We are living through the worst economic crisis of our lifetimes. During this alarmingly difficult economy, fulltime faculty in the Los Angeles community colleges – with secure jobs, guaranteed pensions, outstanding lifetime benefits – are very fortunate, but we are not immune. District revenues will be flat at best for some time, while health insurance premiums will continue to rise. How do we preserve our outstanding lifetime coverage? We have always rejected the options used widely by others in both the private and public sectors. We have not ended retiree coverage for newer hires, made members or retirees pay premiums for family members, or restricted our plan choices to HMOs. We are committed to continuing lifetime coverage for eligible retirees, to having the employer pay all the premiums, and to offering a choice of plans, including a PPO. In the process of protecting these priorities, we have made smart strategic decisions, such as establishing a Joint Labor Management Committee to make recommendations on plan designs and negotiating the establishment of an irrevocable trust to begin to pre-fund the district’s GASB liability for retiree premiums. Unfortunately, the employer-based American health care “system” continues to deteriorate. In the LACCD, after 15 years of recovering refunds, enforcing the Medicare requirement for retirees, auditing enrollments, changing carriers and consultants, and adopting minimal co-payments and deductibles, we have exhausted our “easy” options. Our older, more educated membership uses more medical services than other employee groups. Two-thirds of them are enrolled in the most expensive Blue PPO Plan, The plan is uncommonly rich – a 100% plan with no co-insurance. And because our employer-paid premiums cover everyone, spouses and children use our plans rather than those of other employers who charge more for dependents or require other kinds of cost-sharing. With no new revenue on the horizon and health insurance premiums rising, we believe this Blue PPO Plan has become unsustainable. It will change: what we control is when and how. The demographic risk is daunting. Our plan of 7,000 members is currently 43% retirees. As our largest group of actives also retire over the next decade, it is likely that the majority of our group will be retired. Our financial risk is real. With many of our colleges in deficit, the LACCD absorbed an additional $7 million in premium costs for 2008-09, bringing the total program costs of employee health care coverage to over $70 million dollars. Premiums are expected to continue to increase, but revenues to the district will not. Recently the unions in LA Unified (which eliminated its PPO years ago) agreed to strict caps on employer contributions over the next few years and a 25-year vesting requirement. We need to make smart strategic decisions. We are looking at CalPERS Health Care program for the following reasons:
Why now? Why not just modify our own PPO plan year by year through the JLMBC? We certainly can do that, but if we move to PERS for the next plan year, we have the opportunity to save $15 million – the difference in premiums for our current Kaiser and Blue Shield PPO and CalPERS Kaiser and PERS Choice plans. We would then negotiate with the District to place a significant portion of the savings into salary increases or into Health Reimbursement Arrangements (HRA’s) to help mitigate increased out-of-pocket health care costs. We would not make this change without satisfactory agreement on how the savings would be applied. These are difficult decisions – in difficult times. In addition to discussing them at the March 13 annual conference, we will be talking with you about them at chapter meetings on campus this spring and preparing materials for the Guild website and mail distribution. As always, we welcome your input and ideas.
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Dear Colleague,