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.