health insurance premiums are growing at 6.1% while wages are growing at 3.7%. In Acton the schools and towns health insurance equals 20% of the total compensation costs.

Legal Requirements
Paul Hodnett Acton’s legal advisor for union negotiations presented - he spoke to the ramifications of Chapter 32B, which authorizes municipalities to provide group medical insurance to their employees; stating that under a trust entity you must treat employees with a uniformity of coverage. Under Section 7 deals with the split between employee and employer, in traditional plans the employer must pay at least 50%. In Acton the school system adopted statue7A and the current split is 85%/i 5%. Section 16 allowed for HMO Indemnity plans about 15 years ago, this allows for the employer to negotiate as long as the employee contribution falls between 10% minimum/50% maximum. Section 9 provides for retirees, with the default being the employer pays 100%. Section 9A for retirees permits the town to pay a subsidiary rate which is 50%/50%. Section 9E for retirees permits the municipality to pay more than 50% of the monthly premium. 9E is in effect in Acton but 9A is in use currently. Insurance is a mandatory subject of bargaining, you have to operate within Chapter 32. The town cannot offer any new insurance plan without negotiating it. Chapter 32B does allow the town to offer compensation for the employee to forgo insurance as long as there is no other funding from the town for that employees insurance. The Town of Acton adopted Chapter 32B in 1992. All retirees now are required if they are eligible for Medicare to leave the towns insurance and go to Medicare. Medicare coverage is not comprehensive and has two parts. Supplemental coverage must be provided by the town for those who require it and it must be comparable to the coverage the retiree had in place before going to Medicare.

Jonathan Chinitz inquired if the Acton teachers union is governed by the same constraints as the municipal unions. Council Paul Hodnett replied they are. So how would change be implemented? They would not be in violation if negotiations took place and went into effect a various times. Change can take place over time. You can pay different rates to implement as long as you are in that 40% range.

Steve Noone stated we have a place holder for collective bargaining agreement at Town Meeting, do Public schools bargaining agreements have to go to Town Meeting?

Funding requirements for school is approved by the School Committee and town bargaining funding is approved by Town Meeting. Jonathan Chinitz asked if an individual files a complaint against a ratified agreement can he file suit against what his union voted. Yes, Mr. Hodnett responded, if he wants. Jonathan noted that the minority would in that case have more power than the majority?

Health Insurance Trust
John Petersen from the Health Insurance Trust presented - The purpose of the Health Insurance Trust is to provide good health care cost effectively for our employees. The trust is self insured and authorized by Mass General Law 32B. Health Care cost for Acton employees this year paid for out of the trust will be $14.6 million in paid claims. This is approximately 16% of the Town’s total budget. The primary Trust revenues come from the Town and the Schools, those employees and retirees. The expenses are paid claims and administrative costs. The Trust offers 5 plans, Master Health Plus, Blue Care Elect, Net Blue (HMO), Harvard Pilgrim Health Care (HMO) and Medex for the retirees. The trust contracts with these companies for negotiated rates. Expense trends vary year to year dependent on many things such as cost out of pocket for services, charges paid from the trust for services rendered and reinsurance premiums less the reimbursements received. These factors vary considerably from month to month. The Trust must maintain unrestricted assets; they are funds in excess of the liabilities. That number now is $3M (21% of the assets). Could we lower that number, probably we should not, considering the volatility and complexity of setting rates?

Selectmen Rosenzweig asked who pays the checks. They are actually being cut by Tess Summers at the schools or John Murray the plan administrators.

Brandy Brandon asked can you encourage better behavior from the enrolled and then get better negotiated rates to show another way savings would be accomplished. Mr. Hodnett responded that the plan designs are something that one can negotiate.

