PAC
 
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Dear Health Plan Participants:

During the past several years, national headlines have documented the rising costs of health care. Elected officials, advocacy groups, major employers and economists have lamented the dramatic increases for hospital stays, physician visits and prescription drugs, and worried about their impact on workers nationwide and the national economy.

During the last year, we have proactively communicated with Health Plan participants about the effect of these escalating health care costs on the DGA-Producer Health Plan. We have reported on the magnitude of the problem and implemented a number of changes to try to reduce our financial losses. Health Plan Trustees (including those appointed by the guild, who represent virtually every job classification in our ranks and volunteer their time to the plan), have spent many months analyzing the Plan's fiscal situation, gathering input from participants across the country to understand their priorities and concerns, and outlining options for stemming current financial losses.

New Plan Unveiled

Today, our Health Plan is distributing this Special Edition of "Spotlight on Benefits" to outline the changes in the Plan, many of which will be effective on July 1, 2003. Here's the good news — the new Plan protects all of the current benefits available to Plan participants with only a minimal increase in costs to participants who stay within the Preferred Provider Network (PPO).

This is a statement we truly did not think we would be able to make. As we look at what is happening with employer health plans across the country, it seems that every one is talking about cutting benefits and significantly increasing employee costs in response to the spiraling costs of health care. In fact, a recent survey of 434 large employers nationwide said that 80 percent of employers plan to increase co-pays and deductibles in the coming year, while 83 percent plan to raise the premiums employees pay. Unbelievably, only 43 percent of firms were very confident they would even offer employee medical insurance 10 years from now.

At special health care meetings held with Health Plan participants in Los Angeles and New York and in Committee and Board meetings, possible options were discussed. We shared with participants the more than 60 percent increase in benefits paid over the last three years alone. In response, we looked at eliminating or substantially reducing coverage for certain health care services such as dental, vision and other benefits. We considered a significant increase in the minimum earnings required to qualify for health benefits. We contemplated providing different benefits for participants and their dependents. Each of these options was discarded.

Of course, the news is not all good and, in this health care environment, it simply can't be. Plan Trustees have devised a plan that is designed to achieve an estimated $6.2 million in annual savings without significantly cutting benefits. Rather, we have re-structured the Plan into two plans with similar benefits but different out-of-pocket expenses. The two plans — DGA Choice and DGA Premier Choice — are identical for participants who stay within the PPO — a network that has been dramatically expanded for California participants with the transition to the Blue Cross PPO.

There are also significant increases for out-of-network services for all Plan participants, a new $600 premium for dependent coverage and an increase of $300 in the deductible for family coverage. The details of these and other changes in the Plans are described elsewhere in this newsletter.

A Little History

It is amazing how much has changed in recent years. As we have reported in our previous communiqués, just four years ago, the Health Plan was accumulating $4 million more in annual contributions than it was paying out in benefits. But since 2000, the Health Plan has paid almost $28 million more in claims than it collected in contributions. While that loss was offset in part by earnings on investments, it clearly is a trend that cannot continue. In 2002, the Health Plan had a deficit of almost $8 million.

As the Health Plan Trustees attacked this issue, we had two key goals: 1) maintain excellent benefits for all Plan participants; and 2) regain the financial stability of the Plan to ensure its ability to provide quality health care coverage in both the short and long term.

The need to keep an eye on both the short and long term is due to the fact that the Plan is self–funded. Benefits are paid from funds generated by contributions from producers, from participants who are on self-pay and from earnings generated on investments. If the Plan continues to lose money annually and we are forced to tap into our limited surpluses, we risk eroding future health plan coverage. Put simply, our benefits are not guaranteed — they must be paid for from these sources of revenue now and in the future.

A Word About the Two Tiers

Some people may have concerns about the concept of a two-tiered plan. That's understandable. Throughout the history of the Health Plan, all participants who met the minimum earnings requirement were afforded the same health benefits. In reality, this has not changed. If a participant in either Plan — DGA Choice or DGA Premier Choice — uses doctors, labs, hospitals and other providers that are in the PPO network, their out-of-pocket costs are identical. The only difference in the two Plans is for out-of-network charges.

