Negotiators hoping to forge a new contract for dockworkers and keep hundreds of billions of dollars in cargo moving smoothly through West Coast seaports made significant progress with a tentative deal on health care benefits, a knotty issue that tied up talks for months.
West Coast dockworkers already have unusually generous health benefits — so generous, argue their employers who pay for the coverage, that the insurance plan has become riddled with fraud.
Doctors and clinics have bilked the health plan of tens of millions of dollars, according to the Pacific Maritime Association, which first made the claim a year ago based on a review of thousands of invoices submitted by medical providers.
During contract talks, the association focused on limiting fraud as a way to reduce an impending tax on high-end health plans. Under the Affordable Care Act, if current costs hold, dockworkers' employers would be on the hook for about $32 million in new taxes each year starting in 2018. The tax hit would be higher if medical costs rise, as they typically do.
Employers paid $461 million to cover 13,800 dockworkers and their families in 2013, or about $33,400 per plan, according to an analysis of publicly available data.
Dockworkers have complained that the focus on eliminating fraud has blocked the payment of legitimate claims, and as a result they have to pay thousands of dollars out of pocket while waiting for reimbursements.
Leaders of the International Longshore and Warehouse Union have said the maritime association exaggerated the rate of fraud to gain leverage in negotiations, possibly to trim benefits.
The tentative agreement on health care was announced Tuesday evening but no details were disclosed. To reach a deal, union leaders would have to be satisfied that benefits would be maintained while employers would need to conclude that costs could be contained.
An overall contract agreement depends on the resolution of other issues involving pay, job security and workplace safety.
The contract covers workers at 29 ports from San Diego to Seattle that are a key trade link with Asia. The West Coast waterfront has a history of strikes and lockouts, though during negotiations this year both sides have said they want to avoid further unrest.
Still, worries about possible work slowdowns prompted some importers to divert shipments to East Coast ports. That trend apparently will continue until the union and maritime association reach a final deal.
"Companies will continue to utilize contingency planning until a new contract is achieved to ensure they are able to get their products to market," said Jonathan Gold, a supply chain specialist with the National Retail Federation.
Health care has been the dominant issue so far in the talks, which began in May and continued after the contract expired July 1.
Fraud concerns came into sharp focus last month, when a federal grand jury in California indicted three people on allegations involving a $50 million scheme to swindle health plans, including the one covering dockworkers.
Prosecutors allege that clinics performed hundreds of medically unnecessary procedures such as colonoscopies on patients who then received free or discounted tummy tucks, nose jobs, liposuction or breast enhancements.
The Associated Press found evidence of two other federal investigations into clinics that treat dockworkers.
Last year, Department of Labor and FBI agents raided or seized assets of those clinics, one of which was founded by union members. The clinics were based in or near Los Angeles and Long Beach, the two cities with the West Coast's largest ports.
Contact Justin Pritchard at https://twitter.com/lalanewsman .