Health Insurance & Unions

With the city determined to corral runaway health insurance costs and its employees bent on protecting their benefits package, contract talks with three unions — the Laconia Professional Firefighters (LPF), State Employees Association (SEA) and American Federation of State, County and Municipal Employees (AFSCME) — are at a stand off.

On Monday night, 60 to 70 members of all three unions, in a display of solidarity, picketed outside City Hall, charging that the terms offered by the city would leave them paying increased costs while receiving reduced benefits.

The City Council has pursued firm parameters for negotiating wages and benefits with the unions. First, it insisted on limiting average annual cost-of-living adjustments for the three-year life of contracts to 2.5 percent. Second, it asked for a overhaul of the health insurance program by increasing the employee contribution to the cost of the premium and changing the prescription medication benefit.

City officials stress that health insurance costs have risen steadily for since 1998, driven recently by unusually high claims. According to the report of the factfinder appointed to mediate between the city and the SEA, the city claimed that the cost of the single-person plan has risen by 84 percent, from $3,867 to $7,128, the two-person plan by 84 percent, from $7,733 to $14,256, and the family plan by 134 percent, from $8,221 to $19,245.

Meanwhile, claims climbed from $1.7-million in 2002-2003 to $2.9m in 2003-2004. In 2003-2004 the city spent $1,442,693 for health insurance. The budget for 2004-2005 appropriates $2,371,968 for health insurance, an increase of 64 percent. Although the city has absorbed most of the increased cost of health insurance, the council has taken the opportunity of contract talks to shift a share of the cost to employees.

Under the current Blue Choice Health Plan, employees enrolled in the single-person plan make no contribution to the cost of premiums while those in the two-person and family plans contribute 7.5 percent of the difference between the cost of their plan and the single-person plan. The weekly employee contribution to the two-person plan is $10.28 and to the family plan $17.48. Of the 146 employees covered by the three disputed contracts, 35 are enrolled in the single-person plan, 32 in the two-person plan and 55 in the family plan.

The city also offers the Matthew Thornton HMO plan at no cost to the employee. Only 24 employees have opted for the HMO plan.

In the current round of negotiations the city has asked employees to contribute five percent of the cost of premiums for all three plans. Those enrolled in the single-person plan, who now pay nothing, would pay $6.70 a week or $348.40 a year. The contribution to the two-person plan would rise by $3.11 a week to $13.39, or by $161.72 a year to $696.28. And the contribution to the family plan would increase by $0.60 a week, or by $31.20 a year to $940.16 a year.

More contentious is so-called modified prescription medication benefit proposed by the city. The current prescription medication benefit features a $3 co-pay for generic drugs, a $15 co-pay for brand name drugs and a $1 mail-in option, which provides a 90-day supply of any drug for $1. The modified benefit eliminates the $1 mail-in option and replaces it with a $10 co-pay for generic drugs, a $20 co-pay for preferred drugs and $30 co-pay for brand name drugs.

The city maintains that the modified prescription medication benefit would reduce the annual total cost of the single person plan by $165, the two-person plan by $330 and the family plan by $445. The city claims that prescription medications represented 31 percent of all medical claims in 2002-2003 and 22 percent in 2003-2004, a significant share of which reflects the use of the $1 mail-in option. Moreover, increasing prescription claims adds to the city's claims experience, which is ultimately reflected in higher premiums.

The city has argued that the $1 mail-in option encourages people to try different medications at little cost to themselves while the costs associated with the modified plan will encourage them to choose their medications more responsibly. The unions deny that employees abuse the $1 mail-in option, insisting that prescriptions can only be filled if physicians order them.

For the firefighters, retaining the current prescription medication benefit, especially the $1 mail-in option, has been a high priority. The LPF countered the city's proposal by offering to contribute six percent to health insurance premiums in return for the prescription benefit. The SEA, some of whose members are among the lowest paid municipal employees, has challenged both the increase in premium contributions and the modified prescription medication benefit. The union claims that since the 2.5 percent COLA offered by the city will not offset the increased premium contribution and higher prescription drug costs, some of its members would find themselves out of pocket.