City of Brockton, MA

Municipality Overview:

Confronting persistent budget stress exacerbated by health care costs, increasing from 11 percent to 17 percent of the city of Brockton’s budget over the past decade, and an unfunded OPEB liability of $693 million, the Massachusetts municipality turned to KTP Advisors™ for help.

Major Objectives:

  • Reduce costs for the city and its Medicare-eligible retirees, starting January 1, 2013
  • Maintain the same benefits level as currently provided to the city’s Medicare retirees
  • Generate $7.3 million in total savings between active employee and retiree health benefits
  • Transition from a self-funded plan starting July 1, to a fully-insured plan on January 1, to enable savings throughout calendar year 2013
  • Structure the plan to reduce the city’s OPEB liability


Thanks to the highly competitive RFP process KTP ran, the city was able to reduce the cost of its Medicare supplement plans with prescription drug benefits, net of federal subsidies, from $437 per Medicare-eligible retiree per month to $331 per month. In addition, the city was able to transition the plan from self-funded to fully insured, thereby eliminating the city’s risk of large claims.

The plan year shifted from July 1 to January 1, so the city and its more than 1,900 eligible retirees were able to save $106 per month sooner than if the plan were to remain as a July 1, plan year. In total, this resulted in savings of approximately $2.4 million per year. Because Brockton’s retirees pay 25 percent of the cost, each will save more than $450 per year and the city will save annually in excess of $800 per Medicare retiree per year.

This 24 percent reduction in total costs was accomplished without cutting benefits or shifting costs to retirees. Although many national Medicare Supplement plan insurers were included in the RFP process, the city ended up staying with its incumbent carrier. Even though the city has transferred the risk to the insurer, it is getting the same benefits as before KTP Advisors got involved, but thanks to KTP it is paying 24 percent less.

A subsequent analysis by the city’s actuary attributed the following savings and reduction in liabilities to KTP’s recommended plan changes and assistance in implementation:

columns from actuary letter

Town of Greenfield, MA

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Municipality Overview:

Facing a fiscal deficit, strict state regulations on benefits and impending GASB 45 requirements in 2005, this municipality in northeastern Massachusetts turned to KTP Advisors for help in developing and implementing new Retiree Benefit Solutions©.

Major Objectives:

  • Reduce and simplify the number of plan offerings
  • Generate meaningful savings for the city to avoid increasing taxes, spending cuts to city services or a possible reduction in its bond rating
  • Shift the plan year from July 1, to January 1, to coincide with the Medicare plan year (previously, retirees received two rate changes per year, one based on the city’s fiscal year end and one based on changes to Medicare deductibles and rates at calendar year end)
  • Determine the best way for the city to take advantage of the Medicare Modernization Act — apply for the direct RDS or offer an Employer Group Waiver Plans (EGWPs)


For the city’s plan year, effective July 1, 2005, KTP negotiated a 1.2% rate decrease on the existing plan for the remainder of 2005 (compared with the carrier’s proposed 32% rate increase).

KTP successfully transitioned the plan year to January 1, 2006, and, in seeking additional savings, made the following changes for the 2006 plan year:

  • Replaced regional HMOs with nationwide indemnity plans while keeping the medical benefits virtually identical
  • Transitioned the Rx plan from $2 and $15 co-pays to a co-insurance structure incorporating Part D in the form of an EGWP
  • Increased the Rx deductible from $140 to $250

Those changes reduced the 2006 premium rate by 25%. During the renewal process for the 2007 plan year, KTP ran a competitive national RFP process and through multiple rounds of negotiations was able to lower the initial bids by an average of 18.2%.

Based on KTP’s recommendations, the selected plan for 2007 represented savings of 14.8% for the city and included the following benefit improvements:

  • Elimination of all deductibles
  • A more comprehensive Rx formulary
  • A four-tier co-payment structure
  • Improved customer service