*Editor's note: It has been learned that the weekly cost of insurance for members of the fire department has increased since the most recent contract. IAFF members now pay around $90 a week for an individual health plan
If you’ve taken part in any conversations about the City of Warwick’s financial situation, chances are you have heard at least some talk about “benefits.” At the simplest level, “benefits” is a catch-all term referring to healthcare options provided to city employees and retirees, and lifetime pensions that are doled out to members following their retirement – much of which is paid for at the expense of the taxpayer, and all of which are subject to a litany of various qualifications and subcategories.
In the hopes of creating a more informed public on this complicated and important subject, this first in a series of three articles will delve into an objective analysis of these benefits that are given to the members of the city’s three collective bargaining units on the municipal side – both for active employees and once they retire.
The unions representing these city employees are the Local 2748 International Association of Fire Fighters (IAFF), The Warwick Lodge No. 7, Fraternal Order of Police (FOP), and the Council 94, AFSCME Local 1651 for Municipal Employees.
A follow-up piece will further examine the healthcare and pension benefits granted to the Warwick Teachers’ Union and Warwick Independent School Employees (WISE) Union, and compare those to the municipal unions. That piece will also examine the fiscal implications of these benefits, including the total membership of each union and costs associated with providing them healthcare and pensions going forward. A third and final article will seek opinions on the feasibility of these benefits and explore measures that could potentially curb costs for the city and its taxpayers.
Hopefully, by the end of this series in mid-November, readers will have a clearer picture of what benefits are enjoyed by workers in the city, what those benefits cost, and be able to make their own determinations about whether or not those benefits are lacking, fair, or excessive – and whether or not anything needs to be done by local governmental officials to address the costs created by these benefits.
The City of Warwick utilizes a self-insured method for its healthcare. The city council in June approved a contract with WB Community Health, which acts as the administrator of the health coverage to process claims. Utilizing this method means Warwick is responsible for paying the sum total of all insurance claims each year – in essence, the city insures itself with money from its budget rather than going through an insurance company to pay claims. If there are fewer claims than what was budgeted for, the city can get that money back. If there are more claims than anticipated, the city may be on the hook – depending on how other communities performed that also utilize WB.
All three municipal collective bargaining units are provided a choice of plans, either for individual or family coverage. This insurance can also be provided to a member’s spouse, provided they do not have comparable care of their own.
Members may choose between the primary coverage (equivalent to Healthmate Coast to Coast), or coverage equivalent to Blue Cross Classic Blue as a secondary insurance choice. Delta Dental is currently the negotiated dental benefit for all union employees in Warwick.
The city covers a majority of these healthcare costs, with members of the IAFF and FOP paying a 20 percent co-share for their healthcare, and Council 94 employees paying an 18 percent co-share. For the IAFF and FOP, this breaks down to a cost of about $65 a week for a family plan and $27 a week for an individual plan, or $260 a month and $108 a month respectively for coverage.
Healthcare plans in Rhode Island vary in cost, but the cheapest plan for an individual to purchase on their own, offered for comparison, on a monthly basis is the Neighborhood Health Economy plan, which costs about $200 a month for an individual. However, this plan also comes with a $6,000 deductible. Other variants of the Neighborhood have lower deductibles, but higher monthly premiums – with the lowest deductible being $500 for their Platinum plan, but that comes at the expense of a $446 average monthly premium for an individual.
For the sake of limited space and hopefully to maintain clarity on this complex topic, we will delve only into the city’s primary coverage option for this article. Under this plan, members have a $1,500 deductible for individual plans and $3,000 for family plans.
For the most part, co-pays for this plan are low. There is a $10 co-pay for in network doctor’s office visits, walk-in treatment and preventative services for pediatricians and general practice doctors. Employees also pay a $15 co-pay for all outpatient medical and surgical care, up to 20 visits per year. Things like lab tests, x-rays, physical and occupational therapy, home and hospice care and inpatient mental health care are 100 percent covered once the deductible is satisfied.