Therefore, we want to encourage everyone to stay in the network. It saves substantial costs for both participants and the Plan. Under the new Plan, it is also easier to do, as the change from PHCS to the Blue Cross PPO for the professional network in California triples the number of available providers. The Plan has already been using the Blue Cross PPO network for hospitals in California, and participants have been using these in-network hospitals 92 percent of the time (vs. out-of-network hospitals).

Health Plan Trustees debated long and hard over the best way to determine the earnings requirement for each Plan and ensure they were balanced and fair. We heard often and loudly from participants that the Plan needed to cover as many people as possible, and therefore, we made only the annual change in the minimum earnings requirement for coverage. In the end, $90,000 in eligible earnings became the benchmark for the DGA Premier Choice Plan for three reasons: 1) producers' contributions for $90,000 in earnings are equal to the average cost of providing health care coverage to one plan participant (a family of four requires contributions from almost $170,000 in earnings); 2) approximately half of Plan participants fall into each tier; and 3) the tiers are comprised of a proportionate number of participants from all job categories.

Dependent Coverage

More than 60 percent of Plan participants have one or more dependents that are also covered by the Plan. We are proud to be able to extend the excellent medical benefits to spouses, same-sex domestic partners and eligible children of Health Plan participants. As health care costs have risen, however, it has become more expensive to pay for dependent coverage, which represents about half of the Plan's total medical costs. Therefore, the Trustees voted to add a new $600 per family annual premium, to defray a small portion of the cost of coverage. We believe this is an equitable and affordable means of continuing to provide coverage to families, especially when compared to the cost of commercial health insurance.

Retiree Coverage

The Health Plan covers a large number of retirees who pay a very small premium for their high quality coverage. Contributions from active participants will continue to cover a large portion of the retirees' benefit costs.

Looking Ahead

The changes in the Plan will begin to be implemented on July 1, approximately 60 days from now. During that time, all participants will receive additional information and details on the changes, including an updated Health Plan Booklet. The Health Plan staff will be available to answer your questions and provide suggestions on how to maximize the use of the PPO network [please contact them at (323) 866-2200, option 1]. The Plan Web site will also have a "frequently asked questions" page to address new issues. And, all Plan participants are invited to join us at special DGA-Producer Health Plan meetings in the coming weeks (details noted in this newsletter).

Health Plan Trustees will continue to look for ways to combat the high cost of health care coverage and protect your benefits. We are proud that the DGA Choice and DGA Premier Choice Plans will continue to provide truly outstanding benefits.

We encourage you to share your thoughts on how we can achieve our dual goals of high-quality health coverage and financial security for the Plan. We hope to see you at our upcoming meetings.

Helayne Antler Burt Bluestein
Chair,
Board of Trustees 		Chair,
Benefits Committee
In response to escalating health care costs, the Trustees of the DGA-Producer Health Plan have made changes to the Plan designed to maintain its ability to provide outstanding benefits to its participants, while ensuring it is in a financially stable position. The changes, most of which become effective July 1, 2003, are designed to save the Plan an estimated $6.2 million annually with minimal impact on Plan participants.

The Plan will continue to provide excellent benefits to participants and their families, with small out-of-pocket costs for services received within the Preferred Provider Network (PPO), which has been dramatically expanded in California through a switch to Blue Cross. Other major changes in the Plan include: the adoption of a two-tier health plan based on covered earnings; an increase in out-of-pocket expenses for out-of-network services; the introduction of a new $600 annual premium for dependent coverage; a $300 increase in the medical deductible for families; and a new prescription drug benefit "Specialty Tier" for certain drugs.

How We Got Here

The DGA-Producer Health Plan has always been committed to providing one of the highest quality benefits packages in the nation to as many participants as possible. As such, it has maintained a low contribution and earnings requirement to qualify for health care coverage, while providing excellent benefits to low and high earning participants alike, as well as their eligible family members.

Earlier this year the Health Plan leadership communicated with you about the significant financial challenges faced by the Plan — most notably spiraling healthcare costs greatly exceeding revenue from contributions and investments. While healthcare costs have risen an average of 16 percent per year, income from contributions has only increased three to four percent in the same timeframe. The Plan is also being used more, with an average of 14 percent more physician visits per participant in the last year. As a result, the Plan is losing more than $7 million per year.

