IMPACT OF SECTION 18

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IMPACT OF SECTION 18 for CITY OF SPRINGFIELD
AND CITY RETIREES
January 31, 2005
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What is Section 18?

• Section 18 of MGL Chapter 32b requires that
• All retirees who are eligible for Medicare must
  enroll in Medicare Part B.
• The City must provide Medicare extension plans.
• The city must, by law, pay all penalties
  associated with late enrollments in Medicare.

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Why Did the Control Board Adopt Section 18?

• Medicare eligible individuals have already paid
  into the Medicare system, but are not receiving
  any benefits.
• Adoption of Section 18 transfers up to 80 of
  eligible expenses from the City plan to the
  Federal Government.
• Everyone benefits from accessing the Medicare
• reimbursements the plan, the City, the
  employees and
• the retirees.

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Retiree Impact No Change in Coverage

• Coverage after the adoption of Section 18 will be
  identical to that of active employees.
• The difference will be who pays the claims

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The City Will Save Millions

• 5.3 million reduction in health care costs for
  FY2006
• 18.7 million reduction in health care costs over
  the next 3 fiscal years.

Failure to adopt Section 18 would have increased
health care costs by 18.7 million dollars over
the next 3 fiscal years.
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Impact to Retirees

• Retirees share of reduced costs is significant.
• - 2.4 million in FY2006
• - 2.7 million in FY2007
• - 3.1 million in FY2008
• 8.2 million in reduced costs over 3 years.
• This reduction will be applied directly to the
  Retirees contributions to the City health plan
  to keep them whole.

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Over 500 Retirees Who Already Have Medicare B
Will Save Money Every Month
Estimates are based on projected PPO rates for
FY2006 new Medicare rates effective January 1,
2005.
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Retirees who enroll in Medicare B WillContinue
to Pay the Same Monthly Cost

Estimates are based on projected PPO rates for
FY2006 new Medicare rates effective January 1,
2005.