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Which side won in new grocery contracts?

November 16, 2007 | Page 15

UFCW member DARRIN HOOP takes a closer look at new contracts that the union and grocery corporations both say will help workers forced to bear the brunt of rising health care costs.

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ON OCTOBER 12, 2003, some 59,000 grocery workers, members of seven Southern California locals of the UFCW, began a 141-day strike against the "Big Three" grocery chains: Kroger (Ralph's in California), Safeway (Vons) and Albertsons (which was bought by Supervalu in 2006).

Despite impressive solidarity from organized labor and the community, the strike was settled with a devastating contract that implemented a two-tier system under which wages and health benefits for new hires were significantly less than for the existing workforce.

"The contract increased waiting periods from four months to 12 months for individual (health care) coverage (18 months for clerks) and 30 months for family coverage," according to a study by the University of California-Berkeley Center for Labor Research and Education. "It increased co-pays, co-insurance and deductibles under the new plan, while restricting options."

This concessionary contract in Southern California became the model for the rest of the grocery industry in subsequent negotiations and set the stage for this year's agreements.

Since then, the UFCW prepared for its 2007 round of grocery contracts--covering 328,000 workers nationally--with a series of union mergers and promises to members that gains would be made this time, especially regarding health care.

The first results of this strategy can be seen in two large grocery contracts in Southern California and the Puget Sound region in Washington.

UFCW spokeswoman Sandra Lloyd-Jones called the Southern California agreement, which was ratified on July 23, "a huge victory for grocery workers." Dave Schmitz, president of UFCW Local 21, the biggest of the three UFCW locals to ratify the Puget Sound deal on August 28, said, "From the beginning, we set very clear goals. We met those goals--and more--without taking any steps backward."

In fact, while there are improvements from the last concessionary contracts, there's more to the story.

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THE 2007 agreements still leave wages for UFCW members lagging behind in comparison to the contracts that expired in 2003 and 2004. According to union estimates, it will still take six to nine years for new hires to reach the top pay scale under the Southern California contract, despite the elimination of the two-tier system.

To sell the new contracts in Puget Sound and Southern California, the UFCW trumpeted supposed gains in health care.

In both agreements, preventive health care is covered at 100 percent for procedures such as well-adult and well-child checkups, immunizations, flu shots, mammograms, colonoscopies, pap smears and other screening tests. No deductibles or charges of any kind will be attached to these services.

In the Puget Sound deal, a $5 million "wellness incentive" program was set up. Initially, the program will provide a cash incentive of $50 to workers who agree to a "personal health assessment" designed to identify potential medical problems. There will be "financial assistance" to workers who want to quit smoking or who are willing to begin a "weight management regimen."

The most controversial aspect of the two contracts is the adoption of a "Health Reimbursement Account (HRA)." According to Safeway spokesman Kevin Herglotz, the Southern California contract marks the first time an HRA has appeared in any grocery contract in the country.

Under the HRA, workers will have an annual allowance of $500 for an individual and $1,000 for a family, which can be used to pay for doctor's visits, lab tests, X-rays or any other covered medical expenses, without deductibles being charged. However, the allowance can't be used for prescription, dental and vision benefits, nor to pay health insurance premiums.

After the allowance is used up, workers pay all costs out of pocket, until the annual maximum is reached, and the plan kicks in from that point on.

Unfortunately, health benefits are still two-tiered. Under Plan A, which applies to those hired before August 15, 2004, office visit co-pays have been eliminated. The deductible is $150, with the company covering 85 percent of the coinsurance and workers 15 percent, with an out-of-pocket maximum of $1,000 a year.

Workers in the Plan B category (those hired after August 15, 2004) still have lesser overall benefits than those under Plan A, though the gap has decreased from the last contract.

For example, the co-pay still exists under Plan B. The deductible is $250 ($500 for a family), with the company paying 80 percent of the coinsurance and workers 20 percent, with an out-of-pocket maximum of $2,000 for an individual ($4,000 for a family).

Despite this, the UFCW argues that the new HRA, in the words of Local 21 President Schmitz, is "a groundbreaking health care benefits package that means better care at lower costs for members."

But where does the money come from for the annual allowances in the HRA? According to Randy Zeiler, chief spokesman for the Big Three companies in the Puget Sound area, employers paid $4 an hour worked by each employee into the multi-employer health plan, known as the Retail Clerks Welfare Trust (RCWT).

Starting October 1, this was cut to $1.11 an hour. The companies' contributions will rise to $2.85 in May 2008 and be back to $3.95 in May of 2009. But the reduction of employer payments will save the companies millions. Instead of relying on employer payments, the union will allow a $150 million surplus in the RCWT to fund the HRA.

In Southern California, the union will allow the HRA to drain $240 million of a $500 million surplus from the health and welfare plan.

In addition to this, the Southern California contract will let deductibles rise sharply-- from $250 to $1,000 a year for an individual, and from $750 to $2,000 a year for families.

The inevitable result will be a rationing of health care resources, with workers skimping on needed services now in order to save money for the future.

A 2006 study by the Kaiser Family Foundation of HRA-type plans, known as Consumer-Directed Health Plans, found that workers in such plans are more likely to forgo needed medical care, not fill prescriptions, and take less than the prescribed dose or skip doses than people enrolled in more tradition plans.

The UFCW contracts still maintain the traditional health care plans in addition to the HRA. But is it fair to characterize as a victory a contract that allows the Big Three to avoid paying what could be several hundred million dollars over the life of the contract into the RCWT? Keep in mind that in 2006, the combined profits of the Big Three were $8.3 billion.

The new contracts are likely to become the models for the other UFCW grocery agreements across the U.S. In a climate in which workers' health care under is constant attack, organized labor has the power to draw the line and boost the struggle for health care reform. Unfortunately the UFCW, despite its rhetoric, has so far failed to do this.

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