New requirements to take effect after 2003

HOLLYWOOD — Already facing a serious pinch on health costs, Hollywood actors have been told to expect an even bigger squeeze next year.

Skyrocketing medical costs have battered the actors’ health care plan — jointly administered by SAG and the Hollywood studios — and forced trustees to announce a second round of tightened eligibility and benefit reductions following the initial announcement in August 2001.

Move was not unexpected, coming five months after SAG members were warned by plan administrators that such cuts would be required to keep the plan from running out of money.

“While last year’s changes were a step in the right direction, it is now clear that additional changes are required to preserve the financial integrity of the plan,” said the plan’s Take 2 newsletter, sent out this week to participants. “If these additional changes were not made now, the plan would be in jeopardy of depleting its assets within two years.”

The notification cited double-digit increases in medical costs, a weak economy, continuing impact of last year’s terrorist attacks and flat income. And it noted that many Americans are being asked to pay more for coverage despite flat income.

The plan had announced in April that the 2001 deficit had totaled $22 million and had projected a 2002 deficit of $34 million. Plan administrator Bruce Dow said Thursday that this year’s deficit could go higher.

The changes go into effect Jan. 1 through the next five years. Key shifts include first-ever premiums for actors who earn enough to qualify for the plan; significant boosts in the minimum annual earnings required to qualify; and reductions in coverage levels and allowable expenses.

Dow said the changes were designed to hit most parts of the plan in order to spread out the financial impact as equally as possible among participant groups. He also asserted that a third round of tightening will not be necessary for several more years.

“We are confident the actions we’ve taken will put us on positive footing,” Dow said.

The plan’s first step last year was to tighten eligibility this year for the self-pay program and to raise earnings requirements to qualify for coverage in 2003. Qualification for Plan I, which requires $15,000 in annual earnings, was set last year to jump 33% to $20,000 in 2003 and rise to $26,000 in 2007; eligibility for Plan II, which has a $7,500 income threshold, was set last year to jump 20% to $9,000 in 2003 to $11,000 in 2007.

The new requirements for 2003 remain unchanged but requirements for subsequent years have been significantly boosted, with Plan I eligibility threshold now set to hit $30,100 in 2007 while Plan II will require $15,050 or 82 days of employment that year.

Among dozens of other changes, shifts include elimination of dependent student eligibility; elimination of partial Medicare Part B premium reimbursement for seniors; no orthodontia or supplemental disability coverage; and elimination of the $35 per prescription limit on out-of-pocket expenses for drugs bought at a retail pharmacy.

During 2001, the plan paid benefits to 32,399 actors and covered 62,500 individuals with 699,500 claims processed. The trustees also announced tightened requirements for the pension plan, under which about 7,300 individuals were paid a monthly benefit last year.

“While the plan’s investment strategy is sound and its benefits are well funded, the plan has felt the impact of recent market losses,” the notification said. “In addition, contribution income has been relatively flat.”

The changes, set for Jan. 1, boost the annual earnings required to earn a pension credit from $10,000 to $15,000; kick up the number of days required to earning an alternative credit from 60 to 70 days; and eliminate “grandfather” provisions allowing some participants to earn credit at $5,000 and $7,500 a year. The plan noted that the changes don’t affect benefits of those currently receiving a pension.

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