Imagine running in and out of burning buildings for 25 years or strapping on a bulletproof vest before going to work so that you don’t take a bullet to the chest while trying to maintain law and order on the streets of Birmingham.
After all those long, hazardous years — fighting countless fires, putting away an untold number of bad guys or picking up the city’s trash — imagine being told that the city is going to hike up the insurance rates of retired city employees by 30 percent because the city can’t find funding. Would you feel like your life’s work was appreciated?
After the Birmingham City Council voted on Tuesday, passing a resolution which drastically increased the rates for insurance plans for the city’s retired workers, many members of the city’s workforce are saying no, they don’t feel appreciated.
“It’s a sad day when the city of Birmingham treats employees like this,” said David Crews, the president of Fraternal Order of Police in Birmingham. “Some of these people have put in 40 years’ worth of service, the better half of their lives, and this is how the city rewards them for their service?”
For retirees paying for single coverage, monthly payments are going up from $169 to $220. The trend continues for the employee-plus-one coverages which will go up from $380 to $494 a month while the family plans are going up from $830 a month to $1,079.
The previous plan, which was approved by the city council on July 29, would’ve increased the monthly payments by more than 100 percent, according to Crews. “The first option they gave us, they said the insurance plan for a single employee was going to go from $169 to $356 a month. You can’t sit here and tell me the insurance company doubled their rates overnight,” Crews said.
Crews served 21 years with the Birmingham Police Department. Although he has since found another job and another insurance plan, he still represents the active and retired police force in Birmingham.
“They could’ve cut back on some of their spending and funded the insurance plan. There are only 518 employees on that plan right now, so they’re saying that they can’t pay for that while at the same time they are taking money away from that plan,” Crews said.
The changes to the insurance plan for the city’s retired workers comes as a result of the shortfall in the city’s budget and the burden of finding the money to retain the $4.9 million insurance policy that was previously in place. Instead, the city chose to implement a $1.9 million value plan, which won’t cover the entire cost of surgeries and hospital stays while increasing monthly payments for retirees by 30 percent.
“They find money every Tuesday when they want to pay for something like a stadium or some little project, like a convention that they want, but when it comes to the employees, for some reason, they just don’t have the money,” Crews said.
The coverage provider for the city is Blue Cross/Blue Shield, but the company only acts as an administrator because the city is self-insured.
Nasty spending habits
Don Baker pushed his way through the dense crowd at city hall after the council passed the resolution that will affect the healthcare plan for retired city employees beginning Sept. 1, a move Baker and his counterparts refer to as “not a good deal.”
Baker, the president of the Birmingham Firefighters Association, explained — with a crowd gathered around him — that the new insurance plan will be a heavy burden for those on fixed incomes who can’t afford the increased rates. Also, he said, if someone has a surgery or a hospital stay, the new plan will only cover 90 percent of the cost, as opposed the old plan which covered 100 percent.
“So they are getting a lesser health insurance plan and it’s costing them 30 percent more in deductibles,” Baker said.
Crews and the workers he represents believe that the city just wants more money for their “nasty spending habits,” and that the city is “cutting the funding for insurance while putting the cost on the backs of employees.”
Baker said that the deal the council approved on Tuesday — while he doesn’t like it — was better than the alternative plan that was set to take effect Sept. 1. “Our members and retirees from across the city have been down here fighting and fighting hard. We’ve been in every meeting they’ve had regarding this issue. My job today is to be the bearer of bad news.”
The resolution was passed as follows:
“A Resolution amending Resolution No. 1580-14 adopted by the Council July 29, 2014 authorizing the Mayor to execute an amendment on behalf of the City a contract with Blue Cross and Blue Shield of Alabama for Retirees to provide for a payment by the City an amount not exceeding $873.00 per month for single “Value Plan” medical insurance; $1,450.00 per month for employee + one “Value Plan” medical insurance; $2,681.00 per month for family “Value Plan medical insurance.” The retiree portion will not exceed 30% increase to the 2013-2014 Value Plan rates.”
As Baker says, “I think that they saw a projected deficit in the insurance program and said, ‘We’re going to make it up big time on you guys. If not, we’re just trying to force you out of this insurance program.’ That’s been a long-standing mantra from the city that retirees cost the insurance program more than active [employees],” Baker said to the crowd gathered outside the council chamber.
The resolution passed 6-2 on Tuesday. Councilor Steven Hoyt — who, along with Councilor Sheila Tyson, voted against the resolution — said he is “saddened” by the way this deal was handled. Councilor Lashunda Scales was absent at the time of voting, but mentioned afterwards that she would have voted against the resolution.
“I’m one who has choices, I know some of these folks don’t have that. I have three jobs — that’s three opportunities to get insurance,” Hoyt said. He went on to say that the city needs to “get out of the self-insurance business.”
Hoyt referred to this situation as a “crisis” that came about from a nearly $5 million shortfall in the city’s budget. Perhaps coincidentally, the new health insurance plan comes on the heels of a decision made by the mayor’s office and approved by the city council to earmark $5 million in case the Democratic National Convention chooses to come to Birmingham.
According to Scales, who was speaking to reporters after Tuesday’s vote, there was actually no deficit in the budget that the council announced earlier in the year.
“We said that we had a deficit; we found out later on that there was no deficit. I think it is very unfortunate that the retirees are having to take the brunt of what probably deals with mismanagement of funds,” Scales said.
Baker agrees with Scale’s statement about the false deficit, adding that the city council was not provided with enough information from the city’s financial department to make an informed decision about how to find the new healthcare plan.