To compensate for this growing gap between financial resources and costs, the Plan has been forced to pay benefit claims by pulling funds from its reserves. This is dangerous because it decreases both the amount of available reserves and the income generated from the investment of those reserves. Because the Plan is "self-funded" and pays health benefits directly from its pool of income contributions, its current structure simply cannot keep pace and continue to provide the same level of benefits to the participants. To address this situation, the Plan has made a number of changes in the past year. And while we have seen some improvement in the Plan's financial status, it is not nearly enough to compensate for current and anticipated cost concerns.

After months of thoughtful deliberation, the Board of Trustees recently unanimously agreed to pass important changes to the Health Plan, noted above. The Trustees considered a great number of benefit reductions — including the elimination of certain services or participants eligible for coverage — before discarding them and developing the new structure for the Plan. Ultimately, the new Plan incorporates solutions that will improve the Plan's long-term financial health and ensure its ability to provide an exceptional level of benefits to its participants and growing population of retirees — with minimal disruption in benefits or costs to participants.

Plan Changes

Following is a review of the new Plan changes that will take effect on July 1, 2003, October 1, 2003 and January 1, 2004. These changes will assist the Health Plan in decreasing deficit spending, reducing costs and improving the Plan's long-term financial health and stability. At the same time, Plan participants will still continue to have access to some of the best health benefits in the country.

Blue Cross Becomes New PPO Provider Network in California

Effective July 1, 2003, the California PPO provider network will change from PHCS to Blue Cross. This switch is for the professional network only (physicians and other health care providers). The Plan has already been using the Blue Cross PPO network for hospitals in California, and Plan participants have been using these in-network hospitals 92 percent of the time (vs. out-of-network hospitals). The PPO network outside of California continues to be PHCS.

In making this change, the Trustees examined the list of doctors who are in the current (PHCS) and new (Blue Cross) networks. Blue Cross was found to have significantly more doctors and laboratories than the PHCS network, and the vast majority of doctors who participate in the PHCS network also participate in Blue Cross. This change will almost triple the number of California providers participating in the network. For example:

  • The number of pediatricians in the PPO network increases 167 percent; there are 286 percent more OB/GYNs, 111 percent more internists, and a huge 2,350 percent increase in available labs. So, for many Plan participants, their previously "out-of-network" physicians are now "in-network," which will save them money.

This change to a largely expanded provider network will make it easier for you to use a PPO provider, and when you do that, both you and the Plan save money. When you use in-network providers, you help to control healthcare costs while enjoying a broad range of doctors, hospitals and other health care providers. That's because PPO providers have negotiated lower fees than those out-of-network. So when you go in-network, you pay only 10 percent of the negotiated fee, while the plan pays 90 percent. On the other hand, going out-of-network means you may pay up to 40 percent of the reasonable and customary fee, which can be as much as triple the negotiated network fee, and the Plan pays considerably more as well. Consider the following example, which represents charges for procedures performed at Cedars-Sinai Medical Center, a large in-network hospital in Los Angeles:

  • In the event you needed to undergo a brain MRI — the total eligible charge for the procedure would be $1,168 for an in-network provider vs. $4,863 for the same procedure if conducted by an out-of-network provider.
  • Or if you needed arthroscopic surgery on your knee — the total eligible charge for the surgery would be $877 for an in-network provider vs. $3,895 if performed by an out-of-network provider.

Considering the cost savings, the choice to stay in-network is one that is a win-win to you and the Plan, and one that will be much easier with our newly expanded PPO network.

We understand that in some cases participants will need to change physicians in order to take advantage of the PPO in-network cost savings; though we expect this to affect a relatively small number of participants. For services provided on or after July 1, 2003, doctors and other providers that do not participate in the Blue Cross network become out-of-network doctors for benefit payment and as such have higher

co-payments associated with them. If you are traveling outside of California, you will be able to access in-network providers and specialists through PHCS and be able to take advantage of the significant benefits of in-network services.

We strongly encourage you to check with your doctor to see if he or she participates in the Blue Cross network. To find out about your physicians' participation in Blue Cross, you can also call Blue Cross at (800) 888-4825 or visit www.bluecrossca.com.

