EagleTribune.com, North Andover, MA

Pension

July 30, 2007

How one town cut costs, improved benefits

BOSTON | Rising health care costs and unions reluctant to accept change pose a twin threat to municipalities on a tight budget.

But North of Boston cities and towns can overcome union resistance, cut costs and preserve benefits for their retirees. All they have to do is look to Lynnfield, their neighbor to the south.

Facing a budget crunch in 2003, Lynnfield selectmen moved the town's 112 retired teachers out of the state's Group Insurance Commission and into the town-sponsored health insurance plan.

William Gustus, the town administrator, said getting out of the state insurance plan was something the town had to do.

"It allowed us to moderate our overall health insurance increase every year since," Gustus said. "We have much better control than we did with the state. They set the benefits and sent us the bill."

The state plan theoretically uses its buying power to get good prices | it buys health insurance for all state employees and most retirees. But that doesn't always work for the cities and towns with teachers in the state plan because of the cost-sharing ratio.

In Lynnfield, retirees on the state plan paid only 10 percent of the cost of insurance while the town paid the rest. Under the town's plan, retirees pay 15 percent. The 5 percent difference translated into $150,000 savings per year, Gustus said.

A number of North of Boston communities face the same problem. Teachers in the cities of Gloucester, Lawrence, Peabody and Salem, and the towns of Amesbury, Andover, Newbury, North Andover, Rockport and Salisbury are all covered by the Group Insurance Commission.

Earlier this year, Gloucester City Councilor Jason Grow proposed shifting teachers to the city health plan, which pays only 75 percent of premiums. The council rejected the idea in May when a crowd of more than 100 current and retired teachers protested at a hearing punctuated by boos and hisses. But the new head of the teachers union has indicated a willingness to accept the change if retired teachers are grandfathered at the current premiums.

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