11/01/03 - Medical Inflation

As you may know from previous issues of Carpenters Care, the Carpenters Health and Security Plan – For Retired Carpenters continues to pay out more in benefits each month than it receives in monthly contributions. Medical inflation, especially prescription drug costs, is the major force behind this deficit position and, while rate increases in each of the past three years have reduced the subsidy provided by working carpenters and eased the pressure on reserves, they have not solved the problem. The losses experienced by this plan over the past four years are presented in the chart on page 2. While the subsidy provided by the plan (please see the fourth column) has decreased over the past two years, the subsidy is still too high.

The difference in claims paid versus monthly contributions received is also revealed by the drain on plan reserves. Several years ago, the plan set aside $25 million to help pay retiree claims costs. These reserves were to assist with retiree claims well into the future but have already been reduced to less than $8 million. The recently ratified master bargaining agreement calls for contributions to retiree health coverage. This is the first such commitment of funds by the bargaining parties specifically to retiree coverage. This will help stabilize the plan’s finances and provide additional resources to help the Trustees continue providing retiree coverage. The $.15 from bargaining should help offset the loss of reserves but additional retiree contributions will be required.