DGA Choice Becomes Two-Tier Plan —
DGA Choice and DGA Premier Choice

Beginning July 1, 2003, there will be two levels of benefits depending on a participant's covered earnings for the period that generated benefits on July 1, 2003. Those with coverage based on covered earnings of $90,000 or higher will be covered under the new DGA Premier Choice Plan, and those with covered earnings between $27,900 and $90,000 will continue to be covered under the DGA Choice Plan. (For benefit periods starting in January 2004, the new covered earnings eligibility minimum for participation in the DGA Choice Plan will be $28,700).

If you stay inside the PPO network — now greatly expanded in California — the two plans will cover the same benefits and co-payments. If you use only PPO providers, you will not see a difference at all. The only differences are that co-payments and the out-of-pocket maximum will now be higher if you go out-of-network. If you stay in-network, the amount you would have to pay before insurance picks up 100 percent of the cost is only $1,000 in both plans, plus your deductible. But out-of-network, participants in the DGA Choice Plan will have an out-of-pocket maximum of $7,500 with 60 percent co-insurance. Out-of-network, DGA Premier Choice participants will have an out-of-pocket maximum of $3,000 with 70 percent co-insurance.

How Were the Tiers Decided?

The new two-tiered system allows the Plan to achieve its cost reduction goals without substantially raising eligibility minimums and thus eliminating participants or cutting specific benefits like dental or vision coverage. In meetings across the country, a number of these major changes were considered and then discarded in favor of this new structural change. But the message from Plan participants was clear — we want to cover as many people as possible under the Health Plan. The two-tiered approach means that there will not be a substantial increase in the covered earnings minimum for health coverage. Rather, the Plan achieves significant savings by providing increased incentives for Plan participants to stay in-network, particularly those in the DGA Choice Plan.

In considering possible reductions to the Plan, the Trustees worked to develop solutions that are fair and provide high quality care for all participants, for all levels of earners alike. $90,000 in covered earnings was chosen as the point of entry into the DGA Premier Choice Plan for several reasons: 1) almost 50 percent of all Plan participants fall into each tier; 2) the tiers are comprised of a proportionate number of participants from all job categories; and 3) the average costs for the Plan to cover one person are roughly $6,300, or the equivalent contribution income from a participant earning $90,000. This income level does not take into account the contributions necessary to cover retirees. Moreover, contributions on earnings of $170,000 are needed to cover a family of four.

As a participant, you have an opportunity and a responsibility to become educated about your health care choices. We recommend that you ask questions of providers and about referrals before committing to treatment; research and utilize the broad range of professionals in the PPO network; and work collaboratively with the Plan to keep costs down — your costs and those incurred by the Plan.

DGA Premier Choice and DGA Choice distinctions are outlined below:

DGA Premier Choice and DGA Choice distinctions - click image for larger view.
Which Plan Will I Be In?

Your Plan on July 1, 2003 will be based on how you became eligible for coverage. The following chart shows who will be in each of the Plans.

Breakdown of Different Health Plans - click image for larger view.

Health Plan Premium for Dependent Coverage

Beginning October 1, 2003, participants with Earned Coverage will have an annual premium of $600 for dependent coverage.

On an annual basis, approximately half of the medical benefits paid by the Plan are for coverage of participants' spouses, same-sex domestic partners and dependent children. However, in the past, all participants have contributed at the same level and have not paid a premium — whether they have one or 10 dependents covered by the Plan. The Trustees, with input from Plan participants, determined that a relatively small premium for dependents seemed a fair and equitable way to begin to cover some of the costs.

The same $600 per year charge will apply if you have one or more dependents on the Plan. This premium will be payable semi-annually (or annually, upon request) in advance. We will be sending you more information regarding how to make payment and what happens if you elect not to cover your dependents.

Medical Deductible Increase

Beginning July 1, 2003, the annual deductible for a family will increase from $600 to $900. The deductible for an individual remains at $300.

Before benefits are payable to you, you must satisfy the calendar year deductible, which is $300 for an individual and $900 for a family of three or more. The family deductible is "accumulative" and is considered satisfied once three or more family participants have together met the annual $900 deductible. When this occurs, the deductible amounts applied toward other family participants will be adjusted. The deductible is the same whether or not health services are obtained through a PPO provider.