The healthcare plans also cover things like inpatient substance abuse treatment, for up to 30 days of rehab per year and 90 days throughout the lifetime of the policy. Outpatient substance abuse coverage comes with a $15 co-pay for individual and $10 for group care. A full list of covered services and applicable co-pays can be found at this link. (Note: This is from the IAFF collective bargaining agreement from 2015-18, which provides a full roster of health services that is not provided in either the FOP or Council 94 contracts)
It should be noted that a special provision provided solely to the FOP union members – which began January 1, 2013 under the Scott Avedisian administration – gives access to a city-funded Healthcare Savings Account in the amount of $2,000 a year for an individual and $4,000 a year for a family plan, which can be used to pay off the aforementioned deductible and cover co-pays. This comes at an approximately $500,000 expense to the city.
Another benefit given to the three unions is a 20 percent co-share on prescription medications, which is capped at a $300 out of pocket expense for individuals and $600 for a family plan. This means after paying $300 on co-pays for medication, an employee with individual healthcare can get all of their prescriptions for no charge for the rest of the year, regardless of the cost of that medication. FOP and IAFF members also receive this benefit in retirement, whereas Council 94 members do not, according to Council 94 spokeswoman Alexis Lyman.
Healthcare coverage contractually continues for members of the three unions following retirement until they hit age 65, when they are eligible for Medicare. IAFF and FOP members can retire and receive medical benefits after 20 years of service – or at any time if they apply for a disability pension following a work-related injury. Council 94 members need only to accrue 10 years of service to be eligible for healthcare coverage following retirement.
However, once a member hits age 65, they and their spouse are automatically eligible to be enrolled in a Blue Cross supplemental plan called Plan 65, which covers a majority of co-pays for services rendered through Medicare – at the city’s expense. For example, a Medicare recipient would normally have to pay a deductible and a $792 co-pay if they were hospitalized for 1-60 days. With the Plan 65 supplement, however, there is no cost to the retired member, and the city bears that expense.
An important point that must be considered is during negotiations for the contract period spanning 2015-2018, all three municipal unions agreed to make the concession that all employees hired after July 1, 2015 would only get access to individual medical coverage upon their retirement – not family or spousal coverage. These employees will, however, still get access to the Plan 65 Medicare supplement for themselves.
Plan 65 coverage is extensive but does have certain exceptions. A full list of what is covered by Plan 65 can be found HERE. (Note: This is from the IAFF collective bargaining agreement from 2015-18, which provides a full breakdown of Plan 65 coverage that is not provided in either the FOP or Council 94 contracts)
To provide a broad summary, the three municipal unions get high quality healthcare with a low deductible, low co-pays and a low monthly-co-share comparative to other health plans available in the state. They receive a beneficial out-of-pocket expense cap on prescription medication, and an assurance that their healthcare coverage – for them, their spouse or their entire family – will continue for the years in between retirement and when they can start receiving Medicare. Finally, once they do hit Medicare age, they receive a supplement at the city’s expense that covers a majority of Medicare costs, effectively giving them lifetime healthcare coverage.
It is important to emphasize, however, that employees hired after July 1, 2015 in all three municipal unions only receive individual healthcare and Plan 65 supplemental care upon retirement, not spousal or family coverage. These concessions were made by all of the union leaderships.
Although the exact details of the total cost will be further broken down in the next article of this series, a bottom line number to keep in mind is that the city budgeted over $23.5 million for healthcare to cover its active employees and retirees in the FY2020 budget.
A pension is a method of retirement funding that makes regular, twice monthly payments to retirees who have worked long enough to earn access to that pension, for the rest of their lives. Pensions are funded through contributions of the employee and employer throughout the career of that employee. The size of a pension basically boils down to how many years the employee spent in service and what their highest attained salary was prior to retirement, but there are levels of nuance to each pension fund as well depending on the collective bargaining agreements.
Any discussions of pensions in Warwick must come with the understanding that for IAFF and FOP members, there are two separate pension funds to keep in mind.
