NEW ALBANY — Leaders of the New Albany police and fire unions stated Wednesday that a replacement insurance plan being offered by the city for its employees is a violation of their contracts with the city.

The plan through Humana — separate from the Health Savings Account, or HSA, option also being tendered by the city — resulted in a 1.1 percent premium increase for participants. But to keep the up front costs down, out-of-pocket expenses including deductibles were raised as initially the premium hike was larger.

According to Paul Haub, president of Fraternal Order of Police Lodge 99, unions have a deal that insurance benefits must be the same or better as a previous option if a plan changes.

Haub said co-pays, for example, are a benefit and are being raised through the new option which breaches the contract.

“We don’t want a grievance filed at this point, we do want to reserve the right” to do so at a later date if necessary, Haub said.

The tipping point centers around the 2010 budget shortfall for public safety, which equates to about $1.8 million. The City Council hasn’t taken action yet on mending the gap in the general fund.

“Right now so many things are dependent on how this budget situation gets worked out — how the council decides to make up that budget shortage,” Haub said.

Fire union President Bob Mann generally referred to the insurance as “a pure contract violation,”  but declined to comment further on the replacement plan referring questions to the organization’s attorney, Keith Karlson based in Chicago.

“If the city unilaterally changes benefits in a negative manner it will violate the contract,” Karlson said.

“If the city is so eager to negotiate a change in health care benefits, this seems like an excellent time to show up at the bargaining table — the union has been waiting for a long time for that to happen.”

Mann did add that it’s an important issue because the coverage is being offered to all city employees, not just firefighters or police officers.

The “firefighter’s contract doesn’t just protect firefighters, it essentially protects every employee in the city of New Albany,” he said.

City Attorney Shane Gibson said he is aware of the unions’ opinion on the benefits for the insurance replacement proposal.

“I don’t think there’s a huge disagreement,” he said.

Gibson added he understands the unions may need to file grievances in case negotiations sour, or the HSA plan isn’t widely accepted.

But he said the city is wiling to work with the unions for a positive outcome.

The option being disputed is a more traditional plan than the HSA option being touted by Mayor Doug England’s administration as a possible remedy to the deficit in the general fund.

Officials are hopeful that 75 percent of city workers will sign-up for an HSA plan for 2011 and 85 percent in 2012 as a way to balance the general fund which has been in the negative since 2003.

The plan emerged in August, and Haub said he understands the concerns of union members that feel the HSA option is being pushed on them.

“But I think that looking at it objectively, health care is a big part of the city’s budget,” he said.

Garnering 70 to 80 percent participation by police union members is a reasonable goal because HSA’s can potentially save clients money, Haub said.

“We have to educate them and teach them how it works to the point where every single union member, every single city employee understands how a HSA works,” he said.

Gibson said city representatives will ramp up meetings with union members over the next two weeks to provide more information about the HSA option.

Mann said he can’t estimate how many fire union members would take the HSA option because they haven’t met face-to-face with Humana. The city’s insurance agent, Maverick Insurance, has met with the union but Mann said they want information from the actual provider.

“This is a Humana plan, get us some Humana representatives in here and explain to us how this works,” he said.

Mann added the union agreed to switch from allowing four firefighters to three off per shift beginning next year to cut overtime costs, but said the city has yet to sign the deal.

Even after a one-time stipend is deposited into the accounts of employees that take the HSA plan for 2011, administration officials are estimating the city would save $450,000 next year figuring 75 percent of workers take the option.

The incentives for workers switching to an HSA would cost New Albany about $260,000 next year. The city spent about $4.3 million for various medical insurance plans this year with most employees paying 10 percent of premium costs.

Haub said a move by the council to bridge the $1.8 million public safety funding gap would likely encourage more police union members to consider the HSA option.

“Obviously that would shed a positive light on the whole thing in regards to our ability to cooperate with [the council and administration] for the insurance issue,” he said.

The police department’s share of this year’s shortfall is about $500,000.