Trustees Modify Plan to Stem Continuing Losses, Restore Fund’s Stability

Health Benefits Plan Update

Volume CII, No. 7/8July, 2002

Trustees of the Local 802 Health Benefit Plan have implemented several cost-cutting measures intended to stem heavy losses the plan has experienced in the last three years. The Trustees took this action at their June 12 meeting, after the plan’s accountants, Gould, Kobrick and Schlapp, presented the 2001 financial statements.

In what 802 President and HBP Trustee Bill Moriarity described as an initial step, the prescription drug plan is being restructured and the premium reimbursement plan will be cut back from 90 percent of below-Plan B contributions to 50 percent of those dollars. Both measures will take effect on Oct. 1, 2002. Moriarity had warned that changes were impending in his Allegro President’s Reports in March and June of 2001 and at the sparsely-attended February 2002 membership meeting (see April Allegro).

The 2001 financial statements showed Fund expenses exceeding income by more than $2,111,000. This comes following losses of $564,000 in 2000 and $235,000 in 1999. The Fund’s dollar reserves, which were once more than double its annual expenses, have shrunk to approximately equal its annual financial outlay. According to the Segal Company, the Fund advisors, this shrinkage will not only continue but escalate if no changes are made. Moriarity told Allegro that discussions among the union and employer trustees, which he described as “often heated,” on how best to address this problem, have been going on for more than a year and a half.

The financial statements – available in the Fund office at Local 802 headquarters – show that costs have risen sharply in every area of expense over the last three years. The prescription drug plan cost $445,000 in 1998 and $1,012,000 in 2001, an increase of more than 100 percent. The premium reimbursement plan cost $62,000 in 1998 and $140,000 in 2001 (which was actually a slight decrease from 2000’s $141,500). And, in the most damaging increase of all, the Fund’s insurance premium covering major medical insurance rose from $3,400,000 in 1998 to more than $6,000,000 in 2001, an increase that reflects both higher insurance costs and greater usage of the Plan by participants.


The Prescription Drug Plan, as modified, will continue to provide both mail order/long-term and retail over-the-counter benefits. Under the new pricing structure generic drugs, which now cost $2.50 by mail and $5.00 over the counter, will cost $5.00 by mail but be obtainable at no cost over the counter.

The co-pay required for brand-name prescription drugs will increase substantially, however. Currently, brand names cost $5.00 if purchased by mail and $10.00 if bought at your local pharmacy. As of Oct. 1, 2002, brand-name drugs designated as “preferred” will cost $15.00 over the counter or $30.00 by mail, while “non-preferred” brand-name drugs purchased over the counter will cost the greater of $30.00 or 20 percent of the actual cost, with a cap of $50.00. If bought by mail order, these drugs will cost $60.00 for a three-month supply. (See chart below.)

“Preferred” drugs are those for which our pharmacy benefits manager, National Medical Health Card, has reached a negotiated lower price, while “non-preferred” are those drugs for which the combined member/plan payment is full retail price. The Prescription Drug Plan used by Local 802 has reached agreement with drug companies covering most of the various drug compounds commonly prescribed. For example, if there is no negotiated lower cost for non-drowsy antihistamine Allegra there would be one for the similar drug Claritin.







Greater of $30 or 20% of actual cost ($50 max.)

(90 Day Supply)




The Trustees did not address the major medical plan at their June 12 meeting, but Moriarity told Allegro that it will be the subject of future modification. “Unfortunately, we expect to put in place higher deductibles and lower insurance company payments within the next month or so,” he said. “Taken together with higher eligibility requirements and greater employer contributions, we hope to get out of the red and get the Plan healthy again.”

Moriarity pointed out that Local 802 is not alone in making changes to its insurance plan. “Every union plan that I am aware of is making similar changes. Some are even discontinuing prescription drug benefits altogether. What is really needed is to replace these kinds of plans with a government-sponsored single payer plan. I’m sorry to say that seems as distant now as it was in 1993, when I took office.”