BEVERLY — The city will save an estimated $1.2 million per year under a new health insurance agreement reached with employee unions last week.
The president of the teachers union, however, says those savings will come at the expense of city workers and retirees living on fixed incomes.
"The city is going to save a lot of money, but the way they're saving it is the cost is going to be put on the teachers, the firefighters, the police, the cafeteria workers," Beverly Teachers Association President Heather Kavanagh said. "That money has to come from somewhere, and it's going to come out of our pockets."
Mayor Bill Scanlon announced the new "plan design" agreement at Tuesday night's City Council meeting. The deal is an outgrowth of the municipal health insurance reform law, signed by Gov. Deval Patrick in July, that was designed to ease the heavy burden of escalating health care costs on cities and towns.
The law gave local governments more power to negotiate new benefit plans with employees and retirees. If the two sides failed to reach agreement, the case would have been submitted to a three-person panel.
Scanlon said the estimated $1.2 million in annual savings will free money to spend on other city services.
"It will help us save jobs, and it will help us pave streets, and it will help us have a better city," he said.
Scanlon said employees and retirees will pay lower premiums under the new deal. The savings will come from deductibles and copays. Under the current city health plan, employees paid no deductibles and few copays.
The city will continue to pay 80 percent of an employee's premium.
Scanlon said someone who does not need a lot of health care will see a reduction in their total expense due to the lower premiums.
But Kavanagh said the addition of deductibles and higher copays will drive up costs for many workers and retirees. Copays will range from $25 to $45 for doctor's office visits and $10 to $50 for a 30-day prescription, she said.
Kavanagh said one employee, who is diabetic and has two children, expects to pay $3,000 more in health care costs under the new plan.
"I've already heard some people who are diabetic saying they won't go for their blood tests because of the copays," she said.
Kavanagh said the increased costs will particularly affect retirees on fixed incomes and lower-salaried teaching assistants and cafeteria workers. Under the health reform law, she said unions had little power to negotiate terms of the deal.
Kavanagh said municipal workers have had a history of accepting smaller raises in exchange for generous benefits packages. Now those benefits are being reduced at a time when they are facing the prospect of no raises.
Scanlon included no money for raises in the fiscal year 2012 budget.
"If you look at it that way, we all just took a pay cut," Kavanagh said.
Municipal officials from around the state, including Scanlon, lobbied for the health care reform law in order to deal with the increasing impact of health care costs on their budgets. In Beverly, health care costs have climbed to $17 million out of its total budget of $100 million.
The total savings realized in the first year of the deal will be around $1.5 million. Under terms of the reform law, communities must return some of the savings to employees and retirees in the first year of the new deal.
Kavanagh said Scanlon agreed to return the maximum 25 percent, which amounts to about $376,000. Employees and retirees will realize those savings by skipping a week's worth of premiums, she said.
Just over 3,000 people receive their medical insurance from the city, including current workers, retirees and their dependents.
Scanlon said the city could have saved "a few more dollars" by shifting employees to the state GIC plan, but that would have forced some people to change doctors.
"Nobody's losing his or her doctor," Scanlon said. "That was very important to a lot of people, particularly retirees."
The plan goes into effect April 1, although the deductibles won't kick in until July 1.
Staff writer Paul Leighton can be reached at 978-338-2675 or by email at pleighton@salemnews.com.
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