“The $4.9 that they said was a deficit was not really a deficit,” Baker explained. “In July they budgeted for this deficit, and the finance director, Tom Barnett, admitted that there wasn’t a deficit in a special called meeting after councilor Scales questioned him about it. So the deficit was really zero. What they were doing, according to the city administration, was operating on projected deficits. There’s a lot of issues here.”
Efforts to reach Barnett, the director of finance for the city of Birmingham, went unanswered. He is out of the office until Sept. 9, according to his secretary.
In order to make up the $5 million deficit, which Scales and Baker said do not exist, the city was faced with several options: City-wide layoffs, implementing a hiring freeze for funded, vacant positions, or increasing the insurance plans for retirees by 30 percent.
“I think if you’re talking about the 30 percent [increase] that the council passed then that’s going to be more out-of-pocket expenses to folks who are already on a fixed income,” Hoyt said. “I don’t believe that’s how we achieve that, and it saddens me immensely.”
David Jayne, a retired Birmingham firefighter, is an imposing figure — the kind of person one would be glad to see come to their rescue if trapped in a burning building. Jayne said that after he suffered from a heart attack, he was unable to go back to work. This new plan, he explained, will significantly impact his healthcare coverage.
“They are telling us that they are $4.9 million short on our coverage,” Jayne explained.
“We’re taking an increase to pay for our coverage because of that $4.9 million shortfall. But they found $1.9 million in the budget and added $3 million to the mayor’s budget. So the way I see it is, they stole $4.9 million from us and found $1.9 million to give back to us,” Jayne said.
In order to fund the new “value plan,” the city will spend around $1.9 million to cover the city’s retirees.
According to Jayne, who was covered under the city’s premier plan prior to the passage of the resolution, his payments have increased 30 percent, while his deductibles have gone up and he is only receiving 90 percent coverage for surgeries and hospital stays. He’s now paying $1,071 a month for his health coverage with the city.
Councilor Valerie Abbott, who is the Chair for the Budget and Finance Committee, said that the value plan is a “very generous plan.” After working for AT&T for 40 years, she said that she never even heard of a plan that covered 100 percent of everything.
“Next year, we’re looking into not having the premier plan for active employees,” Abbott said, adding that the cost of providing a plan like that is not sustainable. “We’ve just got to find some kind of compromise.”
Perhaps what Jayne is most upset about is the manner in which the city handled the transition to the new healthcare coverage.
“They snuck it onto the consent agenda, which is supposed to be for non-controversial issues,” Jayne said. “That just tells you right there that they were hiding something.”
On July 29, when the first resolution passed regarding the new health coverage for retired employees, the item was originally not on the consent agenda. During the meeting, however, Abbott requested that the item be added to the consent agenda, which eventually passed.
The resolution that passed on July 29, as Crews explained, called for nearly double the rates that retirees were previously paying for their insurance.
Here is the original resolution as it appeared on July 29:
A Resolution authorizing the Mayor to execute on behalf of the City a contract with Blue Cross and Blue Shield of Alabama for Retirees to provide for payment by the City an amount not exceeding: $356.00 per month for single “Value Plan” medical insurance; $1,100.00 per month for family “Value Plan” medical insurance. [Fiscal Year: 2014-2015; Funding: 001_000.506-002] (Submitted by the Mayor) (Recommended by the Director of Human Resources)
Not looking close enough
“Well, you know I feel like we didn’t get the full story from the administration,” Councilor Abbott said over the phone when asked if the council had enough information on the changes to the insurance plans to make an informed decision. “This was our fault as much as it was the administration. They didn’t give us the full picture, but we should have asked a lot more questions.”
She said that when the council was approached by the city’s financial department about how much the city was spending on health insurance, the figure was $33 million last year, or 10 percent of the city’s budget. Abbott said the council realized that spending that much on healthcare — a large percentage of that spending for retirees — was going to “break the city.
“We didn’t really think that it would be a big increase for those paying for insurance. But I admit we didn’t look at the numbers close enough,” Abbott said.
“The retirees haven’t had an increase in three or four years plus, and I think this was under Langford, they got a $150 subsidy,” she continued. “Well, the active employees have been subsidizing the insurance cost for the retirees and they have had an increase every single year. So it didn’t seem fair to let the retirees ride on the backs of the actives.”
Hoyt hopes that situations like Jayne’s will not deter people from seeking jobs with the city.
“I hope it doesn’t hinder people from wanting to work for the city, but I think what we have to do is press for the council to really look at benefits — you say healthcare is going up, well, people are living longer. That’s all of us,” Hoyt said.
When April Odom, the director of communications for Mayor William Bell’s office, was asked if she thought the increase in health insurance payments would turn away potential city employees, she responded in an email with a one-word answer: “No.”
However, Odom did mention in a subsequent email that while the city did end the 2014 fiscal year with a deficit, the budget for this year, which started on June 1, is balanced.
“The finance department does not administer the plan. We do have budget hearings, to which the Council is invited. We give them updated detailed reports monthly and presentations when they request,” Odom explained.
Baker still contends that the people who have served the city for their entire careers should not be treated as if they are a burden to the city’s budget.
He admits that the city is spending a significant amount of money taking care of retirees, who, like Hoyt mentioned, have a longer life expectancy than ever before.
“I’m sure that may be the case, but those retirees also spent 25 to 30 years running in and out of buildings that were on fire saving people when they have heart attacks and things like that, as well as your trash service, [and] the police officers that do a great job with crime in the city,” Baker said, the crowd still gathered around him.
“So at the end of your career you’re basically told, ‘Well, we are through with you, we’re going to try and make this look good but we’re really trying to force you totally out,’” Baker said. “That’s the way retirees feel, and that’s the way actives are beginning to feel.”