To the editor,
Everyone—families, employers, and governments alike—is facing rising healthcare costs. While no single policy can solve healthcare inflation broadly, House Bill 1399 (H.1399), currently before the Massachusetts House Ways and Means Committee, offers a targeted and practical opportunity to address affordability for one group in particular: Medicare-eligible municipal retirees, whose healthcare costs are rising faster than inflation and faster than municipal revenues.
H.1399 provides municipalities with a voluntary opportunity to modernize retiree healthcare by pairing employer-funded Health Reimbursement Arrangements (HRAs) with individual Medicare coverage. This approach has been used successfully nationwide for nearly two decades and already serves more than 50 million Medicare beneficiaries, including hundreds of thousands in Massachusetts.
Importantly, H.1399 does not mandate any change. It simply allows municipalities to consider this option—and it should only be pursued if an actuarial analysis demonstrates, with 99.99% confidence (as actuaries never say 100%), that retirees would be equal or better off than under the existing group plan. Once an HRA funding level is established, the structure ensures benefits do not erode over time, as funding is adjusted annually for medical inflation.
For Medicare-eligible retirees, the potential benefits are substantial. A representative retiree could obtain the most comprehensive Medicare Supplement coverage available in Massachusetts—no networks, no prior authorizations, and near first-dollar coverage—along with a robust Medicare Part D plan, for roughly $275 per month in 2026. Comparable municipal group retiree plans now cost well over $500 per month and continue to rise more rapidly.
Because Massachusetts law already requires municipalities to subsidize at least 50% of retiree healthcare premiums, retirees in towns like Wellesley that provide a 50% subsidy could see average savings of approximately $4,000 per retiree per year (or about $8,000 for a retiree and spouse), without any reduction in benefits.
Municipalities benefit as well—not only because their share of premiums is lower, but more importantly through a reduction in long-term healthcare liabilities. OPEB liabilities, which represent retiree healthcare obligations for both current retirees and active employees, typically decline by 20–30% under this model. Lower liabilities improve long-term fiscal sustainability, strengthen municipal balance sheets, and can positively influence credit quality. In turn, this makes it easier for communities to fund capital projects, invest in schools and infrastructure, improve employee wages, shore up pension funding, and consider more robust COLA base increases for municipal retirees—without raising taxes or cutting services.
Some advocacy groups oppose H.1399, but doing so effectively prevents municipalities from even evaluating this opportunity—while simultaneously denying Medicare-eligible retirees access to equal or better benefits at substantially lower cost. Maintaining the status quo is not a neutral position; it virtually guarantees growing fiscal strain and diminished flexibility over time.
H.1399 is not a mandate. It is not a benefit cut. It is a measured, responsible option that deserves serious consideration.
Municipal retirees, local officials, and taxpayers who care about long-term affordability and fiscal stability should respectfully encourage their state legislators to allow cities, towns, and the Commonwealth the opportunity to evaluate H.1399 on its merits. Thoughtful consideration—not obstruction—is what responsible governance requires.
Sincerely,
David Kornwitz
Chair, Wellesley Retirement Board
Please read more below, including financial examples:
Subject: H.1399 — Retiree Protections, Market Stability, and a Sustainable Path for Municipal Healthcare
Executive summary: Massachusetts municipalities face a growing retiree healthcare affordability crisis. Medicare-eligible retiree healthcare costs are rising faster than inflation, faster than municipal revenues, and faster than pension obligations—placing increasing pressure on operating budgets, long- term OPEB liabilities, and retirees living on fixed incomes.
House Bill 1399 (H.1399) offers a voluntary, proven framework that preserves or improves retiree benefits while restoring long-term fiscal sustainability for cities and towns. The legislation incorporates unusually strong statutory protections, preserves institutional flexibility, and leverages the stability and scale of the Medicare individual market.
This memorandum summarizes how H.1399 works, addresses common objections raised by retiree advocacy organizations, and explains why the bill warrants serious consideration by municipal leaders.
Representative Retiree Example: Individual Medicare Market
To illustrate how the individual Medicare market functions in practice, consider a
representative Medicare-eligible municipal retiree.
Such a retiree could enroll in a Medicare Supplement 1A plan—the most comprehensive coverage available in Massachusetts—offering no network limitations, no prior authorizations, and effectively first-dollar coverage after the Medicare deductible, paired with a robust Medicare Part D prescription drug plan.
In this representative scenario:
- Combined monthly premiums would be approximately $275 in 2026, reflecting a year- over-year increase of about 10%
- Annual out-of-pocket costs would increase by roughly $100, largely due to Part D design changes now capped at $2,100 annually under the Inflation Reduction Act of 2022
By contrast, a comparable municipal group retiree plan would cost well over $500 per month (up roughly 14% over the same period) and would still involve meaningfully higher deductibles and cost sharing.
