September 22, 2014
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With no co-pay, retiree health costs top $7.2 million

While active city employees are paying a portion of their health care costs, taxpayers are picking up the full tab for their retired counterparts. And, from what some members of the administration are saying, it could be that way for a long time to come.

The issue of health care co-payments for retirees came up during City Council hearings on Mayor Scott Avedisian’s proposed $283 million budget. In response to questions, City Personnel Director Oscar Shelton put the cost of retiree health care benefits at about $8 million.

When Ward 9 Councilman Steve Merolla learned retirees aren’t sharing the cost of health care, as active employees do by contract, he did some simple math. He said if retirees had the same level 20 percent co-pay, the city would save $1.6 million, which, he suggested, could be turned over to schools. Avedisian’s budget would level-fund schools with $118.6 million in city revenues. Schools have asked for an additional $3.8 million from the city.

“Retired employees are not paying into health care and that’s not fair,” insisted Merolla.

Schools also provide health care benefits for retirees, however, school retirees are faced with the same conditions as active employees, meaning they also have a 20 percent co-pay. The overall cost of retiree health care for teachers, administrators and school workers is $1.3 million.

Ward 4 Councilman Joseph Solomon suggested the city impose a health care co-payment on retirees.

City Solicitor Peter Ruggiero said that is an option, adding, “I don’t know if it’s sustainable.” He reasoned the action would most likely be legally contested, to which, Solomon observed, a lot of money is at stake.

“We have to be proactive,” Solomon said.

Asked for additional information last Thursday, Shelton explained that not all retired municipal health plans are the same. But, regardless of the differences, they all are more generous than what is offered by the school department.

Apart from no co-payment, municipal health care benefits are extended to the retiree’s spouse. That is not the case for school retirees. Also, within the last five years, the city has included a provision in its contract providing a “medi-gap” payment that averages about $160 a month to cover Part B deductibles from Social Security when retirees go on Medicare at the age of 65. That benefit is currently costing $590,000 a year and promises to increase as retirees age. No such provision is provided school retirees.

Shelton provided the following breakdown of retirees receiving health care and the cost: 165 police retirees under 65 and three over 65 collecting the medi-gap for a cost of $2.5 million; 151 firefighters under 65 and 12 over 65 for $2.4 million; and 130 municipal retirees under 65 and 308 over 65 for a total of $2.3 million. [The three add up to $7.2 million, not the $8 million Shelton estimated during the budget hearing.]

Shelton imagines there will be a time when the city negotiates a health care co-payment for retirees, but he sees that going forward and not applying to current retirees. The reason is that those retirees were promised those benefits as active employees and reducing them could be legally contested. He points to the case of retired policeman Al Hagenberg, who won his suit for the city to pay medical benefits. Furthermore, he points out, the union does not represent retirees, so it would be impossible for the union to reach a contract requiring a retiree co-payment from already retired workers. In fact, no group represents retirees, so conceivably, multiple suits could be brought against the city if retiree benefits were changed.

What about the city taking its chances?

“I can’t count on the money [the savings with a co-pay] when I don’t know what the courts are going to do,” he said.

Rosemary Healey, director of human resources and legal counsel for the school department, said the department pays 50 percent of an individual health care plan for teachers and administrators with 20 years of service; that increases to 100 percent of a family plan for those with 30 years in the state teacher retirement system. Non-teacher retirees at age 62, and with a minimum of 25 years of service, get family plan coverage until they reach 65, at which point they go on Medicare. All retiree health care benefits cease for school employees once they are 65 and eligible for Medicare.

Healey said school contracts state that retirees are subject to the same conditions of active employees. That meant, when the committee unilaterally imposed a health care co-payment on Warwick Independent School Employees (WISE), that co-payment applied to retirees. Neither the union nor the retirees contested that change.

The committee did the same thing with the teachers, but when they took the committee to court, they backed off. In the following year’s contract, the committee won the 20 percent co-pay and it applied to the actives and the retirees.

“All negotiators worth their salt know it [retiree benefits] is a black hole you never get out of,” Healey said.

She said that many school districts in the state at one time provided lifetime health care to retirees but have since gotten out of them.

Sheldon said the city faces a different set of issues.

“You don’t want 65-year-old cops and firefighters, but you can’t come out and say that because it’s discrimination,” he said. But on the whole, as the numbers indicate, police and firefighters are retiring sooner and at younger ages than municipal employees. This means they are on city health care longer until they go on Medicare.

