Dear Colleague, Since the mid-1990’s, when health care costs began to escalate, the Joint Labor-Management Benefits Committee (JLMBC) has worked diligently to protect the precious core features of our plans in the face of escalating premiums. Guild-led JLMBC efforts have preserved our choice of plans with lifetime family coverage and premiums fully paid by the district. We remain committed to these principles. Over the years we’ve implemented minimal kinds of cost-sharing – primarily a $200 deductible and a variety of office visit and pharmaceutical co-pays for the PPO, our most expensive plan. The JLMBC has also taken numerous other large and small steps to help control costs. Until recently, district revenue has generally grown to keep pace with the increases in benefit costs, and modest plan modifications have made it possible for the LACCD to cover benefit cost increases each year, improve salaries and advance part-time equity without draining college budgets. This hasn’t been easy and it would not have happened without the Guild’s vision and creativity, your support, and the willingness of a smart and progressive Chancellor and Board of Trustees to work with us as partners. Unfortunately, like all Americans, we are now in the midst of unprecedented fiscal and economic problems. In 2008-09 the district absorbed $7 million in increased benefit costs despite receiving no new revenue compared to the previous year. In a best case scenario, 2009-10 revenue will again be flat -- more likely, we will see a year-to-year reduction. The Guild is always working (with some success) to see that district waste is trimmed, but please have no illusions: any increase in 2009-10 benefit costs will be paid for primarily out of existing college budgets. Soon we will know the magnitude of the increase. Thanks to the discussions on national health care taking place in Washington, D.C., we don’t expect another $7 million increase, but an increase even half that size in the absence of new revenue to cover it will have to be addressed through further plan changes. Because our colleges cannot afford to spend millions more on active and retiree health insurance, the JLMBC will have to recommend plan modifications which will inevitably be focused on our most expensive plan, the Blue Shield PPO. Will increasing the deductible from $200 to $500 per person be enough to offset the increase? This is not yet under discussion, but it is the kind of question that we will be grappling with over the coming months. And then there’s 2010-11. The Guild leadership is likely to face a similar dilemma in preparing for that year: with colleges struggling financially, benefits costs rising and no new revenue on the horizon, what will be the next set of cost-saving modifications to the Blue Shield PPO? Holding the line against any increase in employee out-of-pocket costs under our Blue Shield PPO (which currently costs over $20,000 for family coverage for actives) cannot be a guiding principle. There is too much else at stake. The nation’s financial and economic crisis means that our members will face a host of financial threats over the next few years. Though funding will be flat, significant inflation is expected to re-emerge over the next few years. What will we do about our salaries, the likely elimination of certain enhancements to our CalSTRS pensions, and the rapidly rising costs of Medicare B for retirees? What will happen to district health insurance costs as the demographic balance of those covered under the plans tips from actives to retirees? Can we continue the progress we have made toward part-time equity? How can we ensure the fiscal viability of all of our colleges? These are only a few of the challenges we need to face squarely. We need a bargaining strategy that takes into account the “big picture” needs of our members. With this in mind, we are engaging you in a serious discussion about participating in the CalPERS-sponsored health plans. We recognize that such a move would expose active employees in the Blue Shield PPO – and especially those with dependents – to the possibility of greater out-of-pocket costs. (For all retirees and for active employees in the other plans, there would be no significant plan change.) If we make this change now rather than modifying the Blue Shield PPO each year to control rising costs, $10-15 million in savings will be available to improve the fulltime and parttime salary schedules and fund Health Reimbursement Arrangements (HRA’s) to help all benefited employees cover out-of-pocket costs or post-retirement health-related expenses such as Medicare B premiums. If we believed that the Blue Shield PPO would be sustainable in its current form over the next few difficult years, we would not be initiating this discussion. Unfortunately, we see no way to sustain the current plan without doing unacceptable collateral damage in other areas. We are preparing a special publication on the benefits choices we now face. The issues are complex, and we will need to make a collective decision through a vote of the Guild membership by the end of this semester. Should we maintain the district-sponsored plans, modifying the Blue Shield PPO to offset any cost increase? Or should we make the bigger leap into the CalPERS plans, significantly modifying the PPO structure for actives next year and applying the savings to salary improvements and HRA’s? We don’t yet know how much the increase in costs will be for the current plans or what modification will be needed to cover the increase. Also, until we have more information about the exact savings that would result from the move to CalPERS and more discussion within the Guild Executive Board, we cannot determine the exact salary schedule enhancements or the HRA amount. Nevertheless, I am enclosing a copy of our current salary schedule with hand-written notes indicating the scale of adjustments we anticipate if we authorize the cost-saving switch to CalPERS health plans prior to 2009-10. These adjustments include the following:
As more information about renewal rates, possible plan changes and opportunities for savings and enhancements to compensation becomes available, we will be communicating with you. Thank you, as always, for your attention and input.
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April 7, 2009