Ward 5 City Councilman Ed Ladouceur has drafted an ordinance that he says if passed by the council could save the City millions of dollars a year on active municipal employee and retiree health insurance costs. 

Before moving ahead with the measure that he first talked about more than two years ago, Ladouceur is looking for a fiscal note specifying what the measure could save. He already has an idea what it would mean as the accounting firm of Marcum projected in 2019 that retiree co-payments for health insurance could save the city $5 million in the first year.

But getting the city to prepare a fiscal note appears problematic even though fiscal notes on legislation are commonplace.

Finance Director Peder Schaefer recently told the Beacon that while he agrees the cost for health insurance for retirees is substantial state law says that if you have a collective bargaining agreement then health insurance is one of the things that is negotiated. He questions if the ordinance would be considered legal and planned to talk with the City Solicitor about it. 

Schaefer followed up with a letter to Finance Committee Chairman Tim Howe stating, “The City Solicitor has advised the Mayor that the provisions of the language in the proposed Ordinance conflict with state law requiring that health benefits be negotiated with authorized city bargaining units.”

“They also conflict with the right of retirees to retain the health benefits as well as the cost sharing agreement that applied at the time of their retirement,” Schaefer went on to state. “For these reasons, and in compliance with 30-7 of the Code, I am responding to the Finance Committee that there are no savings to project from the proposed Ordinance. It is possible that enactment could result in costs associated with unsuccessful litigation.”

While the legality of the ordinance may be a question,  Ladouceur said that either way he wants the City Council to vote on the ordinance.

City Council President Steve McAllister in an interview last Tuesday said that he believes the City did fulfill their requirement of providing a fiscal note.

“In my opinion the City did give him a fiscal note, and the fiscal note is there is no savings because you can’t do what he’s asking to do,” he said.

McAllister said that he opposes the ordinance because of the legality issues saying that he talked to three other city council solicitors who told him that it wouldn’t hold up in court.

“I’m against the ordinance. I don't think we can do it,” McAllister said. 

Despite the interpretation by the City Solicitor, Ladouceur said he wouldn’t back down. 

“This is a conversation that needs to take place and if someone doesn’t bring this out the conversation will never take place,” Ladouceur said. “We're going to have the conversation and the taxpayers need to know, they have a right to know how much this is costing them.”

During the Nov.15 City Council meeting City Councilman Tim Howe asked that they take a vote on the ordinance based on the information provided by Schaefer.

But Ladouceur said he is waiting for additional information.

“As the sponsor I respectfully ask to hold until Dec. 6,” which the Council ultimately agreed to.

Health insurance costs 

About 15 percent of the City of Warwick budget will be spent on health insurance costs for employees and retirees.

Out of the $159.2 million that the municipality budgeted, $13.2 million was allocated for active health insurance costs and $10.4 million was for retirees this year, according to Schaefer According to a presentation prepared by Bob Cushman former city councilman and former chairman of the Warwick School Committee over $30 million of new spending since 2014 has gone to retired employees benefits, a little under $26 million has gone to active employees benefits and about $7.5 million has gone to all other spending. 

Because of the costs for insurance combined with  Other Post Employment Benefits (OPEB) , the city faces an unfunded liability north of $300 million. Ladouceur is looking set guidelines on the percentage of health insurance costs retirees would pay moving forward. 

Ladouceur explained contracts are negotiated between the Mayor and the collective bargaining unions, without any guidelines or benchmarks. After a tentative agreement is reached it is then sent to the City Council for the Council for a vote. He said it is an up or down vote meaning the council can’t negotiate the contract once it reaches them. 

The goal of the ordinance is for the city to have a baseline for health insurance costs when negotiating. 

“We the elected officials need to finally realize that we got to get control on this, this is not sustainable,” Ladouceur said about health insurance costs. 

One of the biggest issues that Ladoucer pointed to on the health insurance front is when it comes to other post retirement benefits. 

“Today we have an unfunded healthcare liability of 384 million dollars,” Ladouceur said. In 2015 the liability was $272,613,934 according to a document he provided. 

He explained that the unfunded liability continues to increase, saying that from 2018 to 2020 it increased by 23 million dollars. 

Of concern is that more retirees are collecting benefits than there are active employees. According to documents provided by Ladouceur there are 964 retirees currently receiving benefits compared to 675 active employees receiving them. 

“When you're having less people paying in than people that are taking out eventually you're going to cross over that threshold where there's no money left in the plan,” Ladouceur said. 

Currently all classified retirees are eligible for lifetime health insurance through the City. 

What does the proposed ordinance include 

Under the ordinance future collective bargaining agreements would be required to have the following:

Deductibles (a minimum of):

 Individual: $ 500

 Family: $1,000

Coinsurance: (a minimum of) 90%

Out of Pocket Maximum (a minimum of):

Individual $2,000

 Family $4,000

 Co-payments: (minimums of)

 Primary Care Physician Office Visit: $15

 Specialist Physician Office Visit: $25

 Urgent Care Facility: $50

Emergency Room: $100

 Pharmacy Co-payment: 20 percent

Pharmacy Maximum Out of Pocket: Combined with medical Maximum Out of Pocket In the ordinance the minimum guidelines are based in part by salaries. 

It states that for individual coverage if the plan participant “earns an annual salary less than  $102,840, the co-share shall be a minimum of 25 percent; if the employee earns $102,840 or more in annual salary, the so-share shall be a minimum of 30 percent. 

“For Family Coverage, if the plan participant earns an annual salary less than $53,948,  the co-share shall be a minimum of 20 percent; if the employee earns $53,498 up to $102,840, the co-share shall be a minimum of 25 percent; if the employee earns $102,840 or above in annual  salary, the co-share shall be a minimum of 30 percent,” the proposed ordinance states. 

It notes that annual salary does not include overtime pay or other non-salary wages. 

Under the proposed ordinance it would also have stipulations for current and future retirees. 

“Current Retired Employees younger than the Social Security Normal Retirement Age (“SSNRA”) shall pay 0 percent for any retired employee younger than SSNRA receiving a pension benefit from the City of Warwick of less than $30,000 per year. Those retired employees younger than SSNRA that receive a pension benefit from the City of Warwick at or above $30,000 shall pay a minimum co-share of 25 percent of the premium cost of the plan then offered by the City.”

Under the proposed ordinance “Current Retired Employees at or above the SSNRA shall not be eligible for the City’s  active employee health plans but will be eligible for a Medicare Supplemental Plan offered  by the City. The co-share for these plans shall be 0 percent for any retired employee at or above  SSNRA receiving a pension benefit from the City of Warwick of less than $30,000 per  year. For those retired employees at or above SSNRA that receive a pension benefit from the  City of Warwick at or above $30,000 shall pay a minimum co-share of 25 percent of the premium cost of the Medicare Supplemental Plan then offered by the City.”

The proposed ordinance also states “The Retired Employee Co-Shares shall be phased in over a five-year period  coincidental with the passage of this ordinance at 5% per year whereas at the end of the five year period, the retired employee is paying a total of a 25% co-share. Year 1, 5 percent; Year 2,  10 percent; Year 3, 15 percent; Year 4, 20 percent; Year 5, 25 percent; all years after year five shall be a minimum of 25% co-share.”

As part  of the ordinance any employee hired after the ordinance goes into effect would no longer be eligible for the City’s health insurance after they retire.