Welfare Trust Health Plan Potential Benefits

• 1. Active Member Coverage
• a. The plan and rates are selected by Trust members based on the utilization of Local 27 members and dependents. This provides an incentive to the Welfare Trust Board to provide the best plan/benefits with an emphasis on preventive health measures. If fire fighters and dependents are a healthier group than the general population, the utilization rates allow for lower cost to the member. Local 27's control also provides that we will be negotiating our own plan/benefits, and in the future we may be able to create a health plan independent of Aetna, Group Health or other providers - we would negotiate directly with health care providers.
• b. Members could have more direct and easier access to medical coverage. Member coverage changes could be easier and more responsive than our current situation. There are fewer steps between a desire to change and making the change. Currently, we start at our group agreeing to make a specific change. In a Welfare Trust plan that step would be near the end, followed only by the cost impacts and implementation. There would be no need to negotiate with or convince other parties (HCC or the City), only paying the costs.
• c. The Welfare Trust will select plans that are custom designed for Local 27 members. When the Trust evaluates the plan and makes changes, they will not only take into consideration benefits that Local 27 members want, but they could also implement changes that are directly connected to Local 27's medical use. Specific early detection screenings or preventative programs for common injuries could be included. Since our group is unique, these changes might not make sense for a City wide group, but could be effective for our group.
• 2. The Welfare Trust can customize benefits for the needs of our members in a more specific and cost efficient manner than the City currently does. This includes but is not limited to providers, facilities, co-pays, etc.
• 3. Cost to members will more accurately reflect the usage patterns of the membership of L27, rather than the City group as a whole. While the dollar cost of coverage is unlikely to drop, the coverage provided is likely to be broader and/or more specific to the needs of our membership. In a self insured plan, we would not be subsidizing the health care patterns of the City group as a whole, but only that of the L27 membership.
• 4. Savings
• a. In years when L27 has paid more in premiums than we used in claims, the savings have been added to the HCC health plan pot, spread across the whole HCC, and brought all the rates down or reduced the increase by a small percentage. Under a Welfare Trust plan, we will retain those savings in our own plan and may be able to negotiate lower rates with providers because of our healthier group.

• b. If Local 27 uses the medical plan less than expected or cost for a year are less than expected, the savings will be reinvested in the plan. The Welfare Trust Board will either use the savings to build up the reserve, increase a benefit, or lower a cost. In any scenario, the savings are captured for the members use.
• c. Historically, there have been some years when we use as much or more in services than we pay in premiums. When this occurs, an increase in premiums may necessarily follow to maintain the health of the plan. If our members use less in services than they pay in premiums, setting up a situation where we build a surplus in excess of the overages incurred in the years when we are in the red. This sort of situation is what will give the plan financial strength and the ability to offer broader coverage yet, or less expensive premiums for the same level of service, whichever the membership chooses.
• 5. N/A
• 6. Occupational Health
• a. We are currently negotiating with the city and the fire department for Occupational Health Physicals. Annual physicals are a WAC requirement. We will have physicals, to what extent is yet to be determined. Annual physicals provided by the department will catch health problems earlier and could prevent some costly diseases from ever occurring. This will further enhance our trend of becoming a healthier group. The insurance providers re-negotiate insurance premiums annually. They base the rates on our prior year's usage. With annual physicals we believe that the usage will be less.
• b. There may be preventative programs or screenings the City does not agree to provide members through an occupational health program. If these programs or screenings would be beneficial to our plan or members, the Welfare Trust Board could change our medical coverage to include the programs or screenings.
• 7. LEOFF II Retirement Medical Plan
• a. A COMPREHENSIVE, FULLY PAID OR LARGELY SUBSIDIZED LEOFF II RETIREMENT MEDICAL PLAN IS NOT FORSEEABLE IN THE NEAR TO MIDDLE FUTURE, EVEN UNDER THE BEST OF CIRCUMSTANCES.
• b. The true cost of a retirement plan would depend more on the benefits offered and the number of retired members in the plan.
• c. Local 27 currently runs a retirement plan under the Fire Fighter Family Medical VEBA. Rates are based on the utilization of plan members.
• d. No one should assume a no cost retirement plan. It is, however, possible that a specialized plan for LEOFF II retirees could be made available to retired members of Local 27 at full cost.