The deductible applies to both doctor and PPO hospital expenses, as well as all other related expenses that are covered under the Plan. The Dental Plan and Vision Plan have separate deductibles. Prescription drug, TIHN, out-of-network hospital and emergency room fixed co-payments do not count toward the Medical Plan deductible.

Prescription Drug Benefit "Specialty Tier"

Beginning July 1, 2003, certain prescription drugs will be classified in a new "Specialty Tier." Initially, this new classification will include non-sedating antihistamines and Viagra®. When purchased at a retail pharmacy (30-day supply), this new tier has a co-payment of 50 percent of the drug price or $40, whichever is greater. When these drugs are purchased through the mail order program (90-day supply), the co-payment is the greater of 50 percent of the drug price or $60. (Remember, Viagra is limited to 10 pills per month, so 30-day pharmacy prescriptions are for 10 pills, and 90-day mail order prescriptions are for 30 pills).

Why are non-sedating antihistamines being reclassified? In December 2002, Claritin® and Claritin-D® became available as over-the-counter medications, and as non-prescription drugs have not been covered since then. For now, other antihistamines (for example, Allegra®, Clarinex® and Zyrtec®) or antihistamine-decongestant medications (for example, Allegra-D® or Zyrtec-D®) still require a prescription. Based on this change in status, all prescription antihistamines and antihistamine-decongestant combination products will be covered under the more expensive specialty tier. Over-the-counter antihistamines (the Claritins) are not covered.

On a positive note, the Walgreens chain has agreed to rejoin our network of pharmacies. This means that when you present your Express Scripts card at Walgreens, you will receive the network discount on covered prescription drugs.

Retiree Coverage Premiums

Certified Retiree and Retiree Carry-Over coverage has been provided for retired participants who meet certain requirements for a nominal monthly premium. Effective July 1, the premium increases for Certified Retiree and Retiree Carry-Over coverage for individuals under age 65. The reason for increasing the under age 65 premium is because the Health Plan coordinates benefits with Medicare, where Medicare is the primary payer and the Plan is the secondary payer. As such, the Health Plan has approximately three times higher costs for non-Medicare retirees. The new monthly premiums will be:

New Monthly Premiums Chart - click image for larger view.

Using Your Retiree Carry-Over Credits

Beginning with benefit periods that start on January 1, 2004, Retiree Carry-Over credits may only be used by participants who are age 60 and over. Another new requirement is that effective on January 1, 2004, you must have completed at least 10 years of Earned Coverage under the Health Plan in order to utilize Retiree Carry-Over coverage. An exception has been made that retired participants on Retiree Carry-Over coverage prior to January 1, 2004 who are under age 60 or have less than 10 years of Earned Coverage may continue to use their Retiree Carry-Over credits.

The earnings requirement to earn a Retiree Carry-Over credit is also increasing. Effective with earnings periods ending September 30, 2003 and later, it will take $300,000 ($250,000 currently) of DGA-Covered Earnings in a 12-month earnings period in order to earn one Retiree Carry-Over credit. Retiree Carry-Over credits earned prior to that time are not affected by this change.

Special COBRA Rate for Dependent Children of Retirees

As we announced in December 2002, children of retirees will no longer be covered under the Health Plan effective July 1, 2003, except if the participant has coverage due to current earnings or contributions on residuals. When a child loses coverage, he or she will be offered COBRA continuation coverage, which allows continuation on a self-pay basis for up to 36 months. For retirees' children covered on July 1, 2003, we will offer such COBRA coverage at a special reduced premium rate for the 36-month COBRA period. The premium will be $180 per month for medical and $15 per month for dental, or a total premium of $195.

Health Plan Eligibility Changes Effective January 1, 2004

For coverage beginning January 1, 2004, the minimum earnings required to qualify for the DGA Choice Plan will increase from $27,900 to $28,700. This means that in order to qualify for DGA Choice Earned Coverage, you must earn a minimum of $28,700 during a 12-month period that can start on October 1, 2002, January 1, 2003, April 1, 2003 or July 1, 2003. Coverage begins three months after the close of the calendar quarter in which your earnings reach $28,700 and will continue for 12 consecutive months.

Earnings/Coverage Chart - click image for larger view.

