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Union Strategies for Improving Quality

Health care costs have stabilized over the past few years and, in some cases, premiums have even decreased. Much of the cost stabilization has resulted from moving workers into lower-cost managed care plans. Health care cost analysts are predicting, however, that the days of low inflation are coming to an end. Both analysts and employers are projecting 1999 increases ranging from 5 to 10 percent or more. Even large purchasers will likely see higher increases. Health insurance premiums for 9 million federal employees and retirees covered by the Federal Employees’ Health Benefits Program increased an average of 8.5 percent in 1998, following 4 years of stable or declining rates. Pressure over cost sharing is expected to once again become a major issue in negotiations.

AFSCME locals and councils and other unions are addressing cost and quality issues in a number of ways. Many are forming or re-establishing previously formed labor/management cost containment committees and expanding their roles to address the broader issues of quality health care. Some unions are forming or participating in purchasing coalitions and, in a few cases, directly purchasing medical services from providers. Health care quality issues are often addressed through legislative efforts and community initiatives as well, which is especially important in jurisdictions without collective bargaining rights.

Labor/Management Committees

AFSCME Ohio Civil Service Employee Association (OCSEA) along with six other unions in Ohio, addresses health care cost and quality issues through a joint health care committee.

  • Since 1989, representatives of the state and of seven unions in Ohio together have overseen the administration of state health benefits, through the Joint Health Care Committee (JHCC). The unions were particularly interested in strengthening the minimum standards for HMOs available to state employees; later the unions required National Committee for Quality Assurance accreditation. Currently, the unions are trying to move the JHCC toward producing health plan quality report cards for union members. The contract language negotiated to set up the JHCC established an educational/communications subcommittee charged with designing a multimedia plan to effectively communicate health care quality information to state employees. This project is funded through a surcharge payment to employees of $1 per employee per month.

Legislative Remedies

  • In Florida, AFSCME used a public campaign to focus on the quality of care in the state employee health plan. During 1995, the state decided to put the administration and provider network of its self-insured statewide health plan out for bid. The administrator and network had been Blue Cross/Blue Shield (BC/BS) of Florida. Although surveys showed high employee satisfaction with the BC/BS plan, the state issued Requests for Proposals (RFPs), despite concerns put forth by AFSCME about a lack of detail on quality, provider network coverage and transition coverages in the RFP. The state awarded the contract to Unysis, the lowest bidder.
  • AFSCME’s fears became reality when Unysis took over. The network was insufficient and poorly administered; payments were delayed; and coverage was denied for services previously covered. Through AFSCME’s continuing vigilance (including the threat of a lawsuit, solicitation of complaints and regular media alerts), the state began to issue large fines against Unysis for poor performance and hired outside consultants to measure Unysis against industry standards.
  • AFSCME ultimately helped craft legislation that became law in May 1997. The legislation restructured state employee insurance to provide for an independent agency that would be responsible not only for the statewide PPO, but also for HMO coverage and the prescription drug program. A State Benefits Council, including an AFSCME representative and a retiree, was created to oversee programs and contracts. The law set a deadline for Unysis to meet performance outcome measures. Unysis ultimately withdrew from providing services to the state due to strong public pressure, and the state awarded the contract to BC/BS once more.

In jurisdictions without collective bargaining rights, the union must find other ways to fight against poor quality health care. Although Florida has collective bargaining rights, Florida Council 79 effectively took its campaign for a quality plan to the statehouse.

Purchasing Coalitions

In response to double-digit health cost increases in the late 1980s, health care purchasers began to band together in an effort to contain future premium increases. Some employers joined with others to strengthen their bargaining power while others reduced the number of plans offered to employees so that each plan would represent a larger group, thereby increasing its bargaining power. Both strategies worked to a degree. By the mid-1990s health care costs stabilized and, in some larger groups, even declined. Facing premium reductions, health care insurers sought to ensure their profitability by merging into integrated delivery systems, thereby capturing as much of the delivery market as possible, and capitating all aspects of care. As plans merged it became clear that most employer coalitions were paying attention to cost, but not necessarily to the quality of care provided by plans. A few of the employer coalitions groups did, however, realize they needed to pay attention to quality and responded by directly contracting with health care providers.