• 8. The Plan will be run by fire fighters with the assistance of health care and legal professionals. The Plan will hire professional staff, run the plan, and advise trust members. Written directives based on prudent standards and fiscal responsibility will be developed for the Trust/Plan and will guide future trust members in running the plan.
• 9. N/A
• 10. Local 27 must use the plan savings to the benefit of the members of the plan. This includes improving plan benefits, reducing health care premium costs, returning premium dollars or any combination of benefits. It is also possible to create new benefits outside of regular health care so long as it benefits the members of Local 27. Written guidelines and rules can be developed that can blunt any "internal conflicts" by trust members. There are written standards that must be applied in VEBA to prevent arbitrary or unwise decisions.
• 11. If medical inflation for the Welfare Trust plan is less than 7%, the Welfare Trust will retain the savings for members. If the historic trend of Local 27's lower costs continues, then there may be years in which the City's plan experiences inflation over 7%, but the Welfare Trust plan experiences inflation under 7%. In this case, not only would the plan retain the savings, but members would not experience any cost sharing for inflation over 7% as they would if they were in the City plan.
• 12. Initial appeals will be processed by the Welfare Trust carriers, but if a member is not satisfied with the carriers' determination, members will have a final appeal option to present their case to the Welfare Trust Board for final determination. Since the Welfare Trust Board will consist of members, members may have an increased influence on the final determination.
• 13. The Welfare Trust will control the members' medical information not the City. Members' medical information will be completely and physically separated from the City. If the City wants information, they would need to request the information from the Welfare Trust who is committed to our members and has no inherent obligation to the City.
• 14. N/A
• 15. In a Welfare Trust scenario, all medical benefit decisions would be made by the Welfare Trust and the City will only be providing money to pay for medical benefits. There will be no negotiation for benefit changes; however, there will be negotiations over the amount the city will pay the Welfare Trust to provide a medical plan to our members. The value of our existing medical benefits has been determined, and in the future the City and Local 27 will negotiate over the amount of increase to that value. $'s have been historically easier to negotiate than changes in benefits.

• 16. Pensionability
• a. There are two ways that a Local 27 Self Funded Medical Plan could help make the value of medical premiums pensionable. One: In a Local 27 Self Funded Plan, the City will provide the Plan with cash transfers. If the membership so chooses (and the City agrees), that cash transfer could be treated as wages and would automatically become pensionable. However, there would be significant deductions from the amount transferred by the City, including payroll taxes, pension payments, Medicare, etc... The members could absorb these deductions out of pocket or negotiate for the City to absorb these deductions in future Contracts. The Union does not have to rely on this option to achieve pensionability of medical premiums; however, as it can pursue the legal strategy described below.
• b. Two: There are legal arguments, yet to be tested with the Department of Retirement Systems, that medical premiums should be pensionable under current LEOFF administrative law. A Local 27 Self Funded Plan could strengthen the Union's legal argument that medical premiums should be pensionable. In a future Contract, if the Union negotiated financial improvements to the Plan (such as increasing the City's health Care inflation amount higher than 7%), the Union could argue that it could have taken the value of the medical premiums (which are not pensionable) in the form of wages (which are pensionable). Even though the dollar value received by the membership is the same, the net effect of improving medical premiums is a loss of pensionable income. Although we can make this argument currently, a Self Funded Local 27 Medical Plan in which we receive cash (as opposed to a medical benefit) makes the lack of pensionability for medical premiums more explicit, which is helpful in legal proceedings. If made pensionable, members pensions could increase.
• 17. The reserve fund will provide a fully funded Welfare Trust plan reserve.