Anyone who’s taken an interest in the finances of their local city or town in recent years is aware of the challenges posed by retiree health care obligations.
Like pensions, few municipalities have put enough money away to cover the ever-climbing cost of health benefits promised to past, present and future workers.
But with budgets stretched and attempts to shift costs to workers and retirees usually challenged, even those communities who have faced their health-insurance liability issues have found solutions elusive.
Now KTP Advisors of Newport, which has managed health care benefits for corporations and nonprofits since 2002, wants to help.
By better utilizing of Medicare, the federal health-insurance system for seniors, cities and towns can cut health-insurance costs without shifting them to workers, said KTP Vice President of Product Development Barry Eyre.
So KTP decided to offer their Medicare experience to city managers without detailed knowledge about it or the supplement plans that cover what the federal government doesn’t.
“Before, politicians were giving away these benefits and didn’t realize their long-term cost; most municipalities are not being well-advised and could benefit from these strategies,” Eyre said.
Spurring KTP’s move into the municipal market was the 2011 Massachusetts law that allowed cities and towns to move employee health coverage into the state’s Group Insurance Commission package, which has generally lower costs than local plans.
Accounting rules that forced cities and towns to acknowledge their full “post-employment benefit” liabilities also brought the issue to the forefront.
The most high-profile test of KTP’s municipal plan took place this year in Brockton, Mass., where the firm was hired to help the city as it wrestled with a $700 million retiree health care liability and was debating a switch to the GIC plan.
By getting Brockton to competitively bid its Medicare supplement for retirees, KTP estimates it will save the city $2.4 million each year over the next four years.
Eyre said most communities, like Brockton, provide Medicare benefits through the same local insurers that provide coverage for active workers.
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