The Fire 1 pension plan was adopted in 1953 and contains all members hired prior to 1992 who have attained 20+ years of service. This plan covers 327 retired members of the fire department, with just seven members of the department currently actively employed in the city that fall into this plan as of June 30, 2018.
The Fire 2 pension plan covers all employees hired after July 1, 1992. There are 187 IAFF members actively employed within the Fire 2 pension system, with 24 members retired under its terms.
The Police 1 pension covers employees hired before 1971, and has no active members and contains 96 retired members. Police 2 was enacted to cover all employees hired after 1971, and thus has the majority of the membership – with 157 active members and 199 retirees falling into this pension system.
The Council 94 pension was not split in this fashion, and currently has 375 active members paying into the system and 410 members drawing from the lone pension fund in retirement.
Negotiations for the 2012-15 contract year created a tiered system for pension benefits, with employees of all three unions hired on or prior to June 30, 2012 placed into the “Tier 1” system, and all employees hired after June 30, 2012 being put into the “Tier 2” system.
The tiered system changed retirement requirements for IAFF and FOP members from simply attaining 20 years of service to needing to reach age 50 with at least 25 years of service. It also changed how the total pension amount was calculated – from the single highest salary the employee earned to a three-year average of the last three years of service. The change also made it so the maximum pension benefit went from 75 percent of the final salary for Tier 1, to 70 percent of the final salary for Tier 2. It made similar changes for Council 94 members.
Notoriously, the IAFF challenged its participation in the Tier 2 pension change because the language was never properly codified into their contract, and they maintain it was never collectively bargained, despite being included in a city ordinance that was passed into law. As a result, no IAFF members are currently a part of Tier 2 for the Fire 2 pension, which has resulted in an appeal from the city and a large back payment due to members who have retired since the change was made in 2012.
The exact financial implications of these pensions will be examined in the next article, but for the purposes of explaining the benefits of each collective bargaining group, it is important to note that FOP and IAFF members in the Tier 1 system are contractually guaranteed to receive a 3 percent, compounded, cost of living adjustment (COLA) to their pension payments each year.
For IAFF and FOP members in Tier 2, COLAs are also guaranteed but are granted based on the consumer price index, which has averaged around an increase of 1.5 percent in the past 10 years, according to Federal Reserve. If the CPI rises more than 3 percent, the COLA is capped at 3 percent, however. Council 94 is not guaranteed pension COLAs, and whether or not they get one is dependent on the performance of their retirement fund and a complex formula dictated by ordinance.
As for the FY2020 budget, the city has budgeted over $35 million to pay towards these pension funds, which will be further broke down in the next article.
The three collective bargaining units that cover police, fire and municipal employees have secured superb health insurance for their members, their spouses and their families, at rates that are comparably favorable to other health insurance plans offered in the state. After a certain amount of time employed by the city, they retain these healthcare benefits in retirement and then even gain new health benefits upon reaching Medicare age that are paid for by the city’s taxpayers.
Once members have retired from service in the city, they are entitled to pensions that are worth as much as 75 percent of their final, highest salary, which are paid twice monthly for the remainder of their lives. FOP members hired prior to June 30, 2012 – and all IAFF members due to the contractual dispute regarding the Tier 2 split – enjoy 3 percent COLAs for the rest of their retired life.
In total, the city budgeted over $58.5 million in FY20 solely for pension and healthcare benefits to its active employees and retirees.
The biggest difference between the benefits granted to the three municipal unions examined here and the Warwick Teachers’ Union and WISE Union is that neither the WTU or the WISE Unions receive any healthcare benefits beyond age 65, and neither currently get COLAs for their pensions.
Next week’s piece will fully dive into the financial implications of these benefits on the city’s budget, including an extensive comparison to the union benefits granted to the city’s teachers and independent school employees – which are significantly different.
Open a PDF file Health Coverage.
Open a PDF file Plan 65 Coverage.