Structure of Current Health Insurance Plan
Marie Altieri presented - Acton currently offers a choice of six Plans with 12 designs for active employees. There are 880 eligible employees with 14% (125) not subscribing. The cost sharing for these plans is 85%/20%. For the retirees the same six plans are offered with a cost sharing of 50%/50%. Additionally if a retiree is Medicare eligible, they must use Medicare. For these retirees there are three additional supplemental plan options and the cost sharing is 50%/50%. Different plans are offered because plans are oriented towards different care, some are geared towards hospitalization and some geared toward medical visits. By law retirees must be offered equal coverage to the coverage they leave when working. Increases in the “under 65” age bracket are fairly stable but retirees have grown considerably as we have an aging workforce. As noted earlier 31% are over 55. For retirees Medex is nation wide but Tufts is area limited and only available in a few states which is another reason to offer additional supplemental plans. Design of plans is one of the things you can do to help contain your health care costs. There is a dramatic shift to HMO plans. Administrative cost increase will be approximately 2% this year with our current plans from about 6.7%.

GIC Options for Massachusetts Cities and Towns
Group Insurance Commission - Danielle Chaplick was invited to speak on behalf of the Commission - The group is fostered under Administration and Finance, Chapter 67 which strictly deals with Health Insurance. The Commission sets rates and plan design. This year saw a 3.1% increase in premiums, the last 5 years averaged a 6% increase in premiums. If a municipality decides to join the GIG they must adopt Chapter 32B section 19; which provides for a coalition bargaining process. This means Acton would need to create a Public Employee Committee compromised of representatives of the labor unions and retirees. There is an annual October 1 annual deadline to join GIG with a start date of December 1. Implementation to incorporate a municipality into GIC is very complicated; you need birth, marriage certificates and complete reenrollment documentation. Under the GIG the Employee Committee can only negotiate three things; the decision to join, the split between the town and the employees (staying with in the mini 0%/Max40% for employees) and the decision at the end of the term of membership (The agreement calls for a time frame of 3 year increments that you must remain a member.) whether or not to reenroll. Once joined each municipality has two representatives, management and labor. With each additional 45,000 members additional representatives may be added. The GIG determines Health benefits, design of plans, insurance carriers, doctor co pays, plan deductibles, member’s rights and responsibilities and plan costs. These items are not subject to bargaining once the decision to join has been made. The allowable Administrative fee is up to 1%. Contribution rates vary. Co-pays higher and premiums lower. It would take a 70% weighted vote for the town to pull out at the end of a 3 year incremental term. The GIG has a number of carriers with ten plans; 2 indemnity plans, several PPOs and several HMOs. They have seven plans for retirees. They have an open bidding list every five years for vendors. Additionally they offer life insurance and pre tax programs (dependent care and health care spending). The premium rates over the last six years have been held to 61 %. This has been accomplished by moderating the rate of premiums by increasing the cost of co-pays and deductibles. Prescriptions prices are set by a formula negotiated with carriers by GIG. They do have wellness plans. The GIG’s consultant is Mercer who set the plan designs. In FY 09 there were eleven municipalities in the GIG or 286,000 people.

John Petersen asked if there is a financial statement for GIG? Danielle was not sure if it was public but will find out. Would school and town join together or as separate entities? Not sure usually one entity, but will check.

Pat Clifford, what are the current rates? How much you pay depends on what you pick and the GIG sets the rates. Splits are the only negotiating factors that the municipalities would have to deal with.

Options for Change
Town Manager Steve Ledoux presented - We have seen reviewed the GIG option. Everything is claims driven and we do have an aging force. The average age of the workforce is 48 years and (31 %) are over 55, so can we go to higher co-pays. Premiums would be possibly 2.5% lower if the co-pay could be higher. We could change the split. This is a high deductable plan. It could be easier to make a change to higher deductibles with the offer of a “health savings accounts”. This would be subject to bargaining like the other plans presented. It is like a flexible spending account that is pre-taxed money; by law passed in 2003 you can as family put $5450.00 into such an account and for single person you can contribute $2700.00. The advantage over a flexible spending account is the Health Savings Account allows you to roll over your money to the following year. None of the claims actually hit the health care account, so it will additionally lower monthly town costs. This is a relatively new concept and would need research. The town could also choose to contribute some amount to the savings funds. Informal coalition bargaining, Currently Steve Ledoux stated only 16 are part of the flexible spending accounts.

