There is an opportunity for Lexington to give Medicare-eligible retirees access to the highly competitive individual Medicare marketplace — an option currently unavailable under state law — potentially allowing retirees to save thousands of dollars, choose coverage better suited to their individual needs and accumulate funds for future health care expenses, while saving municipalities money and reducing long-term retiree health care liabilities.
Massachusetts came surprisingly close last legislative session to giving cities and towns the legal authority to explore that opportunity.
H.1399, sponsored by Wellesley State Representative Alice Peisch, would have allowed governmental entities to provide Medicare-eligible retirees access to the individual Medicare marketplace, supported by employer-funded Health Reimbursement Arrangements, or HRAs. An HRA reimburses retirees tax-free for eligible health care expenses; depending on program design, unused dollars can remain available for future expenses.
The Joint Committee on Health Care Financing reported H.1399 favorably and sent it to House Ways and Means, where it remained when the session ended.
This would be an option, not a mandate.
Retirees would remain Medicare beneficiaries and could choose traditional Medicare supplemented by Medigap and Part D, Medicare Advantage, or other available coverage. Depending on a municipality’s existing plan and subsidy level, both retirees and their former employers could potentially save thousands of dollars annually while maintaining comparable or better financial protection.
For Lexington, this is not an abstract issue. According to the Town’s most recent available OPEB valuation, Lexington had approximately $265.6 million in retiree health care liabilities and $34.1 million in assets, leaving a net unfunded liability of approximately $231.5 million as of June 30, 2024. Despite Lexington’s responsible pre-funding efforts, only about 13% of the liability was funded.
An individual Medicare marketplace would not eliminate that liability. But reducing the long-term growth rate of retiree health costs could substantially reduce it — in some circumstances by 25% or more — while also reducing annual costs for retirees and taxpayers.
But potential savings alone are not enough.
That is why I have proposed strengthening the next legislation with explicit retiree protections. Before implementation, an independent financial and benefit analysis should demonstrate, using the municipality’s actual retirees, coverage and subsidy structure, that retirees can reasonably expect financial outcomes comparable to or better than their existing coverage.
That analysis should consider premiums, deductibles, copayments, prescription costs and maximum out-of-pocket exposure — not merely premiums.
Retirees should also receive free, unbiased professional counseling and individualized enrollment assistance. No retiree should be forced into Medicare Advantage. And HRA funding should increase with the cost of the underlying Medicare coverage benchmark so its purchasing power is protected over time.
The principle is straightforward: if the numbers do not work for Lexington’s retirees, Lexington should not adopt it. If they do, Massachusetts law should not prevent Lexington from considering it.
David Kornwitz