State employee unions have reached a tentative agreement with state negotiators to ratchet up members’ contributions to their health care premiums from 12 percent to 15 percent beginning next July 1.
The state had sought to increase the employees’ contribution to 26 percent in order to cover inflation in the cost of providing health care benefits. According to the Kaiser Family Foundation, the typical employee in Washington contributes 27 percent of his or her premium cost.
In a memo sent to all state employee unions late Thursday, Tim Welch of the Washington Federation of State Employees called the tentative settlement “a victory in these tough economic times.”
“It will require more sacrifices,” he said, “but not on the level the state originally proposed back in August.”
Under the agreement, the split between the state and union members goes from 88-12 to 85-15 in “master agreements” included in all state employee union contracts for 2011-13. Those contracts must still be ratified by the individual unions.
“Your team held tough and the governor’s team got the message and made significant movement off their original proposal to make you pay 26 percent and the state only 74 percent,” Welch said.
The agreement will increase premiums for state workers by 25 percent, he said.
State budget director Marty Brown said earlier that the state was prepared to continue paying $850 per month per employee for health benefits in the new contracts, but that due to health care inflation, that amount would now cover only 76 percent of premiums, not the 88 percent it covers under current contracts.
The new tentative agreement became possible because health care use has dropped in recent months, said Glenn Kuper, spokesman for the Office of Financial Management.
“Part of the reason we were able to come down to 85-15 is that in the additional months since we first made our offer, we continued to do modeling of health care usage, and those costs have come down significantly,” he said Friday. “It spiked up, but it has come down and leveled off. As a result, it’s going to be cheaper to buy health care than it was six month ago. “
If employees believe that they will continue to be able to afford health coverage, it’s possible that they will put some health procedures off until a later date, Kuper said.
“If we get an agreement like this, employees have the confidence that they will be able to continue to receive their health benefits.”
A 26 percent pickup by unions would have saved the state $500 million in the 2011-13 budget cycle. State negotiators agreed to dip into two health fund reserve accounts to make up the difference between a 15 percent and a 26 percent employee contribution.
“We looked at it and decided desperate times call for desperate measures,” Kuper said. It’s also true that because the cost of providing health care has gone down, the savings the state will realize from the union’s concession will be less, he noted. He said he did not yet have an estimate of what those savings will be.
The state faces a projected $5.7 billion deficit going into that budget cycle, which begins July 1, 2011.
Welch said he expects the state to come back to the unions as early as next week and propose wage cutbacks. State unions are currently under a two-year wage freeze.
Senate Republicans have proposed a 2.5 percent across-the-board wage cut for state employees between now and July 1, but it’s not clear whether the governor’s labor negotiators will press for wage rollbacks.
Kuper said the reason Gov. Chris Gregoire reopened negotiations on the current contracts with its unions “is because we need to cut our compensation costs. What that number will be or what we are trying to get at, I don’t know. It might be furloughs, reducing hours, (or) an across-the-board wage reduction. There are different ways we can do that, but the bottom line is, we have to cut costs because of the deficit.”