As for retiree co-payments, Shelton said, “People think this is the big answer.” He doesn’t argue that it would “be good to have,” but only sees it happening by revamping future benefits.

The alternative, he admits, is what Providence and Cranston have done. He thinks that would be difficult for Warwick to pull off, as Warwick is not in the “dire” situation that those communities faced.


Comments
17 comments on this item

Well asked the retiree's to help out the city. Are the retiree's such horrible people that unless the city is going to go bankrupt they won't help the city out. The city is going to become central falls if we don't get ahead of this. The current workers are giving, the taxpayers are giving, the schools are giving, the retiree's have a good relationship with Avedisian. It's time for them to give.

Well, well, it seems the schools are much better at handling/negotiating health care benefits for retirees with respect to how it impacts taxpayers than the city is. if I read the article correctly, that was negotiated into their agreements at some point. Yet the city, by the comments above as well as their actions, seem to think that it's all but impossible for them to do that. Hmm. So i guess we just eat those exploding costs for the next couple of decades until the current hires are into a copay type of system. Oh, wait.. that hasn't been negotiated yet. No one expects or wants to have 65 year old officers or firefighters, that's not the issue. Providing healthcare to retirees for free is the issue. i guess we just have to wait until these cost thoroughly swamp the budget and we become a Providence or Cranston. Until then, we'll keep talking about how it can't be done because we're not like Providence or Cranston.

Well said Dave, well said!

Cranston's OPEB (Other Post Employee Benefits) lifetime healthcare are, I belive around $50 million. Warwick's is close to $300 million. Pension liability is also greater in Warwick. All together Warwick liabilities are over $1 biliion.

So which city is really in worse shape?

Mark my words, in about three years time when all employees are demanding raises (they won't go another 3 years with zeros), federal grant for the newly hired firefighter expire, pension costs and healthcare costs continue to exploded, the Category 5 Storm will finally have hit Warwick straight on.

And Avedisian will be gone. On to a new taxpayer funded job at the state level. The next mayor will get to come in and pick up the pieces.

We can not wait until we become Central Falls, Providence and Cranston. We need a leader who is WILLING to reach out to the retirees and ask the question. Explain that we don't want Warwick to end up in the same situation as Central Falls and potentially have our retirees lose half or more of their well earned pensions. We need to take care of our retirees and taxpayers by getting them to the table now rather than waiting. It takes a leader.

This ladies and gentlemen, is why I do not like Unions

Patrick, sadly no one in this administration and the Council leadership team of President Donna Travis and Finance Committee Chairwoman Carmella Vella-Wilkinson will not provide that leadership.

In fact what you just described, the kick the can into the future approach is Mayor Avedisian's and the council leadership strategy.

When I retired, the contract stated I would not pay co-pays and my family would receive benefits until age 65. Now Solomon and others think they should just impose co-pays. I will sue and demand attorneys fees. No one represents me. You cannot negotiate with me. Contract law is contract law. The idea that Solomon and others would break the law 'and take our chances' is enough for a judge to add penalties to the city in any lawsuit. Go ahead, make my day.

And we are no way near Central Falls. Bob Cushman is like chicken little. If you want to do this legally, negotiate now for future retirees and stop the 'bleeding'.

DB109, That's what the retirees said in Central Falls when Judge Flanders asked the retiree's to take a cut. And when they said no he filed for bankruptcy. Hubris got the best of them and cost their city dearly. Public unions need to be outlawed. Cities and towns would be healthier and city workers would be happier.

I love your unabashed greed, I got mine, stick it to the new guys. Your not even smart enough to be ashamed of your selfish greed, or your contempt of our workers today.

Is Dave Barry code for something else with the initials DB?

Active workers going three years without a raise and employees paying more for healthcare then those retired, municipal retired employees have not received a COLA in 5 years and it could be 10 more before they get one, the amount of dollars allocoted to the equipment, tools, vehicles needed to do the job for our police, fire, DPW workers getting older and older with no plan to replace them on a consistant basis, family services, youth services eliminated from the budget , the school deparment buildings still 8 years later not in compliance with fire safety codes, building failing, roofs leaking, strret crumbling, school budget allocated only $500,000 more in seven years while tax dollars to pay for retiree benefits have increased by $16 million and -----

over 52 cents of every new dollar collected for the city budget since 2004 going to pay for retiree costs; and the city doesn't have a problem Dave Barry?

