Summary

Agreement for 2014-2016 locks in cost trends at below-market rate for two-thirds of County employees, preventing budget swings in an unpredictable marketplace

Story

Executive Constantine and employee unions reach agreement on sustainable reform of employee healthcare

Agreement for 2014-2016 caps costs at below-market rate for two-thirds of County employees, preventing budget swings and helping preserve services to the public

Executive Constantine was flanked at today’s news conference by co-chairs of the Joint Labor Management Insurance Committee, Dustin Frederick and Whitney Hupf. On right is Budget Director Dwight Dively

Any increase in King County’s cost for providing employee healthcare will be capped at 4 percent a year, a rate that is almost half the projected increase in costs in the local healthcare market, under an agreement reached between King County Executive Dow Constantine and the leaders of labor unions that represent more than half of all County employees.

“Predictability in healthcare costs means better ensuring a high level of services to the people of King County,” said Executive Constantine. “This is good for the public, and good for public employees.”

The three-year agreement, which takes effect in 2014 and will cover two-thirds of all County employees, places a cap of 4 percent a year on any increase in the County’s cost to provide employee healthcare, in a marketplace where economists predict costs to increase by 7 to 8 percent a year.

Should catastrophic events or other factors cause the County’s costs to exceed that cap, the difference will be paid from a new $25 million reserve fund that will be created from past healthcare savings. The reserve fund will be managed jointly by the County and employee unions to preserve employee benefits and keep out-of-pocket expenses the same. If costs increase at a rate lower than 4 percent, the savings go into the reserve fund. Employees will also continue to receive a financial incentive for choosing lower-cost, high-quality healthcare providers like Group Health.

“This demonstrates the employee commitment to a financially sustainable County,” said Dustin Frederick, co-chair of the Joint Labor Management Insurance Committee and business agent for the Public Safety Employees Union Local 519. “This negotiation outcome was a reflection of a true partnership.”

“This deal resulted from a process of labor and management bringing our respective interests to the table to address a shared problem – the rising costs of health care,” said Whitney Hupf, co-chair of the Joint Labor Management Insurance Committee and union representative for Professional and Technical Employees Local 17. “We were open-minded and not wedded to any particular outcome, and this allowed us to reach a deal that we can both be excited about – on behalf of labor, management and the public interest.”

Through their participation in King County’s successful Healthy Incentives wellness program, employees will continue to keep down the cost of their own healthcare. Healthy Incentives has saved the public nearly $46 million in anticipated costs projected between 2007 and 2011:

• $14.6 million through improvements in employee health,
• $6.5 million from employees selecting high-quality, low-cost healthcare through Group Health, and
• $24.7 million from employees choosing generic medications when possible, and paying more out-of-pocket toward healthcare costs.

As a result, King County has experienced lower-than-average increases in healthcare costs over the last two years: 4.4 percent in 2011, and an actual decrease of 5.5 percent in 2010. However, changes in the healthcare environment will continue to put pressure on costs.

“This is a responsible plan that takes full advantage of employee healthcare savings, and protects the public against unforeseen cost increases in an unpredictable healthcare market,” said King County Budget Director Dwight Dively.

The County and labor unions will meet annually to review the performance of the healthcare package and use of the jointly-managed reserve fund.

About 51 percent of King County employees are represented by the unions that worked toward this sustainable reform through the Joint Labor Management Insurance Committee. The agreement also covers the County’s non-represented employees who comprise another 15 percent of the workforce, meaning the reform will cover 66 percent of all employees.