Q. Who is forming health care coalitions?

A. The majority of coalitions are formed by employer groups. While many of the larger purchasing coalitions include companies and public employers that are unionized, union involvement in coalitions is generally low. Of the union coalitions that do exist, most deal with Taft-Hartley (multi-employer collectively bargained) funds. The majority are in construction trades, retail and the service industry, and a few include unions representing school employees, public safety workers and state employees. Coalitions vary in size and location. For example, the Cooperative Health Network covers 14,000 people in Ohio and includes four health funds while the Health Care Cost Containment Corporation of the Mid-Atlantic Region covers 350,000 people in Washington, D.C., Maryland and Virginia, and includes 55 funds.

Q. How can unions become more involved?

A. Unions can be more active purchasers in a couple of ways. They can use existing labor/management committees and/or negotiating teams to form coalitions with other unionized public- and private-sector employers. Taft-Hartley or public-sector health and welfare funds can join existing union-based coalitions or form new coalitions.

Q. What should the goals of a coalition be?

A. Coalitions should seek to contain cost and enhance quality through bargaining strength, enhance competition among plans, and gather and share information on providers, terms of contracts with insurers and satisfaction with care and services. A few coalitions have the limited purpose of collecting information on clinical quality or sponsoring member satisfaction surveys. Roles of coalitions vary. Some form solely for information sharing purposes, while others may share information and jointly purchase services. A few actually negotiate PPO networks, prescription drug care programs, and mental health and substance abuse networks.

Q. What is direct contracting?

A. Direct contracting is a relatively new way of buying health care, in which health care purchasers, such as self-insured employers and coalitions, buy services directly from providers, such as physicians and hospitals, or contract directly with a provider-sponsored network. They eliminate health plans or insurers as the middleman. Some begin by contracting with providers that offer ancillary benefits, such as dental or vision care, while others negotiate for full medical coverage.

Q. Are coalition funds and employers obligated to participate in all of the joint purchasing arrangements of the coalition?

A. In joint purchasing, the delivery system and the level benefits must be identical. Because funds and employers do not always want to offer the exact same coverage, few enter joint contracting for all medical benefits. Some members of the coalition may jointly purchase health care, contracting for the same plans and benefit coverages, while others may negotiate with the same providers as a group, but offer different levels of benefits. Obviously, joint purchasing provides greater negotiating power, but agreement among coalition members may be difficult.

Here are examples of existing coalition activities:

  • The Buyers’ Health Care Action Group, a coalition of twenty-three large self-insured private employers in Minnesota, began jointly purchasing HMO coverage in 1993. Due to limited competition in the area market, the coalition eventually began to explore new direct contracting alternatives. They agreed upon a standard package of benefits and issued a Request for Proposal (RFP), creating competition among the 14 selected “care systems.” These care systems are networks of physicians, hospitals and ancillary providers, and are categorized by cost. This strategy builds on the idea that the most effective delivery of health care will take place in an environment where well-informed consumers choose among competing health plan providers. In 1993, The Minnesota Department of Employee Relations, which purchases health care services on behalf of state and university employees, became an associate member of the coalition. AFSCME has been the leader of the Labor coalition and successfully emphasized the issues of access and physician choice in the coalition model.
  • The AFL-CIO Employer Purchasing Coalition of Detroit represents 70 Taft-Hartley funds, mostly from unions in the building trades, but also includes a public employee trust fund. The coalition began by collectively negotiating for a prescription drug card and mail order prescription program, then moved on to negotiate a dental and vision network for its member funds and employers, charging a per capita fee. Later, another local coalition, the Greater Detroit Area Health Council and the AFL-CIO coalition joined forces, to address mutual needs.

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