Selectman Rosenzweig asked if such a plan would include bargaining with the schools and the towns. The answer is yes and we are not sure of the numbers at this point.

SELECTMEN’S BUSINESS
CONSENT AGENDA
ORDER OF TAKING, EASEMENT DOCUMENTS, MAIN STREET, BREWSTER CONANT
Selectmen Rosenzweig moved to approve and Selectmen Gowing seconded. The vote was 4 approved the easement documents and 1 Selectmen Friedrichs voted no.

EXECUTIVE SESSION
None Required

Maryjane Kenney Lauren Rosenzweig, Clerk
Recording Secretary

Xxxxxxxxxxxxxxxxxxxxxxx

1 Health Insurance Policy Workshop
Acton, Massachusetts July 27, 2009 Jr High Library 7 p.m.
I. Introduction (Paulina Knibbe) (5 minutes)
II. Total Compensation (Steve Ledoux) (15 minutes) a. Salary / benefits
b. One comparison town

III. Legal requirements for health Insurance (Paul Hodnett) (15 minutes) a. What health insurance benefits must be provided?
b. Constraints on changing health insurance benefits
c. Requirements for those eligible for Medicare

IV. Health Insurance Trust Info (John Petersen) (15 minutes) a. Definition
b. Financial Status of HIT
c. Fee for service, not premiums

V. Structure of current health insurance plan (Marie Altieri) (15 minutes) a. What plans are offered ? i. Employees
ii. Retirees

b. Info about the plans

VI. Options for change (Steve Ledoux) (15 minutes) a. Changing within current HIT model i. Co-pays
ii. Changing employing contribution percentage
iii. Health Savings Accounts (Changing deductibles)
iv. Encouragements

b. GIC option (Danielle Chaplick) (15 minutes)

2
Wages, $44,019,592, 79.70%
Health Ins., $11,160,842, 20.21%
Other Benefits, $49,078, 0.09%
Acton, along with the country as a whole, is struggling with the rapidly increasing cost of providing health care. Acton’s cost for health insurance for our employees and retirees is shown in the table below.
FY ‘07 FY ‘08 FY ‘09 FY ‘10
Appropriation $9,431,494 $10,435,416 $10,275,771 $11,111,764
Percentage Change 10.64% -1.53% 8.14%

The municipality, the local schools and the regional school district are self-insured which has historically allowed us to provide coverage to our employees at below premium market rates. We administer a Health Insurance Trust (HIT) that is funded through employee and employer contributions that are primarily determined through collective bargaining.

This white paper is intended to provide a brief introduction to the structure of Acton’s current Health Insurance benefits and to some of the options that we may choose to pursue now or in the future.

Total Compensation
The total compensation package that is offered to employees (by the Municipality, APS and ABRSD) includes both salary and benefits. The benefits are dominated by the cost of health insurance. 3
Most employees of the schools and the municipality are represented by union contractors. Bargaining units include:
Municipal:
• Fire
• Police
• Dispatch
• Highway and Municipal Properties crew
• Municipal Properties union

Schools (The schools have two legally independent units per union (APS & ABRSD)):
• Teachers - Acton Education Association
• Clerical - Office Support Association
• Custodial and Maintenance - AFSCME

In addition, there are several categories of non-union employees :
• School administrators
• School support staff (bus drivers, cafeteria, special ed and classroom assistants)
• Town Administrators
• Town Professional employees
• Town paraprofessional employees
• Town - Certain ground’s maintenance personnel
• Town clerical staff
• Town casual employees

In general, if the benefit package increases in cost, this results in downward pressure on salaries. If the cost for benefits is reduced, salaries go up. Other towns face this same conundrum and may resolve it differently.

