Because of a projected shortfall in funds that threatens the long-term viability of the Local 802 Health Benefits Plan, the plan trustees have been forced to make a number of changes that will go into effect starting Jan. 1. The changes, outlined here, were made after several meetings and lengthy consultations with the fund’s actuaries and accountants. The goal of the trustees is to insure that the fund remains fiscally viable and able to continue providing benefits that are important to Local 802 members and their families.
The changes include a monthly premium that will be required for participants to remain on Plan A, a reduction in the out-of-network benefits, a reduction in prescription drug benefits and increases in employer contributions. There will be no change to in-network coverage, which will continue without a deductible and retain the same copayments for services such as physician visits.
The change that will be felt the most by members is a monthly premium for Plan A participants that will be billed every quarter. The premium will be $50 a month for individuals and $135 a month for families. Anyone who qualifies for Plan A who does not make the quarterly payments will default to Plan B. This premium will also apply to the people who opt for the Empire Blue Cross-Blue Shield Direct HMO.
The plan has never before required premium payments from its participants, and this decision was made with great reluctance. The economic pressure on the plan, however, has never been greater.
Other changes include:
- The out-of-network deductibles will rise from $500 per individual per year and $1,000 per family per year to $1,000 and $2,000, respectively.
- Once the deductibles are met, the reimbursement of reasonable and customary charges will fall from 70 percent to 50 percent.
- The out-of-pocket expense cap that applies to out-of-network expenses will rise to $5,000 from the current $1,500. This means that if you get your care outside the network and you incur a total of $5,000 in co-insurance charges, the plan will then pay 100 percent of reasonable and customary charges.
- The Plan A prescription drug program will have a mandatory generic feature. This means that if there is a generic equivalent for a prescription drug, the plan will only pay the cost of the generic drug. If participants choose not to use the generic, they will have to pay the difference. If there is no generic equivalent, the plan will pay in accordance with the plan design (see the chart on page 5 for specifics). In the new plan design, a generic drug will cost the participant the greater of $10 or 25 percent of the actual cost of the drug. The cost for a preferred drug will rise from a $15 co-pay to the greater of $20 or 25 percent of the actual cost. Non-preferred drugs will rise from the greater of $30 or 20 percent of cost to the greater of $40 or 25 percent of cost with no $50 cap.
- For a three-month mail-order supply, the cost for a generic script will rise from $5 to the greater of $20 or 25 percent of cost; for preferred drugs the cost will rise from a $30 co-pay to the greater of $40 or 25 percent of cost; and for non-preferred drugs the cost will rise from a $60 co-pay to the greater of $80 or 25 percent of cost. The mandatory generic rule will apply to mail order as well.
- Finally, the eligibility levels will rise. For Plan A coverage, the contribution level will rise from $1,075 per six-month period to $1,300, and for Plan B coverage the contribution level will rise from $400 to $500 per six-month period. The flip side of this is that many of Local 802’s collective bargaining agreements have “escalator clauses,” meaning that if the eligibility level rises so does the employer’s contribution. The hope is that this will prevent many people from falling off the plan.
The drastic nature of this problem and the resulting actions taken may beg some questions, such as why the changes made three years ago were not sufficient, or why the looming shortfall did not become evident earlier.
The answer is that the impact of the changes made three years ago took two six-month periods to become fully evident. Those changes were effective and the plan nearly broke even during that initial year. Near the end of the following year, while it was clear that expenses were going up, the full impact of rising health care costs and rising usage was only beginning to be felt. The full impact became clear by early 2006.
While this crisis was probably delayed by the earlier actions, the bottom line is that income to the plan has remained flat while expenses have risen an average of 13 percent a year. This rate, according to our actuary, is typical of health-care inflation, and reports in the media bear this out.
The trend in the American health care system seems to be sharply rising costs and greater difficulty for all health care plans in maintaining benefits for their participants. As a change in this trend looks unlikely in the near future, the trustees have agreed to maintain a standing subcommittee to keep a close eye on whether these changes result in the projected savings and increase in income. The subcommittee will also consider strategies for preventing crises like this in the future.
One of the other savings the plan actuary has been able to obtain will come from a shift of administrative services from Ullico to MagnaCare. While the plan will remain self-insured, beginning Jan. 1, administrative services will be supplied by the same insurer that handles our preferred provider plan, MagnaCare. For participants it means that a new card will be sent to you and you should show it to your provider the next time you seek medical services.
See the chart here for full details of the plan changes.
The trustees are holding a meeting with members on Saturday, Dec. 9 from 5 to 7 p.m. in the 802 Club Room to discuss the health plan changes. Local 802’s Health Department sent out a first-class letter prior to Thanksgiving alerting all participants about the meeting. If you didn’t get the letter or were unable to attend, please call the Health Department at (212) 245-4802 with any questions you might have. Or e-mail the department at email@example.com.
David Lennon, Bill Dennison and 802 member Martha Hyde are the union trustees on the Health Benefits Plan.