City wants union members to share health costs

To help curb growing health-care costs, the Nutter administration wants members of Philadelphia's largest municipal employee union, District Council 33, to start paying for the health benefits they receive.

The city is also seeking to take over the billing responsibility to insurance carriers from all four city unions, which together represent 20,000 workers.

Both moves represent a remarkable shift from current practices, and are among the more aggressive and controversial proposals made by the city as it pursues new labor contracts with the police and firefighters unions, and District Council 33 and District Council 47 of the American Federation of State, County, and Municipal Employees. Contracts with all four expired June 30.

Reducing health-care costs has been a top priority for Mayor Nutter in both the short and long terms. With a budget last year of $4 billion, the city spent $369 million on health benefits, with expectations that such spending will spiral upward each new year.

A recent report by the Pew Charitable Trusts found that local governments, on average, ask employees who are single to contribute 9 percent of the cost for health-care coverage, and those with families to contribute 27 percent.

By contrast, Philadelphia pays 100 percent of insurance premiums for most of its workers.

In an unusual arrangement shared by no other major city, Philadelphia negotiates a flat amount of money per employee to give to the unions' health and welfare trust funds based upon cost projections.

Currently, that amounts to the city providing nearly $11,700 a year to provide coverage for each DC 33 and DC 47 worker; about $14,000 for each police officer; and about $15,200 for each firefighter.

The only union employees who contribute something toward their health coverage belong to DC 47, which represents 3,400 white-collar workers. About half of them pay premiums of either $547 a year for single coverage or $1,523 for family coverage.

But under Nutter's plan, many more Philadelphia workers would be paying for health care - while receiving no pay increase for the next four years.

Specifically, in the administration's July 10 proposal to DC 33, which was obtained by The Inquirer, the city wants single employees to contribute 1.5 percent of their base salary (no overtime included), and employees with dependents to contribute 4 percent.

The average salary for a member of DC 33, which represents 9,400 blue-collar workers, is $36,000. Under the city proposal, that means a single employee would pay $540 a year toward coverage, and an employee with family coverage would pay $1,440.

In an interview yesterday, Shannon Farmer, the city's chief negotiator, would not specify how much those contributions would represent in savings for the city, saying she had not yet shared that figure with DC 33 union president Herman "Pete" Matthews.

Matthews did not return two calls yesterday.

Farmer stressed that "the city is not trying to take over the union's health fund. The members would see no change in their benefits or who they would call if they have questions."

Farmer is also pressing DC 33 - as well as the other three unions - to agree to let the city pay health-insurance bills. That is currently handled by the joint trusts from each respective union.

Under the city plan, the bills would initially go to the unions, which would review a member's eligibility for coverage, and then be forwarded to the city for payment.

Among the advantages of such a "self-funded" or "self-insured" plan, Farmer said, is that "the city would no longer be paying projected amounts based on what experts believe the costs will be. It would be paying actual costs."

In addition, she said, employee contributions would be adjusted annually - either up or down - based on the actual claims.

The president of the firefighters union, for one, said he wouldn't give up his union's billing authority. "It's not broke, leave it alone," said Bill Gault of Local 22. "The city has to get its own house in order before I give up that."

John McNesby, president of Lodge 5 of the Fraternal Order of Police, and Cathy Scott, president of DC 47, did not return calls.

Ben Hayllar, who served as city finance director under Mayor Ed Rendell, lauded the effort to switch to a self-funded system. "It is clearly in the city's interest to control the expenditures, since it is their money," he said. "You are in a much better position to reduce expenditures if you control expenditures."

The city plan also calls for the unions to forfeit their health-care reserve funds - a step the unions will almost certainly oppose. Those funds are made up of whatever money remains in cases when the costs for coverage are less than what was expected. The reserve funds for all four unions total $100 million, Farmer said.

As far as DC 47 is concerned, she said, the city has proposed that members make two different levels of contributions toward health care, based on their levels of coverage, either a PPO or an HMO. Both amounts would be more than what members currently pay.