Kroger Co., UFCW exploring merger of Ohio health plans as part of contract talks

Contract set to expire March 1

CINCINNATI - The Kroger Co. is exploring the merger of union-operated health plans in Cincinnati, Dayton and Toledo as part of its ongoing negotiations for a new contract with the United Food and Commercial Workers Union Local 75.

The idea could be a cost saver that enables Kroger to preserve health benefits, like the spousal coverage that was eliminated for about 1,700 people as part of an Indiana contract in June.

A UFCW spokeswoman wouldn’t say whether the company has proposed the elimination of spousal coverage in Cincinnati. The company also declined to comment on contract proposals.

“We’re still in negotiations and making good progress,” said Kroger spokeswoman Rachael Betlzer. “Out of respect for the process, we don’t comment on speculation.”

The union representing about 12,000 Cincinnati employees has been negotiating a new contract since last fall. The old contract has been extended twice and is currently scheduled to expire this Saturday, March 1. After that, it will automatically be extended to the next bargaining session unless the union or company objects.

The UFCW informed members about the potential health plan combinations in a pair of recent updates in Toledo and Cincinnati .

“We want to make sure that any changes to your contract are manageable,” said the UFCW bargaining update to Cincinnati members. “But, although Kroger is a market leader, we do not get a blank check for bargaining. Over the years, members of UFCW have made many difficult choices in order to preserve some of the best benefits in our industry, even with the changing nature of health care coverage. We recognize that we will need to make important changes and hard choices when it comes to a new agreement, but we are committed to reaching an agreement with access to affordable, quality health care and a wage package that reflects Kroger’s strong market position in our area."

The health plan that covers Cincinnati employees is a nonprofit called the Heartland Health & Wellness Fund, organized under the Taft-Hartley Act, a labor law that allows multiple employers to pay into trusts to cover health benefits. The Dayton-based Heartland plan covers not only Kroger employees in Cincinnati, Dayton and Toledo, but also employees of CVS drug stores, Butternut bread and 81 other companies. About 25,000 people are covered by the plan, including 21,000 Kroger employees, spouses or dependents.

While the plan already covers Kroger employees in three cities, it maintains funding pools for different employee groups because of contractual differences affecting each. Consultants are now studying whether it can save money by merging the Cincinnati and Dayton labor contracts and creating a new health plan covering workers in all three cities.

One thing that’s clear from recent tax returns is the Heartland Health & Wellness Fund is getting more expensive for Kroger. Tax returns show employer contributions to the plan increased 57.5 percent to $104.6 million between 2010 and 2012. Benefits paid to members increased 70 percent to $99.6 million during the same period.

Union spokeswoman Brigid Kelly said "there are economies of scale when you have more people" in one health plan and the parties are looking for ways to "provide affordable health care and protect benefits."

Kroger has about 12,000 UFCW members in Cincinnati, 4,000 in Dayton and 3,500 in Toledo, she said.

Kroger CEO David Dillon told Wall Street analysts in December that the Affordable Care Act is complicating contract talks all over the country.

“It does create a little … bigger pressure on both parties, on the union bargainers and on the company bargainers, because there's certain changes you have to make because of the law,” Dillon said. “And when you make those, then that has cost implications and then that puts pressure on the rest of the contract to make whatever other changes you have to make to adjust for that.”

But Kroger hasn’t adopted the same approach in every city where new contracts were negotiated.

For example, in Dallas last fall, Kroger preserved spousal coverage in a contract covering 9,450 employees. But the company eliminated spousal coverage in June as part of a new contract for 11,000 employees in Indiana. The company said it would deliver one-time payments of $1,000 to about 1,700 spouses who would be required to seek health coverage through state-run health care exchanges, established under the Affordable Care Act. Those spouses continued to receive coverage under Kroger dental and vision plans.

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