Oak Harbor Mayor Scott Dudley said he expects that negotiations with city employees will result in changes in health care benefits for the coming year.

Dudley said he discovered an unusual — and, he believes, questionable — health insurance-related benefit that employees received during the two previous city administrations. He said he will push to have it changed, even though it’s unclear if dropping the benefit would save the city any money.

The Teamster representative for the city’s two new unions, however, said it’s inappropriate for the mayor to publicly discuss doing away with benefits while collective bargaining negotiations are ongoing. The public works and marina employees decided to unionize earlier this year and are in the midst of working out new contracts.

“I don’t want to negotiate this in the press and I don’t think the mayor should either,” said Rich Ewing, the secretary and treasurer for the Teamsters.

The mayor can’t unilaterally change health care benefits for represented staff — the majority of city employees — but alterations would have to be negotiated with the unions.

While some City Council members have faulted the mayor for creating a morale problem among employees, Ewing said it wasn’t the change in administration that prompted the employees to organize.

“They felt like they needed a voice at the table,” he said. “They were tired of watching the police and firefighters negotiating contracts while they got things crammed down their throats.”

Insurance costs

Dudley said he was surprised after taking office in January to learn the reasons behind the city’s health insurance costs. The city spent nearly $1.8 million on medical and dental benefits in 2011.

Dudley said employees receive the most expensive, “Cadillac” medical plan available through the Association of Washington Cities.

The city pays 100 percent of employees’ premiums, which are $630 a month per employee this year. In addition, the city pays 75 percent of the premium costs for dependents on the city’s plan. The premium for a spouse, for example, is $634.

Dudley said the most questionable aspect of the benefits, however, is that employees receive cash if they, their spouses or children “opt out” of the city’s health care plan.

For each employee or dependent who opts out, the employee receives 25 percent of the premiums the city would have to pay if the dependent was on the employee’s health plan.

In fact, Dudley said there are husbands and wives who both work at the city and they each receive cash since the other spouse isn’t on “their” plan.

Dudley said the city paid out $250,000 in cash last year for dependents who elected to opt-out.

“The plan we currently have in place for health care benefits is not sustainable,” Dudley said, adding that the cost of health insurance has been increasing by 11 percent last year.

“It’s not a question of spending, it’s a question of what’s right,” the mayor said. “What can we justify to those who hold us accountable — the taxpayers.”

Finance Director Doug Merriman said the policy was adopted about a decade ago as a cost-saving measure.

He said many employee spouses were on the city’s health care plan even though they had their own insurance and didn’t really need it.

The policy encouraged the employees to remove spouses from the city’s health plan and saved the city $80,000 a year, Merriman said.

Merriman said it was unclear if dropping the payout policy would save or cost the city money.

It would depend on how many employees would return dependents to the city’s plan if the policy went away.

Dudley emphasized that the payouts started when Patty Cohen was in office and continued through the Jim Slowik administration, apparently without review.

He said he discussed the issue at the council retreat this year and none of the council members were aware of the policy.

Dudley said he expects that the city will be able to negotiate with the unions to do away with the payouts.

“I expect, when everything is said and done, we will be able to come to an agreement,” he said.

COLAs coming for employees?

On the other hand, Dudley said he’s in favor of giving employees cost of living adjustments next year.

He said most employees, apart from the police, didn’t receive COLAs for the last couple of years.

“COLAS make a lot more sense to me,” he said. “We want to create an environment where we are able to afford salary increases.”

While government and private sector employees nationwide have been taking on a greater share of the cost of health care benefits, Oak Harbor’s plan doesn’t seem to be out of the ordinary.

Island County, for example, also has a policy to encourage people who don’t need insurance not to sign up, though it’s not as generous as the city’s.

Elaine Marlow, the county’s budget director, said the policy began because the county has a number of employees who received medical benefits through the Navy.

An employee who opts out of health insurance can either receive $100 a month to take home or put into an insurance pool for others, depending on the contract.

The county doesn’t pay out for spouses or children who opt out.

Melanie Bacon, the human resources director for the county, said the county has budgeted to pay $910 per employee per month next year, whether or not an employee has dependents.

She said that represents the county’s per-employee cost, but it’s not necessarily the amount of benefits an individual employee will receive.

Some bargaining units pool the money into a fund; single people and higher-paid employees will generally receive less from the pool than employees with dependents or those who earn less.

The costs aren’t set in stone yet, she said, as negotiations are ongoing.

The deputy’s guild, for example, is going to arbitration over a disagreement about compensation, which includes benefits.