Posted December 16, 2010
Equity Pension & Health Trustees Report to Council
Pension Fund Remains Strong;
(Madeleine Fallon, Chair of the Equity portion of the Equity-League Pension & Health Trust Fund, made the following report to Council on November 16, 2010)
The Equity Trustees are pleased to report to the Council that the Pension Plan continues to reside in the "green zone" as established by the Pension Protection Act of 2006 (PPA). According to the certification of our actuaries, the Pension Plan began the current plan year of June 1, 2010 with a market value of assets of $1,092,000,000 and a PPA funded percentage of 121%. As of our most recent quarter, ending September 30, the market value has grown by another $49 million (to $1,141,000,000). As was discussed in last year's report to the Council, no pension plan emerged unscathed from the financial meltdown of 2008. Despite the market losses of that tumultuous year, our plan is in a much stronger financial position than most pension programs and the Trustees are carefully monitoring the funding status. Credit must be given to the excellent stewardship of the Fund's Investment Committee and their prudent investment policy.
"When we talk about managing costs we do not mean denying care."
It will come as no surprise that the Health Fund has commanded a significant amount of the Trustees' attention. The cost of health care in the U.S has achieved the dubious distinction of being the most expensive in the world . Medical costs are rising at more than twice the rate of inflation and accounts for one sixth of the U.S. economy. The cost of health care in this country is simply out of control.
Our health fund has remained stable and we currently have sixteen months of reserves despite a decline of 6% in work weeks attached to health.
The Trustees' 2009 report to the Council detailed concerted cost containment efforts that had already been made or were soon to be instituted. Administrative costs had been scrutinized and significantly reduced. In April of this year the web site SAGWatch published administrative costs compared to benefits paid in the health plans for SAG, AFTRA and Equity. The results were: SAG, 17.8%; AFTRA, 16.4% and Equity, 6.1%.
It is necessary for Trustees to know what the main cost drivers in a plan are and to take what steps are available to curtail those costs. To that end we conducted a detailed review of our medical claims Now, it must first be remembered that this is a Taft-Hartley Multiemployer Health Fund. The law is very clear -- all monies paid into the Health Fund by employers must be used for members' benefits (minus necessary administrative costs). It is also the stated purpose of the Trustees to provide quality health coverage to as many working members of AEA as possible. So when we talk about managing costs we do not mean denying care. The challenge is to identify those areas where cost containment does not compromise the welfare of the member. To date we have required generic versions of certain drugs and mail order delivery of long term maintenance drugs. We have also mandated changes in the reimbursement schedule for Chiro/Physical Therapy reimbursements in the hope that more of the providers would come in-network. In addition, we instituted a Chiro/PT cap of $4,000 per member per year. Unfortunately, our efforts in cost control in this particular area have not gone smoothly. It was discovered that there were some programming errors that led to CIGNA processing certain claims incorrectly which resulted in significantly underpaying certain providers and charging duplicate co-pays to some members. Both issues are being corrected. Meanwhile, we have encountered considerable push back from members who are loyal to providers who have declined to come in-network. CIGNA has not had any significant success in recruiting these providers and the Trustees are requesting a renewed effort. It also concerns us that CIGNA has sub-contracted management of Chiro/PT claims to two outside review firms. The Fund has begun a dialogue with these firms to highlight the special demands that stage work make on the body. For example, we do not want a Broadway dancer held to the same standard of what constitutes sufficient recovery from an injury as would apply to an office worker. It is essential that the physical demands of our careers must be understood and properly treated. We are hopeful that we will have better results in this area going forward. Chiro/PT claims are a major cost driver to our fund and containment is a necessity, however unpopular it may be.
"We do not want a Broadway dancer held to the same standard of what constitutes sufficient recovery from an injury as would apply to an office worker."
The current focus on cost containment is to develop an effective wellness initiative. Given the nature of our work and the geographical and demographical makeup of our membership this will be a challenge. But it is a challenge which must be addressed. Putting aside the fact that the Affordable Care Act will require all health plans to have a wellness component, this is an area which is critical to the long term survival of our plan. The current annual cost per active participant (members who gained coverage through employment) is approximately $7,600 and is expected to rise to $8,000 in the coming year. Without intervention, these costs could soon exceed the ability of AEA to negotiate sufficient employer contributions.
To illustrate the importance of wellness in maintaining a health plan you need to understand the two applications of the 20/80 rule. The first is that for conditions such as heart disease, type 2diabetes and cancer 20% is due to genetics and 80% to lifestyle. And in a typical health plan 20% of the participants are responsible for 80% of the costs. We need a long term effort to educate our membership on the importance of taking charge of one's health. How many people with high blood pressure or type 2 diabetes, for example, can we encourage to make diet and exercise changes that would reverse their conditions? Yes, it would be great for the fund to not incur those costs. But just think of how much greater for individuals to no longer have those diseases? And how can we help educate and motivate members to take the steps necessary to avoid contracting such diseases in the first place? Again, this will be a long term effort and we need to pursue it with all the creativity and energy we can summon.
As if we didn't already have too much on our plates, the Trustees have spent a great deal of time this year becoming acquainted with the mandates of what is known as the Affordable Care Act or ACA. The ACA is the term which encompasses the Patient Protection and Affordable Care Act (2,409 pages) and the Health Care and Education Reconciliation Act (a mere 153 pages). We have been attending various seminars and webinars and consulting with our professional advisors. At the October Council meeting we reported that there are some major challenges in the legislation that are not compatible with multi-employer plans. We are joining in coalitions with other multi-employer plans to lobby for exceptions to certain provisions. It is too soon to say what the results might be.
As most of you know, Taft-Hartley Multi-employer plans are separate from their unions and are governed by a board of trustees comprised of equal numbers of union and employer trustees. The employer trustees on the Equity-League Fund have been active partners in our efforts to protect and foster our pension and health plans. We appreciate their dedication to the welfare of our members.
The union trustees also appreciate the confidence placed in them by the Council. While this report does not reflect the full range of activity involved in our work we hope that it does reflect the intensity of our purpose.
On behalf of my fellow trustees -- Jeanna Belkin, Doug Carfrae, Brian Myers Cooper, Alan Hall, Thomas Joyce, Kathryn Lamkey, Ira Mont, Carol Waaser and Nick Wyman -- I submit the 2010 report.