By now participants in the 802 health plan have received a Summary of Material Modifications (SMM). That mouthful is your official notification of changes to the health fund and how they affect you. (A copy is posted on the Local 802 website here, under the section called “Plan Descriptions.”)
We’d like to elaborate on the SMM and give you some background.
The health fund has always struggled to offer meaningful benefits to 802 members without making it cost prohibitive for them. This is very difficult because the cost of health care rises so much faster than inflation. The fund walks a narrow line between offering benefits to as many people as possible and not breaking the bank.
First, the changes:
The threshold is now $3,000, up from $2,150, for six months beginning with January 1, 2023 for benefits beginning September 1, 2023. This is a number between the old Plan A $2,000 six-month threshold and the old Plan A+ $4,500 six-month threshold that should help address the fund’s negative cash flow and its depleted reserves.
Participant premiums rise from $300/quarter to $600/quarter for individuals and from $1,200/quarter to $1,800/quarter for families beginning September 1, 2023. The logic: 1) premiums haven’t been raised in eight years, 2) they are STILL lower than typical ACA premiums for a plan like this, and 3) this spreads the increased cost across the participant population instead of only having the sick folks bear the increase through higher deductibles and copays.
The “bank” (the excess in contributions in one six-month period allowed to offset deficient future contributions) will now roll over for only one six-month period instead of the next two periods, before being absorbed into the fund. This begins for contributions received in the period January 1 to June 30 2023. This was again a way of spreading the added cost and allowed for slightly lower increases to the threshold and premiums.
A brief recap of recent fund history:
In 2014 a major overhaul to the A and B plans was necessary to make them comply with Affordable Care Act (ACA) standards. Medical plans now had to cover hospitalization and prescriptions (in addition to the doctors and labs already covered) and all annual caps on benefits had to be removed.
Plan B became an “excepted benefit” plan (NOT health coverage) because the trustees believed vision and dental coverage would be more useful as an extra benefit than as a weak, low-value full medical plan. Because of the way the ACA was written, had the trustees decided to convert B to a low benefit full medical plan, anyone who qualified for it (and refused the coverage) would not have been able to get a premium subsidy on the ACA marketplace. The trustees thought it important to avoid that outcome for participants.
All of this pushed up the cost of coverage. Eligibility thresholds and participant premiums were raised to match the increased cost and for a while it all worked.
Then the inevitable happened. Costs went up, there were some very expensive claims and, once again, the fund was spending more than it took in. By 2018 the actual cost of Plan A+ for a family was about $25,000 a year compared to the $9,000 annual threshold employer contribution amount plus $4,800 in participant family premiums. The cost of Plan A to the fund was not that much lower but the threshold was much lower — $4,000 annually plus the $4,800 in premiums, making the gap in income vs. the cost of coverage that much greater.
In 2019 benefit modifications were made to reduce the cost of coverage by shifting more of the cost to the participant. This was accomplished by establishing higher co-pays and deductibles and by discouraging out-of-network services (which cost the fund more than the negotiated in-network rates).
There were also increases in employer contributions bargained across the board, leading to a modest increase in income. This strategy might have put the fund back on course to stability for a few years but the Covid pandemic shut down most of the industry in 2020 and 2021, creating a drastic drop in income, without a corresponding drop in medical claims.
Because claims often lag behind the dates of medical services, someone who is no longer working enough to earn the required contributions to continue to qualify for the plan could still have a legitimate claim for services rendered while they were covered. During the covid shutdown, income dropped precipitously and people fell off the plan, even as claims continued to be processed and paid. This intensified the MHF’s troubles.
The fund responded to the pandemic by eliminating Plan A+ and raising eligibility for Plan A to $2,150, calling it Recovery Plan A. Certain brand-name prescriptions were no longer covered. Folks who qualified for Plan A+ were allowed to “bank” their contributions in excess of $2,150 for a period of time.
Many fell off the plan because they were unemployed but higher eligibility was not the leading cause. A much higher and more sustainable eligibility would almost certainly have caused far more people to fall off the plan especially in the midst of the pandemic. However, those who had qualified at the higher level now qualified at the lower level which, even with lower benefits, still provided expensive coverage not reflected in the total contributions (employer contributions plus participant premiums) of only $9,100 a year.
Structural changes had to be made to rebalance the annual cost of coverage with the amount needed on behalf of each participant to cover that cost.
This dilemma cannot be solved by merely increasing employer contributions. Increased contributions alone don’t solve the mismatch between the eligibility and the actual cost of coverage. Increased contributions may allow more people to qualify (a great thing), but at a rate that, without changes, will continue to stress the plan’s finances.
The rising cost of coverage, the widening gap between those costs and per member contributions, and the consequences of the pandemic and its shut down of our industry have all combined to stress the fund’s sustainability. Corrective measures are needed to allow the fund to continue to provide coverage.
So once again, the trustees have had to take painful steps to rebalance, while still offering better value for less out-of-pocket cost to participants than they would find on the ACA marketplace.
No one likes making decisions like this. They have real consequences on people’s lives. But these steps have to be taken to keep the plan afloat and to move it towards an actual recovery and replenishment of its reserves.
NOTE: The SMM that you received in the mail in November stated that the Plan B “buy up” for Plan A participants will cost $247/quarter for individual coverage and $692/quarter for family coverage. This was a typo. The buy-up amount is unchanged and is due every six months. The fund is sending a correction.
The union trustees welcome your questions. Please email Tino Gagliardi (email@example.com), Martha Hyde (firstname.lastname@example.org), Sara Cutler (email@example.com), Harvey Mars (firstname.lastname@example.org), or Morris Kainuma (email@example.com).