Academic journal article Public Personnel Management

A Labor-Management Approach to Health Care Cost Savings: The Peoria Experience

Academic journal article Public Personnel Management

A Labor-Management Approach to Health Care Cost Savings: The Peoria Experience

Article excerpt

In 1993, the increasingly troublesome problem of skyrocketing health care costs became intolerable to city council members, city administration, retirees and active employees in the City of Peoria, Illinois. Because health care costs were rising at the rate of 18 percent each year, it became clear that unless a creative approach to this problem was found, the employee's premiums and deductibles would have to be dramatically increased and benefit levels slashed. Since health care is a mandatory item for labor negotiations in Illinois, the difficult problem of ever-increasing costs was a major source of contention between management and the city's eight labor unions. To deal with this problem, labor and management agreed to a precedent-setting decision. Both labor and management agreed to remove the emotionally charged issue of health care from the bargaining table and to form a Joint Labor Management Health Care Committee to manage the city's health care plan.

Results of Peoria's Labor Management Cooperative Approach

Considering this project was initiated and developed in an adversarial environment, it is amazing that positive results were derived from the cooperative effort. The following outcomes were attained:

* Cost savings to the health care plan during the first year of the new plan design (1994) amounted to $1.2 million of a $6 million budget. Cost savings during the first four years exceeded $2.5 million.

* The plan offered increased plan benefits while achieving high levels of cost savings without substantial cost shifting to participants.

* The plan included an agreement that 50 percent of the cost savings would go to the city and 50 percent would be spent at the discretion of the Joint Labor Management Health Care Committee. (The committee chose to provide a 10 percent discount for retiree premiums during the first year of the plan, and 20 percent discounts on premiums for retirees during 1995, 1996, & 1997, as well as enhanced retiree coverage.)

* Premiums have remained virtually the same for the last four years since project implementation.

* The plan moved from an indemnity health care plan to one of managed care with preferred providers, utilization review and an emphasis on wellness and education. The committee developed a penalty system, which was a new and creative approach to steering plan participants to preferred providers. By utilizing this unique penalty system, the committee avoided implementing the normal 30-50 percent co-pays that hospitals normally require of participants if they use a non-preferred provider facility, and the plan received deep discounts from health care providers.

* A high level of participant/patient satisfaction has been achieved. Providing personal assistance through the newly established position of Patient Advocate/Health Care Administrator facilitated accessing plan benefits. Paperwork to file claims was reduced through new annual eligibility enrollment procedures.

* Due to the overwhelming success of the labor management efforts during the first three- year period, the city and unions agreed to manage the health care plan through the Joint Labor Management Health Care Committee for a second three-year period.

* The work of the Joint Labor Management Health Care Committee has served as a guide when attempting to resolve problems and achieve goals in other areas of city government.

Relationships Preceding the Health Care Committee

In April 1992, the City of Peoria and the Peoria Fire Fighters Union Local #50 went through interest arbitration over the issue of health insurance premiums. The interest arbitration process generated a great deal of bitterness between the parties. The trust, confidence and relationship between the City of Peoria and the Fire Fighters Union, as well as other unions representing city employees, plummeted to an all-time low.(1)

In October 1992, a special meeting of the city council was called to discuss the issue of health care premium costs. …

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