By Chris Cassidy
It would mean the difference between saving jobs and laying off workers, Salem Mayor Kim Driscoll told union leaders last year.
The mayor proposed raising union members' health insurance co-pays from $5 for a basic doctor's visit to $10. As a result, the city would save some $1.2 million — enough money, the mayor believed, to avoid layoffs.
"Nobody has a $5 co-pay anymore," Driscoll said. "It's not unreasonable to make that change."
Driscoll's sales pitch went further. Premiums would drop by $252 a year for individual plans and $681 for family plans. The city would fully reimburse employees if they were admitted to the hospital. And for agreeing to the changes, employees would receive $50.
"We thought this would be a terrific way of not having to lay people off," Driscoll said. "Unfortunately, you have to get the support of collective bargaining units. We have eight in Salem."
All of them either rejected the offer or never voted on it.
Two months later, the mayor delivered a grim forecast to the City Council — jobs would be eliminated, nearly every city department budget would be cut, and student athletic fees would double.
Similar scenarios are playing out across the North Shore and beyond as mayors and town managers struggle to find ways to curb runaway health insurance costs.
The solution, they argue, is a proposal dubbed "plan design." It would empower municipal executives to change certain features of employee health plans — such as co-pays and deductibles — without union approval.
Over the last few months, mayors and town managers have been pushing state lawmakers to pass "plan design" legislation, presenting it as the best way to keep health costs in line and avoid cutting jobs and slashing services.
Union leaders, however, are vehemently opposed, arguing city leaders don't want to play by the rules and are simply trying to circumvent the collective bargaining process.
"There's no excuse for totally eliminating people's rights where they once had them," said Tim Sullivan, the legislative and communications director for the Massachusetts AFL-CIO.
Health costs soaring
Health insurance costs are expected to rise 12 percent next year in Salem, 9 percent in Beverly and 12 percent in Peabody. At the same time, communities are bracing for the possibility of million-dollar cuts to one of their largest revenue sources — state aid.
In Salem, health insurance is expected to soar by $1.2 million, while, simultaneously, aid from the state is expected to drop by $1.2 million or more.
Driscoll said plan design mirrors the system the state uses for its employees under the Group Insurance Commission. Under that system, the state can change insurance plans without negotiating with collective bargaining units.
Giving local leaders the ability to change benefits could help rein in health insurance spending, Driscoll said. Increasing co-pays from $5 to $15 would save the city between $800,000 and $1 million a year, she said.
In Beverly, Mayor Bill Scanlon estimates the city could save as much as $2.5 million from plan design. Beverly's health care costs are expected to jump by $1.3 million, to a total of more than $16 million next year. The city pays 80 percent of premiums, and a doctor's basic co-pay is $10 (though that will rise to $15 next year).
It's a vicious cycle, Scanlon said. High health care costs may force the city to lay off workers one year, only to have the savings from the layoffs consumed by higher health care costs the following year.
"We really see this as a jobs plan," Scanlon said. "You have to eliminate jobs to deal with health care. If we can get this under control, we can save jobs."
But the issue is hardly one-sided.
Union leaders contend they have, in fact, made concessions and that the lines of communication between labor and management should remain open, not sealed off.
In Salem, all the city's unions agreed in the latest round of contract talks to increase their share of health insurance premiums from 20 percent to 25 percent. In many cases, teachers had to pay back part of the increase retroactively, said Joyce Harrington, president of the Salem Teachers Union.
Harrington said the health insurance changes Driscoll proposed last April didn't leave city workers much time to digest the information. Some were unsure if they'd have to change doctors or whether a particular treatment would be moved to a higher co-pay tier.
"People had some legitimate concerns and wanted to get as much information as they could," Harrington said.
The benefits — more generous than many offered in the private sector — evolved when employees agreed to trade away raises, she said.
"People have to understand: A lot of the benefits that municipal and state employees have is because over the course of years and years, they didn't get the big raises and the big bonuses," Harrington said.
"Some mayor 25 years ago thought this was a good idea and doesn't have to live it out. Now (Driscoll) has to live it."
Looking for middle ground
Sullivan, of the AFL-CIO, conceded that mayors and town managers are in a bind on health care but said their dilemma doesn't mean they should be handed tools to bypass the unions.
"This is a temporary crisis, but these will be permanent diminutions of the quality of jobs," he said. "... At the end of the day, the economy will recover, the budget will be restored, and what will have happened to the quality of the job if we allowed mayors to get control in a way they weren't legally allowed to do?"
Sullivan said unions and city leaders have sat down in recent days to try to find some middle ground.
Meanwhile, mayors across the North Shore say they need a solution, and the sooner the better.
Peabody Mayor Michael Bonfanti estimates his city's health insurance costs have soared 177 percent in 10 years. Health benefits account for 19 percent of the municipal budget, he said. And the combination of salaries and health benefits accounts for 70 percent of the budget, he said.
"It's been a monumental problem," Bonfanti said.
Staff writer Chris Cassidy can be reached at ccassidy@salemnews.com.