Legal Requirements
Massachusetts General Law Chapter 32B specifies the rules for providing health care coverage for municipal and school employees (http://www.mass.gov/legis/laws/mgl/gl-32b-toc.htm) . Health Insurance products must meet the requirements of current Collective Bargaining Agreements. Any changes to product offerings may be subject to negotiation as well as applicable state law.

Municipalities and schools are required to offer an indemnity plan. The indemnity plan offerings, costs, and percentage split must be the same among all units within a municipal entity. In some cases, the Health Insurance Trust may add products without negotiating a change to existing contracts, but all other changes require negotiations. Aspects such as co-pays, employee contributions and prescription benefits are all subject to bargaining. 4
The Collective Bargaining requirement may be satisfied by three distinct means:
• Individual Union Negotiations
• Collaborative Bargaining under Section 19 MGL 32B. Management and Labor Counsel do not recommend this process.
• Informal Collaborative Bargaining - rules set between the parties

Structure of current health insurance plans
Acton provides health insurance both for employees and for retirees.
• Employees. Employees who work more than 19.99 per week are offered health insurance. All employees are free to choose from any of the offered employee plans.
• Retirees. Retirees who do not qualify for Medicare continue to be covered by existing plans but they pay 50% of the cost.

Plan Higher Co-Pays Yearly Cost Lower Co-Pays Yearly Cost Higher Co-Pays Employee/Employer / Retiree Lower Co-Pays Employee/Employer / Retiree
Indemnity Plans
Master Health Plus Individual $12,648 $13,020 $1,896/ $10,751/ $6,324 $1,953/$11,067 /$6,510
Master Health Plus Family $28,573 $29,436 $4,286/$24,286/ $14,286 $4,415/$25,020 /$14,718
Blue Care Elect Individual $11,138 $11,136 $1,672 / $9,466/ $5,569 $1,670/$9,466 /$5,568
Blue Care Elect Family $22,838 $22,836 $3,425 / $19,412/ $11,419 $3,425/$19,410 /$11,418
HMOs
Harvard Pilgrim Individual $6,920 $7,140 $1,035 / $5,884/ $3,460 $1,071/$6,069 /$3,570
Harvard Pilgrim Family $15,974 $16,464 $2,396./ $13,578/ $7,987 $2,470/$13,994 /$8,232
Blue Cross Individual $6,708 $6,924 $1,004/ $5,703/ $3,354 $1,039/$5885 /$3,462
Blue Cross Family $15,481 $15,972 $2,321 / $13,160/$7,741 $2,396/$13,576 /$7,986

• Retirees who qualify for Medicare. All retirees who qualify for Medicare are required to move to that program when they become eligible. Acton offers supplemental insurance for retirees who are on Medicare.
5
Supplemental Plan Yearly Cost Retiree / Town Contribution
Medex III 4,956.00 2,478 / 2,478
Tufts Medicare Preferred* 1,968.00 984 / 984
Tufts Fee for Service* 1,980.00 990 / 990
First Seniority Freedom* 2,784.00 1,392 / 1,392

* These plans are premium plans and as such are not part of the Health Insurance Trust.
Health Insurance Trust (HIT) Info
The Health Insurance Trust (HIT) is a joint purchasing agency of the Town of Acton and the Acton-Boxborough Regional School District. The trust contracts with various service providers (Blue Cross / Blue Shield, Harvard Pilgrim, etc) to provide beneficiaries with access to their networks and directly administer claims from physicians, hospitals and pharmacies.
HIT Income. The HIT is funded by the municipality and the schools as well as from beneficiaries - municipal employees, local school employees, regional school district employees and retirees. The fund also derives income from investments (interest) and reinsurance reimbursement for large claims in excess of deductibles.
• Most town and school employees pay 15% of the cost of health insurance and the town and schools cover the remaining 85%. This percentage is set during union negotiations.
• Starting in FY10, School Administrators will contribute 25% of the costs of their health insurance. In return the Administrators received a one time cash bonus in FY 10 only of the difference between the 15% employee contribution and the 25% employee contribution.