Thank you Patientman for your spot on comments.

To see the number paste this link into your browser Dave. Pay particular attention to how every other area except retiree benefits have been cut in the city and school budget.

https://docs.google.com/file/d/0B6P1sIPd4PTdZHY1TE5WUmgzYWs/edit?usp=sharing

Mr. Cushman, keep fighting the good fight. In time, hopefully soon. the current workers will see that we're looking out for them, the retiree's and the city as a whole. We need to reverse the cities course or our tax base will dwindle to the point where you have the wealthy living on the water surrounded by a sea of foreclosed homes and shuttered business's. The rallying cry shouldn't be "we are no way Central Falls". It should be "What can we do to protect the city, our children and our grandchildren. It's not to late. Mr. Howell take your head out of the sand. Do your job and be remembered as a daring investigative journalist. Because right now your just Scott Avedisian's in house p.r. firm.

greedy union terrorists care for nobody but the person in the mirror. don't care about their own kids, grandkids, anyone but that person staring back at them. They'd sell the sidewalks, roads, buildings, parks everything if it meant keeping the gravy rolling.

It is amazing that you folks continue to label retirees and union workers as 'terrorists', 'greedy', and worse. As if we ever did anything illegal. As if the mayor and city council were unaware of what was in these contracts. Amazing. The union did what it exists to do. It negotiated the best deal for its employees concerning wages and benefits. That is what it exists for. For years, we took no raises or nominal raises in exchange for great benefits. Now the benefits, through no fault of ours, cost losts of money. Will you increase my pay that I gave up in exchange for reduced benefits? What will you give me to get what you want? That's a negotiation. The politicians made the mess, you won't clean it up on my back. You dolts have fallen for the politicians trick of turning the taxpayers on the citizens while ignoring them. They did this. Make them pay.

Dave here is my answer that I wrote in an 2011 Projo op-ed to your claim that the union leaders our not responsible for the current conditions . I will repeat it for the sake of others to read:

Organized labor now is laying the blame for the condition of the pension plan on past and present political leaders. What union leaders don’t say is that they endorsed and supported most of these politicians in exchange for their passing laws that defined current pension benefits.

To make matters worse, labor also supported scheme after scheme by politicians that let employees manipulate the system: allowing enhanced benefits through the purchase of pension credits, enabling questionable disability pensions, receiving retirement benefits after only 20 years of work. Granting lifetime health-care benefits and unrealistic compounded cost-of-living adjustments only escalated today’s problems.

Yet Rhode Island’s labor leaders have never accepted responsibility for their failure to monitor the health of the system. And by brainwashing public-sector employees into believing the system was infallible, they also ignored any problems. It was only a matter of time before the system’s faulty structure was exposed.

Now labor leaders won’t accept reform because it exposes their culpability. So, instead, they point fingers and resort to the despicable tactic of personally attacking those for trying to fix it.

Labor bosses have seen the warning signs for decades. But, instead of being partners in acknowledging the problem, identifying corrupt costly policies and proposing solutions to fix them, they and their ethically conflicted political supporters put some caulking in the leaks, slapped on a fresh coat of paint and masked the rotting structural problems for decades more.

It was bad enough that the state and its cities and towns have, for years, been redirecting budgetary resources from all other programs in an attempt to stabilize the system. The fact is, current state and local employees are now paying the price with sub-par equipment and staffing, and, along with taxpayers, paying for retirement benefits for former employees that they themselves will never realize.

Organized labor leaders bear much of the responsibility for these conditions.

We need not hesitate to fairly criticize, and justly tarnish, the reputation of labor leaders. These union bosses still pretend to have been the guardians of the public-employee pension system. The truth is that they are ultimately responsible for its failure.

The real “scam” and “lies” perpetrated upon all Rhode Island citizens are the promises of unsustainable benefits by the union bosses.

The union bosses are so well compensated they never want to lose their job. So negotiating pensions that they know aren't feasible will keep them on top and the membership happy. Can you envision a world where a union boss says "we don't envision a scenario where this is a viable plan". No its gimme gimme gimme and gimme more. Guess what the can has been kicked down the road and here we are, at the end of the road. Mr. Barry, I would be expecting a call from the mayor's office very soon.

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