Thanks to everyone who responded to our June 16th post asking for feedback on your fellow trustees’ questions. We’ve looked over the responses and have some interesting things to report.
1. Shrinking locals makes maintaining healthy pension and health & welfare funds a challenge. If you are a trustee in an area with a shrinking local, what strategies have your funds adopted to ensure the continued health and support of your funds?
In general, your fellow trustees have sought to keep their plans healthy by making adjustment to the health & welfare benefits; perhaps because health benefits are the easiest to adjust of all the benefit funds? It seems that trustees are following the overall health-care trends of increasing co-pays, deductibles and co-insurance in a bid to make participants larger stakeholders in their health-care decisions.
Below is a snapshot of what three different areas have done or are looking to do.
Area One has done a number of things to keep their health-care fund robust, including increasing the cost to go the emergency room. (The ER was being used like an urgent care facility, but far more expensive.) Deductibles and co-pays were also increased. By increasing deductibles to levels in keeping with norms for employer-provided health coverage overall, usage dropped almost immediately by about 25%. They have also implemented various prescription savings strategies along the way that have helped keep costs "reasonable."
Area Two has a tentative agreement to move all their sheet metal workers from Health Plan A to Plan B. Both plans offer a PPO. Plan A offers an 80/20 co-insurance split and Plan B would have a 75/25 co-insurance split. Both plans offer the exact HMO plan and 75% of the local has already elected to participate in the HMO. Both plans provide for an hour bank with Plan A having a 9-month bank and Plan B a 3-month bank. Self-pay, once a participant, has exhausted their hour bank and is not permitted under Plan B. The difference in the contribution rate as of July 1, 2011 between the two is significant. Plan A costs $7.35 and Plan B costs $4.40. Area Two is also establishing an HRA effective July 1, 2011 to cover the hour bank, self-pay and dental coverage benefits that will be affected by changing to Plan B. The employer contribution rate for the HRA has been established at $1.00.
Area Three, has also made changes to their co-pays and deductibles. They recently raised both the deductible and out-of-pocket cap by 10% in an effort to get the participants to think a little bit more about their health-care decisions. Previously, they had established a separate deductible for emergency room visits and a lower deductible for urgent care. The plan continues implementing changes in baby steps.
2. Some health & welfare funds are self-funded programs while others are insurance-based funds. Has your fund recently changed from one to the other; and if so was the change good or bad?
At least one area has looked into the idea of going to a fully insured plan design and found that it was likely to cost significantly more than maintaining the self-funded status. Another downside for them is that it took much of the decision-making out of the hands of the trustees which was looked at very adversely by the union trustees.
3. Continued delinquencies are a struggle. What strategies are your funds using to “encourage” prompt payment?
Two different approaches to dealing with delinquencies arose from the comments. One area has taken an approach of trying to work with those contractors who have normally been prompt payers before the economic downturn and give them payment plan options. Habitual offenders, however, are now being required to make payments weekly instead of monthly.
For more information on what Assistant Secretary Borzi is saying, look in the New & Noteworthy section on www.dol.gov/ebsa or call 866-444-EBSA.
Another area currently has one delinquent employer. They believe this is in part because the association collects all the fringes through its office. They believe this greatly affects how prompt the employers are in their contribution payments; no one wants to have to face their peers on these matters. They are also adding a merchant account to their trust funds transmittal operations; employer’s facing cash-flow problems will be able to finance the contributions through their own credit cards instead of the trust funds financing their delinquencies.
4. Does your fund require weekly payment of fringes in any circumstances?
At least one responding fund requires weekly payment for those who are behind on their fringe payments and those who cannot get a bond for whatever reason. Their contract states that they must have a bond or irrevocable letter of credit from a bank. However, in the event that they cannot secure either, then they must pay weekly.
So was your fellow trustees’ feedback helpful? If so, send us more questions for your fellow trustees to respond to. Let’s share information to benefit every fund.