It doesn’t take negotiations for the city and its unions to agree on one thing: Health care costs too much.
City looks to rein in health care costs
But the ideas forwarded by Vancouver’s unions differ from the administration’s plan of increasing premiums and decreasing benefits.
Among them is a push by the firefighters union to see the city look at a new way of purchasing insurance that firefighters say may save taxpayer money while increasing benefits to workers.
International Association of Fire Fighters President Mark Johnston said that after word broke of Vancouver Fire’s budgetary woes and the closure of Fire Station 6, he was approached by the Clackamas (Ore.) Fire District Union President, Karl Koenig, who told him about a company that saved them 22 percent just by switching.
The brokerage company, LBG Advisors of Edmonds, took over Clackamas Fire’s plan in May, Koenig told The Columbian. Now, the firefighters are on track to save $400,000 or more by the end of the year, he said.
“We changed the way we thought, we changed brokers and look what it’s done,” Koenig said, before referring to ever-increasing insurance rates, “Does anyone deserve a 15 percent raise right now, when 15 percent of people are out of work?”
On Friday morning, representatives from seven of the city’s unions met at the Firefighters Union Hall in Fruit Valley to hear LBG’s pitch. Vancouver human resources, which was invited, declined to attend, because the city’s contracted insurance broker, Mercer, was barred from the presentation.
Friday’s meeting also included a presentation from the Western States Trust Funds of the Office and Professional Employees International Union. Unions are also discussing the idea of negotiating together for health benefits, which would make all city plans the same.
Before about 20 people, LBG President and CEO Ron Kirkpatrick described how his company works. While the full system is complex, the basic idea is that LBG breaks up different components of insurance — the administrator, the network provider and the pharmacy benefits manager — and shops them separately.
LBG does not have any cities as clients, although Kirkpatrick noted they had several fire districts and private sector clients. He did not offer specifics on how much his company would charge the city during its presentation.
Most brokerage firms, he said, shop out those services in a bundle, and therefore damage their ability to fuel competition and drive rates lower.
“To me, that’s the most powerful thing people can relate to — that a lot of clients are funneled to just a few carriers in a traditional model, juxtaposed to that was the (LBG) power of bargaining in the marketplace,” Johnston said Friday.
Many of LBG’s plans are also partially self-funded, meaning that in good years, when there are not many large claims, the money that was not used by a group’s risk pool is returned. The additional risk incurred by partial self-funding can be mitigated by purchasing re-insurance, which covers bad years, Johnston said.
Johnston was quick to say that he wasn’t “wedded” to LBG, just to the idea of saving money while increasing benefits.
But LBG’s model was greeted skeptically by Human Resources Director Elizabeth Gotelli and other city officials.
“(Friday’s meeting) sounds like a proposal to get the city’s business at a time when we are not soliciting new business from brokers,” she said. “Let’s have a discussion about the different options out there, not about the broker.”
Mercer has been the city’s broker since 2007, when it was chosen from a competitive bid process. The city pays Mercer a flat fee of $84,000 a year; the contract expires in May, with an option to extend it for one more year. Under the contract, Mercer also is the city’s primary adviser on how to cut its insurance costs.
“Our goal is to substantially reduce costs,” Gotelli said. “We need to work within our box and control our costs. And I think we have a way to do that.”
