EXCLUSIVE: Hard times call for hard decisions, which trustees of the SAG-AFTRA Health Plan say they had to make to save health benefits for future generations of participants.
Even before the pandemic, the Plan was facing unsustainable deficits, and the COVID-19 production shutdown accelerated the need for a complete overhaul of its benefits structures. Sources familiar with the Plan’s projections say that roughly 3,500 participants and more than 2,800 of their dependents no longer will qualify for health coverage because of the new earnings requirements that take effect on January 1. That’s about 10% of the 33,000 participants and 9% of their 32,000 family members now covered by the Plan. However, those participants who have $13,000 in earnings will be eligible to continue their coverage under a new Transition Benefit.
The saga of the Plan’s sagging fortunes began in 2018, six years after SAG and AFTRA merged, though they maintained separate health plans until those also were merged on the first day of 2017. The new SAG-AFTRA Health Plan finished that first year with an $18 million surplus, with reserves of about $500 million. But fueled by the skyrocketing cost of health care and a growing demand for health services, the Plan suffered a $48 million deficit in 2018; a $50 million deficit in 2019; a projected deficit of $141 million this year; and another projected deficit of $83 million in 2021, if the trustees failed to act to stem the flow of cascading shortfalls.
The Plan, which last year paid out nearly $468 million in health care costs, is funded primarily by employer contributions, which make up about 80% of its income. Last year, employer contributions were approximately $340 million. Another 15% of the funding comes from premiums paid by participants, with about 5% coming from investments – in a good year.
Cutting costs has helped. “We have been working diligently to try to control the growing costs of healthcare by negotiating better contracts and reducing costs within our control,” Plan officials told participants this week. “Examples of this include negotiating $30 million in savings from our pharmacy benefit manager contract in 2017, and an additional $29 million in savings with a new contract for 2021. We have also worked continuously to reduce our operating costs, finding ways to do more with less. Last year, just eight cents of every revenue dollar was spent on the Plan’s operations, leaving more money to pay for participant benefits.”
Even so, health care-related costs exceeded income by $98 million in the last two years alone, further eating away at the Plan’s reserves.
Crunching the numbers, the trustees and actuaries settled on a plan that say won’t hollow out benefits or raise eligibility requirements that would be out of reach for most performers. Under the new plan, annual deductibles will be combined to $500 for an individual and $1,000 for families. And premiums will go up from $300 a quarter for one participant to $375, from $348 a quarter for the participant and one dependent to $531 and from $375 a quarter for the participant and two or more dependents to $747 per quarter, which Plan officials say better reflects the added cost of covering more dependents.
Critics of the restructuring – and there are many, they are vocal and they’ll be holding a town hall tonight to air their grievances – say that the brunt of the changes will fall on low-income performers and retirees. To date, more than 8,000 actors have signed a petition calling on the Plan to rescind the changes.
Speakers at the opposition’s town hall tonight will include Patricia Richardson, president of SAG-AFTRA’s Los Angeles Local, and LA Local vice presidents Frances Fisher and David Jolliffe. To attend the town hall, which is hosted by LA Local board member Shaan Sharma, click here.
The new rules will get rid of the current two-tier earnings threshold. The current threshold for the Plan’s top-tier coverage is $35,020, and the cutoff for the Plan’s lower level benefits is $18,040. Under the new plan, the earnings threshold is $25,950 during a 12-month base earnings period, including sessional and residuals earnings for participants under age 65.
A major problem for the Plan, aside from the rising cost of health care, has been that the earnings thresholds were too low. Few jobs in America that pay as little as $35,020 a year – let alone $18,040 a year – come with health benefits. Raising the threshold to $25,950 – which is nearly $8,000 more than the lower tier but more than $9,000 lower than the top-tier coverage – still will be within reach of the vast majority of those currently covered, if and when jobs return. And many of those who fail to qualify will be eligible for Obamacare, unless Donald Trump is re-elected and gets rid of it, as he has vowed.
Retirees will also find it harder to qualify because under the new plan, residuals earnings will be phased out of their eligibility calculus, as they had been under the old SAG Health Plan prior to the health plan mergers in 2017. For those who turned 65 and started their SAG or AFTRA pensions before October 1, 2019, only sessional earnings will be included in their earnings evaluation for benefits in 2021 and beyond. And for those who turned 65 and started their SAG or AFTRA pensions from October 1, 2019 through September 30, 2020, sessional and residual earnings are included in their earnings evaluation for 2021 benefits, but for 2022 and beyond, only sessional earnings will be included.
Many older participants rely on their residuals to help them qualify for SAG-AFTRA health benefits, but the trustees note that those who are 65 and older are eligible for other health plans that supplement Medicare, like the current SAG-AFTRA Health Plan, and won’t lose health coverage even if they lose their union coverage.
The Plan also opted to adopt new rules for spouses whose jobs offer health plans, requiring them to enroll in that plan. “If enrolled with their employer, you can choose to cover them under the SAG-AFTRA Health Plan as well,” the Plan said. “The employer’s plan will pay benefits first; then, our Plan’s cost-sharing may apply for remaining eligible expenses. If they don’t enroll in their employer’s plan, you cannot cover them with us — our Plan will not pay benefits for their healthcare. If your spouse is not working, or their employer doesn’t offer a health plan, you can enroll them with the SAG-AFTRA Health Plan.”
This new rule, the Plan says, “is in line with common practices across entertainment health plans, other union health plans and private and public-sector employer plans.”
Another major problem for the Plan is that employer contributions on earnings are capped too low, allowing employers to make contributions on a fraction of earnings of the union’s top earners. For actors in theatrical films, those employer contributions are capped at the first $232,000 the actor is paid, even if he or she makes $20 million a film.
Similarly, for TV actors, the caps are $15,000 on earnings for a half-hour show, per episode; $24,500 for a one-hour show per episode; $33,000 for a 90-minute show; and $40,000 for show that’s two hours or longer.
The trustees of the Health Plan – which include representatives from both the union and management – don’t establish those caps, which are negotiated with the companies through collective bargaining. Critics, however, note that David White, SAG-AFTRA’s national executive director, and Ray Rodriguez, the union’s chief contracts officer, serve as trustees of the Plan, as does Carol Lombardini, president of management’s AMPTP, who recently negotiated the terms of the union’s new film and TV contract. Critics say that they should have warned the membership about the Plan’s dire circumstances before they voted for ratification of the new contract.
Earlier today, the Plan gave a presentation to SAG-AFTRA members on the health plan changes. Similar presentations will be held next Monday and Wednesday. Members can RSVP here.