LYNN — A tentative agreement between the city and its dozen unions includes retroactive raises, despite the city’s fiscal stability officer and chief financial officer assertion that Lynn’s proposed $367.93 million fiscal year 2020 budget doesn’t allow for wage increases through collective bargaining.
The document, a Health Insurance Memorandum of Agreement between the city of Lynn and its unions, obtained by The Item, also shows the city will continue to use the same health insurance plan administrator, Harvard Pilgrim Health Care. The agreement, which provides coverage from July 1, 2019 to June 30, 2022, has not been ratified by the unions.
The decision on health insurance was made despite a report, recommended by Sean Cronin, the city’s fiscal stability officer, that showed Lynn could have seen a budget savings of $10.4 million this year if it switched to the commonwealth’s Group Insurance Commission (GIC). Cronin declined a phone interview, but in a statement, called the decision “disappointing” in the midst of the city’s financial woes.
“Based on the mayor’s comments the evening the budget was presented to the City Council, it is clear that the city and its employees are not moving to the commonwealth’s Group Insurance Commission (GIC), which is disappointing since the city is foregoing a significant amount of savings that would position the city for long-term fiscal stability and allow much-needed investment in its capital and infrastructure needs,” said Cronin in an emailed statement.
The memorandum also includes retroactive employee raises of 1 percent for July 1, 2018 and 0.5 percent for Jan. 1, 2019, which are applicable to base salaries. The city’s proposed FY20 budget does not factor in potential wage increases through collective bargaining.
The July 1, 2018 raise would be paid upon the execution of the agreement and the Jan. 1, 2019 raise would be paid during the first quarter of FY20, or no later than Sept. 30, according to the agreement.
It’s unclear how much of an increase in expenses that would be, but Chief Financial Officer Michael Bertino told the City Council last month that a 1 percent raise would result in an increase of about $550,000. It’s unclear if that would be the same projection for a retroactive raise of the same amount.
Bertino and Mayor Thomas M. McGee declined comment on the agreement on Wednesday because it has not been ratified and signed by the unions, which has to be done by July 1.
But since Cronin said the proposed budget doesn’t have the capacity for retroactive raises, he wrote on Wednesday that any retros paid out in this fiscal year would have to be paid from free cash or budgetary surpluses found elsewhere.
“Any retros related to FY19 that are paid out in FY20 would have to be funded from the savings yielded in the health insurance budget via a transfer,” Cronin said. “Of equal importance is the need for the FY20 budget to be adjusted to account for the raises.
“Since the FY20 budget presented by the mayor did not include any funding for raises, it is not in the base budget. Therefore, a budget amendment would have to be made, such as moving some of the savings from the health insurance budget to individual departmental budgets.”
Cronin told the council last month that the FY20 budget could potentially allow for raises if the cost savings through a change in health insurance offset the funds needed for the increases. The proposed budget is based on status quo health insurance.
Although the agreement only includes retroactive raises, the understanding is that if it is ratified by unions, the city and its unions will continue to negotiate other non-health related matters such as further raises.
McGee told the City Council last month the tentative agreement that had been reached with the city’s unions, referencing the health insurance memorandum, resulted in a cost savings through changes in health insurance. He said the agreement, which includes contracts for fiscal year 2019, “preserves the much-needed benefits for our employees, while realizing budget savings.”
Although the city opted to stick with Harvard Pilgrim Health Care, the health insurance agreement appears to have some changes from the previous health insurance agreement, obtained by The Item, that provided coverage from July 1, 2018 and expires on June 30, 2019.
Under the new agreement, both Preferred Provider Organization (PPO) and Exclusive Provider Organizations (EPO) plans would be provided. The city now offers PPO plans, but EPO would be a switch from what it currently offers, which is Health Maintenance Organization (HMO) plans.
According to Business Benefits Group, one of the biggest advantages of an EPO plan is the lower cost because it typically costs less than both PPOs and HMOs.
Effective July 1, for active employees and non-Medicare retirees, the split for PPO individual and family coverage would be 70 percent paid by the city and 30 percent paid by employees. The split for EPO individual and family coverage would be 77 percent paid by the city and 23 percent paid by employees, which would change on July 1, 2020 when the city share decreases to 75 percent and the employee share increases to 25 percent.
The PPO plan split is the same as the agreement that expires on June 30, but employees would take on a higher share with the EPO plan vs. the current HMO plan. On the HMO plan, employees currently pay 16 percent for individual and 19.6 percent for family coverage.
It’s unclear what the cost savings would be through the changes. In a correspondence to the City Council and McGee in March, which recommended the city switch to the GIC, Cronin provided figures that showed the cost of Lynn’s current plan for active employees, Harvard Pilgrim HMO, is $10,789 for individual coverage and $28,889 for a family plan.
The agreement also states all active employees and Medicare eligible-retirees must use the mandatory generic prescription drug program. The city will conduct an analysis starting July 1 to estimate cost/savings impact to migrate active plan retirees over the age of 65 to the Medicaid Enhanced Plan. Should the analysis show a cost savings, the city will migrate the active plan retirees on Jan. 1, 2020.