Results of the 2011 Retiree Healthcare Negotiations for Plan Year 2012

Each year, as negotiated in 2004, the JRHC reviews Retiree healthcare costs reported by the Company projected to have exceeded the negotiated Retiree Healthcare Caps that year.   The JRHC is required to “True Up” the balance of the excess cost by making changes to the Medical and/or Prescription Plan Designs, as well as Provider recommended programs designed to help save future costs for the Plans and for the Retirees.  The JRHC must also consider possible increases to Retiree Contributions over and above those mandated by the collective bargaining agreement.  The Company is required to deposit a minimum of $25 million dollars in a Taft-Hartley Trust Fund overseen by Trustees from the Company, IBEW and CWA, to help reduce the costs to be borne by the Retirees in the current or subsequent years.

This year the deficit the committee was faced with was an alarming $41.4 million dollars.  Several important things took place however; that helped reduce the deficit to a more manageable amount.

First, due to President Obama and Healthcare Reform a new program called Early Retiree Reinsurance was established that provides financial relief to employers who provided retiree healthcare and who have retirees aged 55 and older who are not yet eligible for Medicare.  Alcatel-Lucent applied for and has received subsidies under this program that helps reduce the deficit.  The projected savings to be applied to the 2012 deficit is $11,686,000.

In addition, Alcatel-Lucent was in the process of renewing contracts with the vendors who are utilized to administer the Medical and Prescription Drug Programs.  The projected savings from the vendor contracts is $10,000,000.

The most impacting change that was made by the JHCC is the decision to move our post 65 retirees to a Medicare Advantage Plan.  We will be providing more information on this change as we move into open enrollment in the fall.  It is important to note that the Medicare Advantage Plan is actuarially equivalent to the current Traditional Indemnity Plan and will still be administered United Healthcare.   As in the past we will still offered Medicare HMO’s.  The projected saving attributed to the change to a Medicare Advantage Plan is $14,600,000.

As negotiated in 2004, Retiree Contributions increase by a minimum of .05% each year unless the JRHC makes alternate recommendations.  For plan year 2012 the Committee was not able to hold contributions steady or reduce those as we have in the past therefore the contributions for Pre-65 Retirees will be 11% for single and 22% for family.  The premiums for the Post 65 Retirees will be 6.50% for single and 13% for families.  The projected cost savings beyond the .05% contractual increase is an additional $2,500,000.

The Prescription Drug Utilization Programs that we currently have in place will be enhanced to include other categories of drugs.  The projected savings attributed to this is $405,530.

Finally, the JRHC will be utilizing $2,208,470 from the Taft Hartley Trust to bridge the remainder of the $41.4 million dollar gap.

These negotiations are extremely difficult and the Unions work hard to find ways to care for our retirees with as little impact as possible knowing the financial constraints our retirees are under.  If you have any questions please don’t hesitate to e-mail wconnolly@cwa-union.org.

In Unity,

Martha Flagge