On an all-in basis, this represents savings of approximately (for those entities subsidizing 50% of the premium):
- $4,000 per retiree per year
- $8,000 for a retiree and spouse
When paired with a well-funded OPEB system, these savings translate into average OPEB liability reductions of approximately 20–30%, materially strengthening municipal balance sheets without reducing retiree benefits.
What H.1399 Does—and Does Not Do
H.1399 modernizes outdated provisions of Chapters 32A and 32B by allowing municipalities, on a voluntary basis, to pair:
- Employer-funded Health Reimbursement Arrangements (HRAs), with
- Individual Medicare coverage (Medicare Supplement or Medicare Advantage, plus Part D)
This structure has been used successfully for 15–20 years nationwide and currently serves over 50 million Medicare beneficiaries, including hundreds of thousands in Massachusetts.
H.1399:
- Does not mandate participation by any municipality or the Commonwealth
- Does not reduce retiree benefits
- Does not shift costs or risk to retirees, now or in the future
- Does not affect active employee healthcare (or collective bargaining most likely)
Active employee healthcare remains fully within the group market.
Addressing Key Objections Raised by Retiree Advocacy Organizations
Objection: Retirees would be placed in “total dependence” on the individual Medicare marketplace
This characterization is inaccurate.
H.1399 statutorily requires municipalities to fund HRAs at a level sufficient to purchase the most generous Medicare Supplement and Part D coverage available in Massachusetts, with funding adjusted annually for medical inflation. This creates a defined, enforceable benefit floor that is more durable than current group plans, which remain subject to annual redesign, contribution shifts, and political budget pressure.
Objection: The individual Medicare market is “high-risk” or “volatile”
This concern conflates the Medicare-eligible market with the pre-65 Connector market. These markets operate under fundamentally different rules.
The Medicare individual market is:
Community-rated
Tightly regulated
- Benefit-stable
- Supported by vastly larger risk pools
More than 50 million Medicare beneficiaries already participate nationwide. In Massachusetts, Medicare Supplement plans have demonstrated lower and more stable medical trend than group retiree plans over 15–20 years, typically running 3–5 percentage points below group trend due to scale, transparency, and competition.
Objection: Retirees should not be placed in a decision-making role
H.1399 does not require retirees to navigate the marketplace alone.
The bill requires municipalities to contract with a professional retiree healthcare marketplace administrator to provide:
- Personalized counseling
- Side-by-side plan comparisons
- One-on-one enrollment assistance
- Ongoing support
All at no cost to retirees. This represents materially more support than retirees typically receive under group arrangements.
Objection: Transitioning to the individual market is irreversible or risky
This is incorrect.
If the individual Medicare marketplace were ever to become untenable from a cost or benefit perspective, municipalities retain the ability to return retirees to a traditional group model.
H.1399 expands options; it does not eliminate them.
By contrast, the current group-only paradigm offers no comparable flexibility.
Additional Statutory Protections
H.1399 further includes:
- Guaranteed “No Worse Off” Standard
An actuarial analysis must (should) demonstrate that every retiree is at least as well off as under the existing group plan before implementation. - Non-Forfeitable, Spousal-Protected HRAs
HRAs can be structured to persist until the death of both spouses, with balances transferring automatically to a surviving spouse. - Employer-Funded Risk Protection
- Guaranteed “No Worse Off” Standard
Retirees who choose lower-premium Medicare Advantage plans may accumulate HRA balances of $5,000–$15,000 or more over time, insulating them from catastrophic out-of-pocket exposure before transitioning to a Medicare Supplement plan if needed.
This is not cost shifting; it is employer-funded risk management.
Fiscal Impact for Municipalities
Depending on subsidy levels, municipalities typically achieve:
- $2,500–$4,000 per retiree (or spouse) in annual savings
- 20–30% reductions in OPEB liabilities
- Meaningful relief to operating budgets
Savings are generated by eliminating group-plan inefficiencies—not by reducing benefits. Freed resources can be redirected to education, public safety, infrastructure, climate initiatives, or COLA base increases for retirees.
Conclusion:
- H.1399 is not a mandate.
- It is not a benefit cut.
- It is not cost shifting.
- It is a voluntary, proven, and fiscally responsible framework that delivers equal or better retiree healthcare, stronger long-term benefit security, and long-term affordability for municipalities and taxpayers.
At a time when maintaining the status quo virtually guarantees future benefit erosion, H.1399 provides a credible and responsible alternative grounded in data, experience, and statutory protection.