Once you have established an eligibility earnings period, you must continue to earn the minimum in that same earnings period each year thereafter in order to continue coverage under the Plan. While the $28,700 requirement is the minimum amount needed to qualify for health benefits, contributions must be made for all covered earnings. The Health Plan's minimum earnings requirement generally increases each year based on increases in DGA minimums as designated in the collective bargaining agreements.

If you have questions regarding these benefit changes or how they affect you and your family, please call Participant Services at (323) 866-2200, option 1.
If you have questions about your health care benefits, contact:

DGA-Producer Health Plan Office
DGA-Producer Pension Plans
8436 West Third Street, Suite 900
Los Angeles, CA 90048-4189

Participant Services Department

  • Phone: (323) 866-2200 (Press 1 on Menu)
  • Toll-Free: (877) 866-2200 (Outside Los Angeles Area)
  • Fax: (323) 653-2375

Office Hours: 7:30 a.m.–5 p.m. Pacific Standard Time
Monday through Friday

To find out whether your doctor is a Blue Cross PPO: Go to http://www.bluecrossca.com/ and click on Provider Finder.
Or call Blue Cross of California: (800) 999-3643.
Special Health Care
Plan Meetings

Los Angeles

  • Monday, May 19, from 7 to 9 p.m.
    DGA Theatre 2
    7920 Sunset Blvd.
    Los Angeles, CA 90046

  • New York
     during DGA Annual Membership Meeting
    Thursday, May 29, 2003
    DGA Theatre
    110 W. 57th St.
    New York, NY 10019

To RSVP: call toll-free 800.474.0542
or 310.289.5329

Please leave your name and phone number and identify which meeting you plan to attend.
The Directors Guild of America-Producer Health Plan is a separate entity from the Guild. The Plan is administered by a Board of Trustees made up of Guild representatives and representatives for the Producers.
CHANGES TO DGA-PRODUCER HEALTH PLAN AT-A-GLANCE
Changes to Plan Effective July 1, 2003
New professional provider network in California

Network of providers will almost triple
California PPO network provider will switch from PHCS to Blue Cross. The PPO network outside of California will continue to be PHCS.
Adoption of two-tier plan

Virtually no difference if participants stay in-network; significant increases in out-of-pocket costs for out-of-network services

DGA Choice – if covered earnings are $27,900* – $89,999
  • Out-of-pocket maximums (after deductible) – $1,000 per person in-network/$7,500 per person out-of-network
  • 60% out-of-network co-insurance

DGA Premier Choice – if covered earnings are $90,000 or above

  • Out-of-pocket maximums (after deductible) – $1,000 per person in-network/$3,000 per person out-of-network
  • 70% out-of-network co-insurance
Prescription drug benefit – new specialty tier
Viagra and non-sedating antihistamines covered at 50% benefit, with $40 retail minimum co-payment; $60 mail order minimum co-payment
Increase in medical deductible for family

Increase in deductible for a family from $600 to $900; deductible for an individual remains at $300
Increase in Certified Retiree coverage premiums
  • Monthly premium of $100 (double for family) charged to Certified Retirees under age 65 on Certified Retiree coverage; and
  • Monthly premium of $100 charged to Surviving Spouses under age 65 on Certified Retiree coverage
New Retiree Carry-Over premiums
  • Monthly premium of $100 charged to retirees under age 65 (and Surviving Spouses under age 65) on RCO coverage;
  • Monthly premium equal to 1/2 of Certified Retiree premium charged to retirees 65 and over (and Surviving Spouses 65 and over) on RCO coverage
COBRA rate for dependent children of retirees
Move retirees' dependent children covered on July 1, 2003 to COBRA coverage with a rate of $195/month ($180 medical/$15 dental) and eliminate coverage of any future dependent children of retirees
Changes to Plan Effective October 1, 2003
New dependent premium

Addition of a $600 annual dependent premium. Premium covers all eligible dependents.
Changes to Plan Effective January 1, 2004
New requirements for Retiree Carry-Over credits

Retiree Carry-Over credits available for use after retirement only at age 60 and later, and only after attaining 10 years of Earned Coverage. Effective for eligibility periods ending September 30, 2003 and later, minimum earnings for RCO credits increased to $300,000.
Health Plan eligibility
*Minimum covered earnings to qualify for health plan coverage increases from $27,900 to $28,700.
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