SAG's health plan is on critical list

Cure: tighter eligibility regs, increased premiums

By DAVE MCNARY

Skyrocketing costs have landed the actors' health care plan -- jointly administered by SAG and the Hollywood studios -- in critical condition.

While not life-threatening, the malady's cure will be painful: tighter eligibility requirements and increased premiums. And it's the second time in less than a year that the plan's trustees have been forced to take such steps.

"I must advise the board of directors of SAG that the financial condition of the Health Plan continues to deteriorate," plan administrator Bruce Dow said in a recent memo. ""The situation is serious (not hopeless) but corrective action must be taken. Unfortunately, the actions necessary may involve changes that would further eliminate some participants from coverage and involve additional cost shifting to the remaining participants."

Dow also disclosed that the member cost of a monthly premium of $61.88 to provide family coverage next year is actually three times that amount. "This tremendous gulf between income and expenses must be rectified if the Health Plan is to avoid a financial crisis," Dow wrote.

Deficit at $23 mil

Dow, in a presentation last month to SAG members at a national membership meeting, disclosed the plan's deficit for 2001 totaled $23 million – well above the $10 million deficit that had been projected. He also said the projected deficit for this year will total $34 million for the plan.

Dow told the SAG board that the plan trustees have hired an independent actuarial firm to review past projections and issue its own forecast. "Most likely these projections will reveal that additional changes will have to be adopted to avert a financial crisis in the Health Plan," he said.

Dow said special meetings of the trustees have been scheduled to prep recommendations to address the deficit and will be announced in August for implementation in 2003.

Financial problems with the health plan have become a major factor in recent months for two key SAG issues -- the now-expired master franchise agreement for agents, which actors voted down last month, and beefing up enforcement of its contract on foreign shoots, which was launched May 1 as a Global Rule One campaign.

In the case of the spurned agent deal, negotiators for SAG and agents agreed to create a new fund, mostly to shore up the SAG-Producers pension and health plan. That new fund would have been created from two sources -- a slice of the additional commissions of $24 million over three years, plus a 1.5% "transfer fee" for new investments that would been allowed in talent agencies.

Migration consequences

As for Global Rule One, which is designed to discipline members for working non-SAG contracts at foreign sites, SAG has claimed the ongoing migration of work from the United States has reduced contributions to the pension and health fund by $23 million over the last five years.

The combo of flat contributions and rising costs were cited as the key factors in last summer's move by the health plan trustees to tighten eligibility requirements for the first time since 1996. Dow told the SAG national board at that point that without moving to bring costs under control, the plan would run out of money by 2006 (Daily Variety, July 31).

The plan's first step last summer was to tighten eligibility this year for the self-pay program and to raise earnings requirements to qualify for coverage in 2003. Qualification for Plan I, which currently requires $15,000 in annual earnings, was set last year to jump 33% to $20,000 in 2003, with increments coming over the next four years until the requirement is $26,000 in 2007.

Eligibility for Plan II, which currently has a $7,500 income threshold, was set last year to jump 20% to $9,000 in 2003 with $500 increments for the next four years.

Plan II at $11,200

In his recent memo, Dow said if the earnings requirements had been indexed with health care costs, Plan II should currently have a minimum of $11,200 in annual earnings while the Plan I figure should be at $22,300.

During 2001, the plan provided benefits to 32,399 actors and covered over 62,500 individuals with 699,550 claims processed and paid, up 8% over 2000. The pension plan over 7,300 individuals paid a monthly benefit last year.

Dow's report also disclosed that the pension plan lost 5.4% last year -- well under its 5-year average annual return of 7.9% -- and closed the year with slightly under $2 billion. In response, the trustees performed a re-evaluation of the investment portfolio and expect improved performance this year.