HIT Expenses. The HIT is responsible for covering all the health insurance claims for covered individuals, administrative cost of the health insurance plans, the cost for the reinsurance policy and administrative expenses of the Trust.
Coping with the National Crisis in the Cost of Health Care 6
MGL Chapter 32B requires universal coverage of all Town employees and retirees. We at the local level cannot solve the problem of the overall cost of Health Care; however we are able to determine the effective employer/employee share of the expense for health insurance. Below are some methodologies that effect the distribution of cost between the parties:
• Co-pays
• Employee contribution percentages
• Health Savings Accounts (Changing deductibles)
• Encouragements

Massachusetts Group Insurance Commission
In July, 2007, Massachusetts enacted the Massachusetts Municipal Partnership Act. This Act permit municipalities to join the state run Group Insurance Commission (GIC) to provide health insurance for their employees and retirees. Historically, the GIC pays less for its health insurance plan than most municipalities and its rate of growth for health insurance costs has been less than that of municipalities. The GIC is able to provide health insurance savings because of the large pool of people that it serves and because of different rules in how it can structure health insurance plans.
GIC Rules
Once the unions have approved membership in GIC, benefits are not subject to future collective bargaining. The GIC determines health benefits, the design and type of plans offered, the insurance carriers, doctor copays, plan deductibles, plan members’ rights and responsibilities and plan costs, excluding employee contributions. The percentage of the premium to be paid by the employer and the percentage to be paid by the employee is determined each year as part of the Commonwealth’s budget process. The state has made a conscious decision to use co-pays and tiered networks to drive down the premium cost. This decision has been successful. From 2001 to 2005, state health insurance costs rose 29 percent. Because municipalities lack this fundamental ability to update plan design (the co-pays, deductibles and networks), their costs rose 63 percent.
Requirements for joining the GIC
The Municipal Partnership Act requires the governing entity (in our case, the municipality and the schools) to reach agreement with its unions to join the GIC. After joining the GIC, the governing entity must offer all GIC plans, commit to GIC for 3 - 6 years, and pay GIC an administrative fee of up to 1%.
The agreement process requires the formation of an employee committee that consists of representatives of each union plus one retiree member. The agreement must be approved by a 70% weighted vote of the employee committee. The votes of the members of the employee committee are weighted according to the proportion of a union’s members who are eligible for GIC. 7
Some Issues to Consider
Most discussion about the GIC includes the caveat that this is a good idea for some towns and not for others. It is not clear yet whether or not joining the GIC would be good for Acton.
Potential positives
• Financial. Being in a larger ‘risk pool’ helps financially by spreading risk across a larger group of people and by providing a better negotiating position with health insurance providers
• Procedural. The GIC has more flexibility in plan design

Potential pitfalls
• It is not clear whether or not Acton would experience significant cost savings by joining the GIC. The analysis depends heavily on how those covered by existing plans would migrate to GIC plans. Some of the savings that other towns and cities have experienced have occurred through policy changes that Acton already does such as requiring Medicare enrollment for those who are eligible
• Local control. Currently, we can negotiate the setting of rates, plan design, benefits - including optional benefits and locally targeted wellness programs. Asking the unions to give up negotiating input on these components of the plan is likely to require concessions on other aspects of total compensation
• Comparable benefits. Currently, the GIC does not offer any Blue Cross/Blue Shield type plans. In addition, not all GIC plans are available in all geographic regions
• Withdrawal concerns. Signing up for GIC requires a 3 (or 6) year commitment. However, at that point it may be quite difficult to withdraw. Currently, the GIC does not track claims experiences by member communities. This makes it difficult for a municipality to judge whether or not the GIC has been a cost effective solution. In addition, this will make it impossible to get a competitive price quotation from outside insurance carriers

Summary
The growing cost of health care and health insurance is a complicated topic and we will not solve this problem inside the borders of Acton. However, we can and must understand where we are now and what our options are as we move forward. Health Insurance is a major budget driver and a major benefit to our employees. Any changes that we may make have wide ranging implications and should be done with as much understanding as possible.