The Chief

August 25, 2000


PBA Forced To Raise Co-Pays On Drug Plans

Health Funds a Major Contract Issue For Cop Unions

By William Van Auken


basically insolvent.'


While many of their members are waging a battle against drugs in the streets of the city, the five police unions are facing a drug war of their own, which has forced them to bite the bullet in the face of skyrocketing prescription costs.

As of Sept. 1, the Patrolmen's Benevolent Association is introducing new and higher co-pays for its members, following in the footsteps of even more draconian changes introduced by the Sergeants' Benevolent Association in April.

Drug Use Climbs

Union officials said that the pressure on the health and welfare funds was amplified by the growing marketing of new prescription drugs through television advertising and the increasing use of drugs rather than surgical procedures to treat a wide variety of ailments.

While health insurance plans that pay for surgery cover every member of a city employee's family, they point out, city contributions to the health and welfare funds are made on a flat per-capita basis with the same amount paid out for single members as for those with spouses and children. The city also pays the same for a 75-year-old retired officer as it does for a 25-year-old active one, despite the sharp disparity in the amount of prescription drugs the two individuals may need.

The PBA is confronted with an insolvent health and welfare fund, which its officials say is the product of a 20-percent inflation rate for prescription drugs and politically motivated benefit decisions made by prior administrations.

"Due to the increased costs, we're basically insolvent," said PBA First Vice President John Puglissi.

$1.8M Shortfall

The PBA official estimated that in the last year, the union spent $1.8 million more on its retiree health and welfare fund than it received in contributions from the city, with the money siphoned out of its active members' fund to make up for the shortfall. If left unchecked, he added, the union was anticipating a $6.5 million deficit next year.

In letters sent to its active and retired members earlier this month, the PBA spelled out the changes that it was compelled to introduce. Having coasted along for years with no co-pays at all for its active members, it will be introducing a $5 co-payment for generic and formulary drugs, and an $8 co-pay for non-formulary drugs.

For the union's retirees, whose prescriptions account for 74 percent of their fund's total expenses (as opposed to, 51 percent for working cops), the impact will be considerably more severe.

Retirees will be required to pay up-front deductibles of $50 for individuals and $100 for families. For generic drugs, they will make co-payments of $20 or 25 percent of the cost, whichever is greater. For formulary drugs - those brand-name drugs covered by the union's prescription drug program  - the co-payment is $40, or 25 percent. Members must cover the full cost of non-formulary drugs.

Under the plan currently in effect, retirees made only $10 co-payments for generic and formulary drugs and $15 co-payments for non-formulary drugs.

'Getting Wiped Out'

"We were getting wiped out; the retirees were just going right through it," said Mr. Puglissi.

Funds have been shifted from the active to the retired fund since 1994, he said, but for years, PBA officials chose to ignore the problem for political reasons.

Under former PBA President Lou Matarazzo, co-pays were increased slightly for retirees and deductibles were introduced for the union's dental plan in 1997. While the modifications stemmed the deficit for the following year, it began rising again shortly thereafter.

"We hate to do this, but we have a fiduciary responsibility to the members," said Mr. Puglissi. "We have to give them the bad news." While the union has yet to feel the full wrath of retirees over the changed plans, it fully expects to, he said.

'Worst Fears Confirmed'

While Mr. Puglissi and his fellow insurgents on the Voice of the Blue Line slate feared that the health and welfare funds were in trouble when they won their upset victory over the old PBA leadership last year, they did not know to what extent they were hemorrhaging money. "Before we were elected, we didn't have the raw numbers," said the union's vice president, "but once we got in there, our worst fears came true."

The Sergeants' Benevolent Association led the way in upping co-pays, a move for which its new president, Bernard B. Pound, was forced to take some heat from his membership.

For active members, the union introduced an annual $25 per-person, $100 per- family deductible and a 15-percent co-payment on prescriptions. The union has two retiree plans. "Plan A," covering 1,240 of the older members, introduced a $100 per-person deductible and a 40-percent co-pay, "Plan B," which covers another 3,019 retirees, includes a $50 per-person deductible and a 30-percent co-pay.

