DC 37 Approves Tentative Contract Extension to Help Stabilize Financially-Squeezed Drug Benefit
By GREGORY N. HEIRES
DC 37 and the city agreed to a contract extension that allows the union to pour millions of dollars into its financially pinched prescription drug benefit.
The agreement, reached Jan. 12, calls for extending the union’s 2010-17 contract by two months and 23 days.
Savings achieved through the extension will significantly help the union address the budget gap at the DC 37 Health & Security Plan, which provides the drug and other benefits.
The agreement will help reduce the shortfall by requiring the city to permanently increase its annual welfare fund contribution to the DC 37 Health & Security Plan by $200 for each full-time worker and retiree. That will generate $24 million in new funding for the plan.
Under union rules, the agreement must be sent to DC 37’s 100,000 members covered by the current contract for a vote.
Mail ballots will be sent out in mid-February and must be returned within two weeks to be tabulated by an independent monitor. The Delegates approved the agreement on Jan. 24.
“Together with other fund changes we are adopting, the contract extension and new welfare fund contributions will help us confront the plan’s budget crisis over the next year and a half,” said DC 37 Executive Director Henry Garrido, who led the negotiations on the Jan. 12 agreement with David Paskin, director of the DC 37 Research and Negotiations Dept. “But until the federal government adopts regulations to control the outrageous drug prices, this problem will persist,” Garrido said.
“We have a drug benefit that is second to none,” Paskin told city negotiators. “We need to maintain it.”
Drug costs account for most of DC 37 Health & Security Plan’s budget gap. Last year, the plan projected that it faces a $55 million deficit in fiscal year 2017 and $74 million in fiscal year 2018.
To deal with the rising cost of prescription drugs, the plan was forced to withdraw $30 million from its cash reserve last year.
Skyrocketing drug prices
Over the past eight years, the highly profitable pharmaceutical industry has jacked up prescription drug prices by 105 percent, while city contributions for welfare benefits have only increased by 1.05 percent. Drug costs eat up 76 percent of the DC 37 Health & Security Plan’s benefit expenditures.
With the additional $200 for each member and retiree (the contribution is prorated for part-timers), the city’s annual welfare contribution will increase from $1,575 to $1,775 a year.
The $200 city contribution increase and other changes in the drug benefit will reduce the plan’s projected deficit to $13 million in fiscal year 2017, $10 million in fiscal year 2018 and $2 million fiscal year 2019.
As one of a number of significant steps to address its deficit, the DC 37 Health & Security Plan negotiated new contracts with OptumRx and Aetna that will provide significant annual savings.
On Jan. 1, the plan raised the copays of the prescription drug benefit for the first time in nearly two decades.
In a positive development, the Jan. 12 benefits agreement between the union and the city will open the door for bargaining on a new contract.
By moving the expiration date of the current contract from July 2 to Sept. 25, the agreement creates the opportunity to wrap up negotiations before the current contract ends. Hopefully, jump-starting the negotiations will allow members to receive their next pay raise sooner instead of having to wait months, or even years, for retroactive pay resulting from dragged out negotiations.
At the bargaining table on Jan. 12, Labor Commissioner Robert W. Linn agreed to the union’s proposal to extend the contract and begin negotiations as soon as possible for a new economic agreement.
During the last round of bargaining, the city and municipal unions, agreed to a plan to save $3 billion in health-care costs. The agreement, Linn said, demonstrated how the needs of labor and management can be met through constructive negotiations. Improved labor relations under the administration of Mayor Bill de Blasio should help negotiations precede more smoothly than usual, he said.
“This administration has no desire to simply push increased costs onto the union’s members,” Linn said.
To attract and retain the “best and the brightest,” Garrido told Linn that the new contract needs to provide for competitive salaries. It also should ensure that city workers have a decent health plan, a good prescription drug benefit and well-funded other benefits, Garrido said.
As the union prepares for bargaining on a new economic agreement, it will survey members to seek their input on demands, Garrido said.
This article originally appeared in the February 2017 issue of Public Employee Press.
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