2008-11-05-AC -GIC-memo - Laserfiche WebLink

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We were particularly interested in learning how GIC has achieved its lower costs and slower expense growth rate. Our research suggests the following contributing factors:  Scale – ability to negotiate favorable insurer rates due to the size of its insured pool  More co-pays, and in some cases, higher co-pays; this has contributed to lower base rates for plans but has remained stable – that is, GIC has not increased co- pays as a method of controlling expense growth  Freedom to change plan design and plan offerings  Wellness programs  Tight controls over eligibility We were also interested in whether this slower expense growth rate is sustainable. We concluded that there is a high probability that GIC’s advantages are sustainable, due to:  continued attention to plan design and offerings (and the ability/freedom to alter both)  increasing investment in wellness programs  heavy emphasis on data collection and analysis as well as tight eligibility controls  and, most notably, the GIC’s aggressive pursuit of tiering strategies to influence consumer – i.e. employee - choice (charging higher co-pays for services provided at higher-cost health care facilities vs. lower co-pays for lower-cost providers of similar quality/outcome history)  advantages of scale only increase as additional municipalities join GIC We have both been persuaded that the time is ripe for putting GIC on the bargaining table, for a number of reasons:  Significant potential for cost savings – both for Lexington and its employees. (See Brookline analysis; they estimated a cost savings of 10% in year 1.)  8% growth vs. 13% historically for cities and towns – benefits both the town and employees. (See attached spreadsheet of hypothetical savings over 5 years for Lexington; we would anticipate/recommend that some portion of these savings be shared with employees.)  Reduces/eliminates the annual town expense associated with our health benefits consultant, and eliminates the administrative burden of managing health benefits in-house.  Simplifies future bargaining over health benefits, since only the town/employee contribution split is negotiable for communities in the GIC.  We can now draw on the experiences of towns similar to ours which have joined (Weston) or are pursuing (Brookline) GIC.  Despite limited history with municipalities, GIC has long, successful history of providing a rich selection of health benefit choices to 275,000+ state employees, with high level of subscriber satisfaction.  GIC is a sophisticated system (tiering, analytics, etc.); when combined with scale, should ensure a cost advantage in the future. Page 2 of 3