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Cheaper health premiums eluding big groups


Buying in bulk may be a good idea for warehouse shoppers, but it may not always work for purchasing health benefits for public employees.

"The era of using economies of scale—if it isn't well past its end, it's close to its end," said Paul Hackleman, director of benefits for San Mateo County, Calif.

Mr. Hackleman said that several years ago, the county considered, and then decided against, purchasing health benefits for some of its employees through the California Public Employees' Retirement System, the nation's largest state health plan.

One particular stumbling block was a CalPERS requirement that public entity participants provide the same level of benefits to retirees as to active employees, Mr. Hackleman said.

"We felt we were being locked into a benefit structure vastly different from our own and that over the long term it would be more expensive," he said.

Marc Waldman, treasurer/collector for the city of Wellesley, Mass., has similar reservations about participating in the Group Insurance Commission, which would be permitted under a bill pending in the Massachusetts Legislature.

Though the proposal would allow public entities to continue to set employer and employee premium contribution levels locally, it would require that the selection of benefit plans offered be governed by the GIC.

"Many municipalities are very leery of losing local control," Mr. Waldman said.

Moreover, public entities would be able to participate only if their unions approve of the move, he said.

"We're still obligated by law to bargain any changes with our unions," Mr. Waldman said.

By contrast, when the GIC was created, the Legislature gave it the authority to change benefits as necessary to meet state budget constraints without having to enter into collective bargaining agreements with unions that represent state workers, Mr. Waldman said.

"That has a lot to do with why their costs are lower," he said.

At least one executive of a union that represents more than 1.4 million public workers said his members would be hesitant to relinquish control over benefit plan content to a higher authority.

"Our concern is losing the right to collectively bargain at a local level to tailor plans to different groups," said Steve Kreisberg, collective bargaining director for the American Federation of State, County and Municipal Employees in Washington, which represents about half of the nation's public employees.