Welfare Trust Health Plan Potential Risks

1.    The primary risk of having the L27 WT choose plans and rates is that they may make a poor choice that leads to financial difficulties.  The L27 WT is a group of elected Firefighters who will study the possibilities and put a lot of time and energy into selecting the best plan possible.  However, they are not professionals in this field.  Furthermore, the L27 WT may make choices that the membership may not approve of due to fiscal considerations.  The primary responsibility of the WT is to select and run a plan that is fiscally sustainable.

2.    The primary downside of the L27 WT plan regarding coverage benefits will be fewer choices to members.  Currently members choose between several Aetna plans and Group Health plans.  Under the L27 WT plan, the only choice will be Group Health or the Self Funded plan.  There is no guarantee that Group Health will always allow our members to continue to participate in their plan.  In this event, members only choice will be the Self Funded plan carrier.  It is unlikely that there will be different options in the near future.

3.    If L27 usage is up the WT will have to set rates higher.

4.    No risk.

5.    If our medical expenses exceed expected levels (or if we experience a bad year or years), the L27 WT will be financially responsible for all losses.  This means that if we do not have adequate reserves to cover losses, or if reserves are significantly depleted, the L27 WT will have to raise member premiums (possibly significantly i.e. hundred(s) of dollars per month) to cover expenses and rebuild reserves.  L 27 will have fewer plan participants than the City and does not have the resources or reserves the City has.  Therefore, there are fewer people to spread the cost of losses between.  Put simply, if the plan runs at a deficit, members will have to absorb the cost, or the plan will go bankrupt.

6.    No risk.

7.    Self Funded Medical is not a sure solution to retirement medical, only a long range possibility.  Members should not assume Self Funded Medical equals Retirement Medical.  The primary function of Self Funded Medical will be to provide health insurance to active duty members and their dependents.  Self Funded Medical can only become a vehicle for retirement medical funding if it has significant long-term success.  Retirement medical is expensive by nature.  It is possible that retirement medical subsidization may bankrupt the active member health insurance plan either due to higher than expected costs or poor financial decisions made by the L27 WT.

8.    It is possible that members who run for the Welfare Trustee Board may be coming to the office with a personal agenda.  This agenda may be helpful or harmful to the greater good of the Self Funded medical plan.

9.    If things go poorly with Self Funded Medical, we will have no one to point the finger at but ourselves.  Remember how heated the discussions were about the last contract vote?  If we have that kind of internal fight about health insurance, the division it will create will significantly weaken our Union's solidarity and ability to represent our members other interests. 

10.   If Self Funded Medical is financially successful the L27 WT will have to decide how to use the "profit."  There will be widely varied opinions amongst our members (and possibly between trustees) about how to best use these funds.  If we are not able to make fiscally prudent, democratic decisions on how to use excess profits, we will eat each other alive and seriously weaken the Union.  Deciding how to use any profits is a good problem to have, but members should be aware that it does come with risks.

11.   If the membership chooses to go Self Funded, we will receive annual contribution increases of 7% from the City (unless that number changes through negotiations).  Any cost in health care inflation above 7% will be absorbed by the plan (which means it will be absorbed by the members).  If health care inflation remains at a level significantly above 7% for an extended period of time, it may bankrupt the plan (there are other factors that might save us or hasten our demise in this scenario).

12.   In a Self Funded Medical plan, the final appeal for denied claims will come before the Board of Trustees.  This means that your private health information may be seen and discussed by a co-worker who is a member of the L27 WT when a claim denial is appealed.  Despite the emotional nature of these claims, the L27 WT will make decisions based on what is best for the plan and the majority of its participants.  This may mean denying a claim for a co-worker and creating a divide among the membership.   

13.   As with appeals, Trustees may occasionally be required to make decisions using members' protected health care information.  In most cases, member's names and their social security numbers will remain out of the pertinent information.  However, some rare illnesses or injuries may identify a co-worker even if their name and social security number are not present.  Essentially, your anonymity to the Trustees cannot be guaranteed in all circumstances.

14.   If Self Funded Medical fails financially, the L27 WT (and ultimately the members) will be responsible for any debt left after the plan is closed.  If there is significant debt after plan failure, we may be forced to try and get the City to take us back onto their insurance and pick up the tab for our debt.  At this point, the City would have a tremendous amount of leverage in any negotiation we are party to.  Depending on the relationship between the Union and City, this could be a little bad or very bad.

15.   Since changes in $ are easier to negotiate than changes in benefits, if Local 27 does not negotiate successfully, the medical inflation rate provided by the City could be lowered or eliminated.

16.   No risk.

17.   If we run Self Funded Medical and it fails, we will have lost all of the $1.9 million dollars we now have in reserve assets.  If we choose not to run Self Funded Medical, most of that money can be returned to the appropriate members in the form of a benefit (which is a certain smaller benefit as opposed to a possible larger benefit).  There may be alternate ways to use this money in ways that would help ease the burden of retirement medical costs.  These options would be researched if Self Funded Medical does not move forward.