City Health Care Costs For Retirees Exceeds Active Employees

sam-teresi-jamestown-mayor

More than $3.5 million in the approximately $6.5 million the city will spend for health insurance is spent on retirees.

October 11, Sam Teresi, Jamestown mayor, released his 2017 executive budget that contains an $878,736 deficit. Teresi said the ”No. 1” issue city officials have no control over is their self-insured health care plan. He said the city’s health care plan includes active employees, which includes their dependents. The plan also includes retirees, which also includes their dependents. He said the retirees are the biggest burden on the plan because they account for 60 percent of the $6.2 million city officials spent on health insurance in 2015. He added because of legally binding contract agreements, they cannot eliminate the retirees from the insurance plan.

In an effort to curtail health care spending on retirees, city officials have proposed a new health care initiative for Medicare eligible retirees. City officials have submitted paperwork to the state Financial Restructuring Board for Local Governments for more than $4 million in funding to provide an incentive and a new health care subsidy for Medicare eligible retirees.

If the new health care initiative is approved by the state, which Teresi is hopeful will be done during 2017, the city could save $600,000 in health care costs for Medicare eligible retirees if 25 to 30 percent opt for the new plan. City officials are already banking on state approval for the program and that they will reach their goal of retirees opting into the new plan. If the city doesn’t receive funding from the state or they don’t reach their goal of retirees opting into the new plan, the 2017 budget deficit will be larger than the currently proposed $878,736. Teresi said the new health care program is voluntary.

”(The) alternative insurance package (will) be offered on a voluntary enrollment basis, individually to each retire. In fact, it should be noted that the decision for any retiree above or for that matter below the age of 65, to continue participating in the city’s health plan is not mandated on or required of the retiree by any union contract. In other words, while the contracts say the city must offer continuation of insurance to the retiree, it does not require the retiree to accept or use it,” he said. ”The final decision to accept and use the city’s insurance, or a lower cost alternative plan that would be offered individually to each retiree, is strictly the option and decision of the retiree. Although, up to this point-in-time, the vast majority have opted to receive and utilize the city’s insurance due to its ‘Cadillac’ coverage and relatively low out-of-pocket cost.”

The city health insurance plan has approximately 300 individuals that are Medicare eligible, including spouses, city officials stated in an email response to The Post-Journal about their health care coverage. Medicare is the primary coverage for the retirees older than 65 and, currently, the city’s self-insurance plan serves as the backup supplemental coverage for these individuals and families. For the roughly 300 Medicare retirees, the city spends about $2 million for their backup supplemental coverage. Even though 65 is the age for Medicare eligibility, the city’s plan does include individuals under the age of 65 who qualify for Medicare due to a disability or other event.

The city has 79 retirees who are under the age of 65 and do not qualify for Medicare yet. The city is proposing to spend $1,550,000 in 2017 on non-Medicare retirees. The city has 205 active employees included in the health care plan. In the 2017 executive budget, city officials propose to spend $2,950,000 on active employees next year.

Teresi said the current benefits system was originally put in place, and largely still in tact, through legally approved and protected collective bargaining agreements with the various unions that date back to 1987. These unions include the International Association of Firefighters Local 1772 and Kendall Club Police Benevolent Association, American Federation of State, County and Municipal Employees local 418, Civil Service Employees Association local 1000 and Jamestown City Administrative Association

”Those agreements stipulate that the city will supply a very specific, defined level of benefits through a self-funded program, containing negotiated and stipulated out-of-pocket contributions, deductibles and co-pays from the subject employees and retirees,” Teresi said. ”The continuation of these benefits must be offered to retiring employees for life at the same contribution rates paid by existing, active employees. Continuation in the health care program for retirees is determined by and made at the option of the retiree … thus, we do have the ability to go on an individual basis to each retire and have a conversation about alternative health care plan offerings.”

Teresi said the collective bargaining agreements and the health care program components are protected in place by both the state’s Taylor Law and its Triborough Amendment, which stipulate that changes can only be made via the mutual consent of both parties. He said the city, unlike what a private business/non-governmental organization could do, does not have the legal ability on its own to change the agreed to plan and replace it with something of it’s own choosing, reduce or change specific benefits or coverage levels, increase employee out-of-pocket contributions, co-pays and deductibles or remove retirees in good standing from the plan or change their benefits or contribution levels in any way.

”Change, however, can and over the years has in fact come about across the negotiation table,” Teresi said. ”This has typically been in smaller, hard fought for increments and usually has involved out-of-pocket employee/retiree contribution rates.”

Other changes made by city officials to lessen the city’s health insurance plan burden on tax payers include adding a wellness plan. In December 2013, city officials negotiated a new contract with the fire and police union employees to start the BlueCross BlueShield Good Life wellness program in 2015. In 2014, Jamestown City Administration Association and Jamestown Urban Renewal Agency employees agreed to a new contract and to also participate in the wellness plan starting in 2015. Last year, city officials reached a new contract agreement with the American Federation of State, County and Municipal Employees and the Civil Service Employees Association, who joined the wellness program at the beginning of 2016.

City employees can voluntarily join the Good Life Program to pay less for their health care coverage. In May, Joseph Bellitto, city comptroller, said 86 percent of general fund and Jamestown Urban Renewal Agency employees and retirees, who have health insurance, participated and completed the required steps for the wellness program.

This year, police and fire department employees and retirees will pay 22 percent of the health premium. If they voluntarily participate in the wellness program and complete the required steps, they pay 17 percent of the premium. All other general fund and Jamestown Urban Renewal Agency employees and retirees pay 26 percent of the health premium. If they voluntarily participate in the wellness program and complete the required steps, they pay 19 percent of the premium. Part-time employees pay 38 percent of their health care premium.

Along with the wellness plan, city officials have also taken another important step to possibly curtail the costs of health insurance. Last year when an agreement was reached with American Federation of State, County and Municipal Employees and the Civil Service Employees Association, the two new contracts included a provision that will eliminate health insurance coverage for new employees once they are retired and eligible for Medicare.

The 2017 executive budget has a proposed tax levy increase of $150,220, or .96 percent. With the proposed increase, the city has reached its Constitutional tax limit. The Constitutional tax limit is the amount of money a municipality can ask its property taxpayers to provide compared to the total assessed property value in the community. Each municipality in the state has a Constitutional tax limit of 2 percent of the five-year average of the total assessed property value in the community.

The tax levy increase is $42,955 above the state’s tax cap, which is .69 percent for the city in 2017. On Monday, City Council passed a resolution to override the state’s tax cap. Brent Sheldon, Ward 1 councilman, was the only council member to vote against the tax cap override. A public hearing will be held for the tax cap override at 9 a.m. Monday, Nov. 7. Teresi said after the public hearing, he will either sign the tax cap override law into effect or veto the legislation. The local law to exceed the tax cap, the public hearing and the mayor’s approval are all necessary before Dec. 1.

Council needs to approve a spending plan by Dec. 1 or the executive budget goes into effect for the city’s fiscal year, which is Jan. 1 to Dec. 31. The proposed tax rate is $23.77 per $1,000 assess property value. This is an 18 cent increase, or .76 percent. The executive budget totals $35,052,304. A public hearing on the 2017 budget will be held at 6 p.m. Monday, Nov. 14.

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