"When I came in, the first thing I wanted to address was the health and welfare fund," said Mr. Pound. "Over the past three years, our fund utilization and the cost of drugs were both going through the roof."

Must Save $2M

To stop the prescription costs from eating up the funds' reserves, the SBA trustees determined that they would have to introduce savings of $2 million over the next year, necessitating the drastic measures.

In a recent edition of the SBA publication, "Sergeant," Mr. Pound acknowledged that the changes had "caused considerable surprise and discord among our members."

The SBA president said that four months into the new requirements, the union's providers indicate that the health and welfare fund is on track for returning to solvency.

The Detectives' Endowment Association, which currently has only a $1 co-pay for its active members, will probably soon adopt similar measures to those being introduced by the PBA, said its president, Thomas J. Scotto.

While the union enjoys one of the largest health and welfare fund reserves - more than $8 million - prescription costs are eating it up it the rate of $200,000 a month, Mr. Scotto said.

Part of the problem, he said, is that with the DEA's current low co-pays, working spouses of Detectives use the DEA prescription plan rather than their own employer's, forcing the DEA to bear a disproportionate burden.

Mr. Scotto predicted that the police unions would have to focus more on the health and welfare contributions made by the city in the current round of collective bargaining. "The general rule has been to put as much money into the membership's pockets as possible in terms of salary," he said, "But there comes a time when the cost factors of the health benefit package become so enormous that you have to focus on that."

In the last round of negotiations, the DEA reached a unique settlement in which its members' 3-percent and 6-percent salary increases in the final two years of the contract were delayed for one month, with the deferred raises providing a cash infusion for the health and welfare funds.

Favor Merging Funds

Mr. Scotto voiced support for merging the four existing police union health and welfare funds (the Captains' Endowment Association and the Lieutenants' Benevolent Association are both covered by the Superior Officers' Council funds).

In the early 1970s, the DEA was part of a combined fund with the Sergeants and the two superior officers' unions. It subsequently broke with that coalition and merged its funds with the PBA, only to have a falling out a few years later, ending in a court battle over the reserves.

There isn't one health and welfare fund now because of egos," said Mr. Scotto.

The Superior Officers' Council, having made previous benefit adjustments over the years, is in the enviable position of being able recently to lower its co-payments.

"Our plan is healthy, but like most union plans, prescription costs are eating away our reserves at a quick pace," said LBA President Tony Garvey.

Other police unions, he said, were paying the price for not taking measures earlier as well.

Chickens Home to Roost

The SBA broke away from the Superior Officers' Council in 1993, introducing an improved benefit structure. "Now I guess they're paying for it," the Lieutenants' union leader said.

Mr. Garvey said that the superior officers' unions have long supported bringing the four police union health and welfare funds "under one banner."

"You'd get better bang for the buck and end the confusion of officers being promoted only to discover that they are getting different levels of benefits," he said.

Resistance to such a united policy was largely political, he said. "If a president of the PBA tells a delegates meeting, 'What we're going to do is bring the Lieutenants and the Captains into the health and welfare fund to improve the benefits for them and for us,' he knows some delegate is going to get up there and say, 'What are you talking about? A Lieutenant just gave me a command discipline. Screw them; let them suffer on their own.'"

But, as Mr. Garvey pointed out, while there was little incentive to circle the wagons before, rising drug costs may have altered attitudes.

"We may explore that possibility," Mr. Puglissi of the PBA said when asked about joining the funds. "It's true that there is a greater buying power with greater numbers," he said, while noting that a downside for the line union could be the likelihood that the relatively older members of the superior officers' unions would make greater use of the plan than younger cops.

Meanwhile, he said, increased contributions from the city to the PBA health and welfare funds will be a greater priority in this year's bargaining than in the past. "We have to put more money into these funds," he said. "Salaries are extremely important for us, but we still have to provide our members with the benefits they deserve."