What some unions are doing about out-of-control health care costs
By DON McINTOSH, Associate Editor
After decades of rising health costs, American workers are used to rising health insurance premiums and worsening coverage, and watching as raises are gobbled up by health care cost increases. And the question of who will pay for the increases — workers or employers — is the number one source of conflict in union contract bargaining.
At Boeing, it was a factor in the last two strikes. At TriMet, new hires will have 401(k)s instead of a traditional pension because of rising health costs: In July, an arbitrator said he imposed the employer’s contract proposal (which included the pension change) because the union’s contract proposal would have continued the same health benefits and thus would have been too costly.
Health insurance premiums have doubled in a decade, according to a nationwide annual employer survey — from $7,061 for employer-sponsored family coverage in 2001 to $15,073 in 2011. And employee-only coverage now averages $5,429 a year. Under President Obama’s Affordable Care Act, premiums will be disclosed on every worker’s W-2 form, but they’re expected to continue to rise.
America spent 17.9 percent of its Gross Domestic Product on health care in 2010 — $2.6 trillion. That’s $8,402 per person per year, and double what Canada spends.
To combat metastasizing cost increases, unions and employers around the country are looking at ways to improve health and/or eliminate costly administration.
In New York City, a health trust jointly run by a hotel employers association and the New York Hotel Trades Council is saving a bundle by employing doctors directly, and cutting out the insurance middleman. The trust operates four health centers and employs 200 physicians, 50 dentists, 24 pharmacists and 700 other medical support staff to serve hotel workers and their dependents — 86,000 people in all. The $315 million annual cost is completely funded through contributions from approximately 300 participating hotel employers at a collectively bargained contribution rate of 22.5 percent of gross wages. And in the most recent master contract, the employer group committed to replacing an aging Brooklyn health center with a new 100,000 square foot state-of-the-art health center, which Dr. Robert H. Greenspan, the health network CEO, estimates will cost around $60 million. That may sound like a lot of money, but the cost to the trust for health care works out to be $358.79 a month for a single member and $986.52 for a family. And that’s about a third the cost of an equivalent HMO, Greenspan said in an e-mail.
The strategy of cutting out insurance middlemen may be spreading: Service Employees International Union (SEIU), which long had a clinic for its janitor members in Chicago, recently opened one for janitors in Houston. And a group called the Freelancers Union is opening a clinic in Brooklyn, New York, this winter for its members.
A more common approach is to try to encourage employees to become healthier — quitting smoking or losing weight. Pepsi charges employees $50 a month if they smoke or have obesity-related medical problems — if they refuse to attend smoking cessation or weight loss classes — though Teamsters in upstate New York are fighting aspects of that move.
At least 17 state governments are offering some combination of incentives and penalties to get employees to complete a health assessment and take steps to improve health. The State of Oregon began such a program for its roughly 50,000 employees and spouses, domestic partners, and dependents, based on a model pioneered by American Federation of State County and Municipal Employees (AFSCME) in Illinois. Since January, the state has deducted $17.50 a month for the roughly 14 percent of full-time employees who fail to complete an online health evaluation and follow it up with two online health classes. Next year, after agitation by Oregon AFSCME and SEIU Local 503, the two largest state employee unions, the stick will shift to a carrot instead — employees will receive $17.50 a month when they do participate.
Oregon’s Public Employees Benefit Board is also getting rid of the one controversial piece of its Health Engagement Model (HEM): asking members to report their waist circumference. Previously, men who reported over 40 inch waist circumference in the online HEM health questionnaire, and women over 35 inches, were directed to join a weight management program. The two union representatives on PEBB argued that the stand-alone waist measurement was not a fair assessment. Now the assessment will only ask employees if they are overweight.
UNITE HERE Local 54, which represents casino workers in Atlantic City, New Jersey, combines the clinic and behavior change approaches. In 2007, the union health trust teamed up with a local hospital to set up a health clinic that got startling results by focusing exclusively on the sickest 1,200 employees. Nationally, it’s estimated that 5 percent of the population accounts for half of health care spending. The Atlantic City clinic offered greater personal attention and “health coaches” to the sickest 10 percent — at no cost to patients — and saw hospitalization drop by 41 percent, emergency room visits drop by 48 percent, and total spending drop by 12 to 15 percent.
Key to the success of the Atlantic City effort, says Dr. Rushika Fernandopulle, who was hired to set it up, is that doctors are paid a flat amount per patient, and clinic staff were able to develop personal relationships with patients.
“The sickest people do the poorest in the current system, and they’re the ones who drive the costs,” Fernandopulle said. “They have diabetes, hypertension, heart failure, they’re on many medicines, seeing lots of docs, and they’re in and out of the hospital and emergency rooms. Those kinds of people really don’t do well in the current system, because it’s fragmented and reactive.”
Instead of a typical practice, where doctors get paid for each “sick visit,” the Atlantic City clinic gets a flat fee from the union trust, which allows it to be creative in how it serves patients, Fernandopulle said: “Many of the things we think are of high value — a phone call with patient, a group visit, doing a home visit, having a ‘health push’ talk with someone — none of that gets paid for in the typical system, so they don’t happen.”
Now Fernandopulle is working with unions to set up other similar clinics: A UNITE HERE local in Las Vegas opened one six months ago, and a Carpenters regional council is opening one in Boston this winter.
In Portland, City Commissioner-elect Steve Novick is interested in trying Fernandopulle’s approach with City employees, and partnering with other large employers, like TriMet, that have high health insurance costs.
“When you look at what’s happened to the working class over the past 45 years,” Novick says, “the richest 1 percent used to get 10 percent of the [nation’s] income, and now they get 20 percent, and health care used to get 8 percent of gross national product and now it gets 17 percent. The two things have been eating at their paychecks to an almost equal extent. So just as we need to fight increasing inequality, we need to fight increasing health care costs.”