HOT Issues of Health Insurance

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NOV 2006 - What Do They Mean? -

By way of our numerous media outlets, including the Voice, 24-hour hotline and website, we strive to keep you updated on the latest developments involving your health insurance. From reading and listening to these sources, you know that there are several insurance issues which will remain front and center – put simply, “hot” – over the ensuing months and years. In this primer, we included a brief explanation on what some of these issues mean. It’s hoped that you find it informative and helpful. Mandatory Medicare

The term “Mandatory Medicare” refers to retirees and their spouses being forced to transfer out of their existing health insurance plan when they become eligible for Medicare (”Medicare-eligible”). In place of their existing insurance coverage, they are required to enroll in Medicare Parts A and B, as well as a Medicare supplemental plan.

Under the state’s group insurance program, which is administered by the GIC (Group Insurance Commission), Mandatory Medicare is imposed upon all Medicare-eligible retirees and their spouses. The mandate is contained within Section 18 of Chapter 32A of the General Laws, which took effect on July 1, 1991. As part of its group insurance program, a municipality may elect to implement Mandatory Medicare. In order to do so, it must adopt the local option provision, that is contained within the municipal group insurance law, Section 18 of Chapter 32B which also took effect in 1991.

It’s important to remember that if you’re not Medicare-eligible, you cannot be forced to transfer out of your existing insurance plan and can remain with it. If you have any questions about your Medicare eligibility, you should check with your local Social Security office.

GASB & Statement 45

The term “GASB” (pronounced “GAZBEE”) refers to the Governmental Accounting Standards Board, a private-sector board, financed by Wall Street, that establishes accounting standards for some 80,000 state and local governments, including what information should be contained in their financial reports. While they are not law, officials adhere to GASB standards.

Back in 2004, GASB issued accounting standards, known as Statement 45, that requires state and local governments to disclose their liability for future retiree healthcare costs in their financial reports. Statement 45 not only requires that healthcare liabilities be disclosed, but also encourages that liabilities be funded in much the same manner as pensions. While pre-funding of retiree healthcare is not required, doing so could be necessary in order to maintain a strong bond rating for the state and municipalities.

The state government and municipalities with revenues of $100 million or over must comply with GASB’s Statement 45 on July 1, 2007; municipalities, whose revenues are between $10 and $100 million, must report on July 1, 2008, and those with less than $10 million in revenues must do so on July 1, 2009.

Coalition Bargaining

The term “Coalition Bargaining” refers to the local option provision which became part of the municipal group insurance law (Section 19 of Chapter 32B) in 1993. It should be noted that the Association was a principal sponsor of this law.

If Section 19 is adopted by local officials and union/retiree representatives, then a public employee committee (PEC) is created, which includes a retiree representative appointed by our Association. The PEC negotiates with municipal officials over the insurance plans for local retirees, employees and survivors. An agreement on the plans must be approved by at least a 70% weighted vote of the PEC.

With coalition bargaining, retirees, survivors and employees all pay the same premium contribution percentage toward their health insurance plan. It also requires that out-of-area retirees must receive the same benefits as in-area retirees.

Retiree Drug Subsidy

The term “Retiree Drug Subsidy” or RDS refers to the federal subsidy program that the Congress created when it established the Medicare prescription drug program, known as Part D. The subsidy program began January 1, 2006.

Employers, including the state and municipalities, are eligible for RDS if they provide drug coverage, comparable to or better than Part D, to their retirees. Under RDS, the federal government, specifically the Centers for Medicare and Medicaid Services (CMS), is essentially reimbursing the state and eligible municipalities for 28% of their total drug costs for Medicare retirees. According to CMS estimates, the average RDS payment will be approximately $668 per enrollee.

Insurance Advisory Committee

The term “Insurance Advisory Committee” or IAC refers to the eight member body which a municipality is required to establish under the municipal group insurance law (Section 3 of Chapter 32B). It should be noted that in 1993, the Association successfully enacted legislation, expanding the then seven member IAC, comprised of union representatives, to include a retiree representative appointed by the mayor, selectmen or county commissioners.

According to the IAC law, municipal officials must submit the health insurance plans, that they intend to offer to retirees and employees, to the IAC before they do so. If the IAC recommends changes, then officials must respond to them, explaining why they did not include particular suggestions in the final insurance plans.

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