President’s Report

The Health Benefits Plan Shortfall: An Update

Volume CI, No. 6June, 2001

Bill Moriarity

In March, I reported on the financial difficulties being experienced by the Local 802 Health Benefits Plan. Increased insurance premium costs (which rose by a total of $780,000 during the 18 months ending June 30, 2000) and greater payments for prescription drugs (which rose by well over $300,000 in the same period), together with decreased earnings on our investments had led to deficits at that time of about $1.3 million.

I outlined the initial steps we would be taking to address this situation: monitoring our investment policies, seeking bids on the insurance, and auditing our major medical carrier and prescription drug provider. All of those are being done. However, the preliminary financial statements for all of 2000 are now in and show losses for the year amounting to between $600,000 and $700,000. This means that the total deficit for the two years, 1999 and 2000, has increased to approximately $1.4 million.

The HBP Board of Trustees has long observed a policy of maintaining financial resources equal to at least one year’s expenses. After accounting for future benefit obligations, we now have reserves of $7.6 million, while our annual expenses in 2000 came to $6.3 million, including premiums and prescription drugs.

We have, therefore, a little more than one year’s reserves.

This problem must be confronted now. In the absence of a government-administered universal health care program, it becomes the responsibility of organizations such as ours to administer their plans in ways that keep them viable. While this clearly is not the optimum way to provide for our members’ health needs – and while the present system is driven by and for the insurance companies’ benefit – it is the only option we currently have, and at this point we lack the wherewithal to change it.

At the end of the last HBP board meeting, the union trustees told the board that, at the meeting scheduled in August, we would present plan modifications to address this issue. We will be looking at three major items in an attempt to both cut costs and increase income: first, prescription drugs; second, the cost components of our premium payments; and third, the eligibility rates, which have not increased since 1993. In examining the second of these subjects we will no doubt try to increase the attractiveness of the PPO component, MagnaCare, relative to the ULLICO indemnity provision. In creating the proposed modifications we will be working in consultation with, and under the guidance of, the Fund’s advisors, the Segal Company.


Elsewhere in this issue, in the Grievance Corner, you’ll find a brief item on the arbitration conducted under the Broadway contract for the show Saturday Night Fever. The facts of this situation represent a fundamental break with producers’ practices of the past, and they betray a cynical attitude toward our agreement on the part of this producer (and the producers of Seussical, who have now used this same ploy) such as had not previously been evident.

In the past, although one party or the other may not have been happy with certain contract provisions, an unspoken, unwritten agreement was in place that the provisions were to be administered in good faith. Subterfuge, with regard to important contract provisions, was unacceptable.

Unfortunately, that’s no longer true. Instead, among a growing number of management people, a “hustler” mentality has taken hold – a state of mind that allows any trick to be used, no matter how questionable, and the employer-union relationship be damned. It’s an unhealthy state of affairs that bodes poorly for the future.

Relationships – such as the one between the Broadway producing community and any of the unions whose members are employed in the theatre – are complex in nature, and require constant care and understanding in their continuing evolution. A break with the past, such as happened here, could cause an irreparable tear in the fabric of this field.

As to any potential redress of the situation, that can only be done at the negotiation table. The arbitrator hasn’t written any new contract language (although it may seem that way); he has merely interpreted the existing contract. Our task now is to carefully create proposals that will address these newly-discovered needs.