HAVERHILL — Mayor James Fiorentini said the city has avoided health insurance problem that threatened to cost Haverhill taxpayers millions of dollars and drive up insurance payments for city workers.

With Haverhill facing an 18 percent increase in health care coverage costs, Mayor James Fiorentini said that effective July 1 of next year city employees and retirees will switch to a new health insurance plan to avoid the increase.

The switch will also avoid a $3 million additional annual cost to taxpayers, Fiiorentini said.

Starting July 1, employees and retirees will be in the same health care plan that handles state employees and retirees. It's called Group Insurance Commission — GIC for short.

Fiorentini said that for the last two years, health insurance for city employees and retirees has been handled by the Massachusetts Municipal Association and its related insurance group, MIIA — the Massachusetts Interlocal Insurance Agency.

In the coming year, MIIA is facing an 18 percent increase in premiums, Fiorentini said. That meant the cost of providing health insurance costs for Haverhill's city employees and retirees would have gone up by about $3 million, he said.

"This is a unaffordable increase," Fiorentini said. "It is just not sustainable when taxes go up by two and half percent or less and our second-largest budget item goes up by 18 percent."

Faced with that 18 percent increase, Fiorentini said that after talking with city employees and unions, he made the decision to switch the insurance to the Group Insurance Commission, which handles health insurance for the state employees and retirees.

Under state law, communities have the right to switch health insurance coverage to the state plan without the agreement of workers' unions. Several cities have already made the switch, Fiorentini said.

By transferring to the GIC, the city and its employees will be able to avoid most of the projected 18 percent increase, Fiorentini said.

Costs will still rise, but at a much lower rate, he said.

Under state law, the city is required to give 25 percent of the first year's savings to the employees as mitigation. 

Fiorentini said the city and the union representatives have been negotiating for some time, and agreements were reached last week that mitigation money was to be divided. 

The mayor said the city will set aside $750,000 for mitigation money. He said that money will be used to pay the out-of-pocket expenses of employees with high out-of-pocket medical expenses. In addition, the city will pay for the inpatient deductible for employees who elect to go to the Steward family hospitals in Haverhill or Methuen.

In making the announcement, Fiorentini said the switch to the GIC would save taxpayer dollars, protect employees and would help to keep a local hospital here in the city.

"Switching our health insurance plan to the state plan, the GIC, allows us to avoid the tremendous and unaffordable premium increase that the city and its employees were about to be hit with," Fiorentini said. "If the city was forced to pay an increase of this size, we would have to cut back on other critical expenses in the city."

The mayor noted that communities in Massachusetts can raise taxes by up to 2.5 percent and that having health care costs go up by 18 percent is unsustainable. 

"By switching coverage to the GIC, our employees will have several different carriers to choose from," he said. "In addition, the mitigation plan we entered into allows us to help protect our local hospital."

Fiorentini said he has worked for many years to make municipal health care costs more affordable. 

"Controlling costs is the key to our fiscal stability," he said.

In making the announcement, the mayor praised city unions for working with him to make the change possible:

"No one likes change, and I understand that," he said. "Under the GIC, employees will be able to keep their same doctors and same hospitals, and avoid the 18 percent premium increase. The unions worked with me to come up with a good mitigation plan that will protect our most vulnerable employees from rising health care costs. They also worked with me to provide incentives for employees to use our local hospitals. Keeping our local hospitals viable is critical to us."

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