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President Ask the President The Tentative Agreement and Healthcare
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President Ask the President The Tentative Agreement and Healthcare
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President Ask the President The Tentative Agreement and HealthcareCliff Guffey,
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Below is a response by former APWU President William Burrus to a question posed online by a union member. Other questions cover a wide range of topics, from contract enforcement to union governance.
Question:
The healthcare provisions of the new contract seem to be trying to force everyone to buy a certain policy — the APWU Consumer Driven Health Plan. I realize we still have a choice, but you will have to pay considerably more for a different plan. I’ve had BlueCross BlueShield for 12 years, but now the cost may be too much and I will be forced to change. That doesn’t seem right to me.
Bill, Toledo (OH) Area Local
President Burrus:
Thank you for sharing your opinion about the changes to the USPS contribution to healthcare benefit premiums that were negotiated as part of the tentative agreement.
As you are aware, healthcare costs in our country have skyrocketed, and virtually every contract negotiation — in both the public- and private-sector — is consumed by that issue.
The APWU negotiating team anticipated that agreement with the USPS would hinge on this subject, and the final agreement was a compromise. During negotiations, postal management proposed to increase the employees’ share of contributions to healthcare premiums from the current 15 percent to 30 percent.
The tentative agreement will reduce the USPS payment by 1 percent each year for four years, beginning in 2008. If the new percentage had applied to 2006, your share would have increased by $3.31 per pay period in net pay. Using this example, and assuming total premiums remained the same for three additional years, your share of the premium would increase by a total of $13.24 per pay period at the end of four years.
During the four years of the Collective Bargaining Agreement, you are scheduled to receive eight Cost-of-Living Adjustments, two pay increases (of 1.3 percent and 1.2 percent), and an upgrade. The estimated total pay increases will be approximately $4,751 annually, compared to $344.24 for increased healthcare costs. Clearly, the benefits of the tentative agreement far outweigh the adverse impact of increasing the employee payment by 4 percent over four years.
Unfortunately, the example of healthcare premium costs cited above cannot be relied upon to determine future healthcare costs and is used only as an illustration. Healthcare premiums are determined by experience. The costs a health plan incurs in one year are used to set premiums for the following year. An exception would be when a major insurance carrier (such as BlueCross or GHIA) elects to use its “reserves” to hold down premiums. In that instance, premiums are set artificially low for one year and do not track experience. Typically, however, in those situations, premiums escalate in the following year because of pent-up costs. In short, premiums are based on the cost of healthcare.
Your costs are determined by many factors beyond the division of the premium between the employee and employer. These factors include the escalating cost of healthcare itself; changes in benefits; and the healthcare plan’s decision to use reserves or pass on increased costs to participants.
Under any scenario, your healthcare premium will not increase commensurate with the increases in your salary, so you should not use this issue as the determining factor in your support or opposition to the agreement. This tentative agreement includes many improvements and should be evaluated on the broader question of improving conditions for postal employees.
The APWU Health Plan's Consumer Driven Option is a good one, and postal employees should consider it when they make healthcare choices. The plan is structured differently than BlueCross, the APWU High-Option Plan, and others, but a cost comparison will show that it offers an excellent value.
The concept of the Consumer Driven plan is to engage the consumer of health benefits in the decision-making process about how healthcare dollars are spent. Too often, individuals lose sight of the fact that healthcare is expensive because “it’s covered” — someone else is paying.
In the Consumer Driven Plan, members are granted $2,400 in a Personal Care Account. This money is used for healthcare expenses, including doctor visits, with no deductibles. (Most high-option plans have deductibles of approximately $275 per covered family member or approximately $550 per family.) After an expenditure of $2,400, the next $1,200 is paid by the enrollee. This $1,200 is offset by savings of approximately $50 per pay period or $1,300 annually in premiums. After payment of the $1,200, the coverage returns to traditional high-option insurance.
I emphasize to the membership: The increase in management’s share of the premium payment for the Consumer Driven Health Plan was to present you with an option. We expect that each postal employee will evaluate their need for medical insurance and make the decisions that are best for them and their families. If BlueCross or another high option plan better suits your medical needs, we strongly encourage you to enroll in that plan.
Employees will not be eligible for the reduction in premium costs associated with the Consumer Driven plan in 2007. The agreement provides that the 95-percent payment by the USPS will not begin until 2008. Employees will be eligible to enjoy these benefits only after having been enrolled in an FEHB plan for a minimum of one year.
December 15, 2006
