Writers attempt to revise health benefits in new pact.

Rising health care costs have emerged as a likely haggling point in talks that began last week between film and TV writers and Hollywood producers.

Since signing its last contract three years ago, the Writers Guild of America has shouldered sharp increases in the cost of medical insurance.

In January 2003, the WGA raised the income eligibility level for coverage, leaving 477 of the union's 11,000 members without union-sponsored coverage. The WGA had already trimmed $18 million per year in costs from the system without funding from the studios and networks.

The guild administers its health care fund with per-project contributions from producers, studios and networks, which are represented by the Alliance of Motion Picture and Television Producers.

In the current contract, producers pay health benefits of 7.5 percent of the first $200,000 in writers' tees on a project. In the new contract, the WGA wants them to contribute a higher amount, although union officials won't say how much.

WGA negotiators say that if they can't get the producers to increase their contributions, they will strike. The current contract expires on May 2.

"We've made sacrifices and they've been really painful," said Dan Petrie Jr., president WGA West in Los Angeles. "We did it because the health plan is the most important thing to us and we wanted to keep that plan healthy. We've carried the burden of doing that completely so far. Now we expect our management partners to pony up."

Barbara Brogliatti, a spokeswoman for the producers' alliance, declined to discuss health care or other specific issues.

"We are all looking for a mutually satisfying contract and we're hoping for the best," she said. "We're not going to characterize anything. We're going to negotiate it at the table and not in the press."

Winter of upheaval

The talks, which began on April 5, follow a winter of upheaval at the guild. First, Victoria Riskin resigned as president after it was discovered she had not written enough scripts to qualify for re-election. Her replacement, Charles Holland, was found to have embellished his military and college athletic record, and he resigned, too.

The guild's board in late January appointed Petrie, who served as WGA president from 199799. New elections will be held this September, a year before they would otherwise be scheduled.

Among other issues in the contract talks are DVD and VHS sales and rentals. This segment of the industry generates $22 billion in annual revenue, but studios contend that the profits offset losses from movies.

Studios allocate 80 percent of DVD sales to manufacturing and distribution costs, but writers say they are lower, citing a 2004 Merrill Lynch report that states the studios retain 65 percent of the sales.

Writers get a portion of licensing tees, not sales, and WGA negotiators are trying to get studios to increase their share. "Our formula in this area is grossly out of whack," Petrie said.

WGA officials also want to bring screenwriters on reality shows into the guild, claiming that scenes are scripted to dictate where and when the participants are located.

But as with other industries, it's health care that's getting much of the attention.

Costs have risen 11 percent annually in recent years, guild officials say, while the cap on producer contributions hasn't changed in two decades.

In January 2003, the WGA raised the annual earnings required to qualify for health benefits to $28,500, the minimum fee for a script for an hour-long television show. Previously, the minimum had been $19,500, the fee for a half hour script.

WGA members using the health benefit were also required to kick in a half-percent of their income on top of their regular fees in the past two years to keep the fund healthy.

"We had never done that," said John McLean, WGA's board chairman and chief negotiator. "'We ended up doing that and we still had to make some cuts to make sure that the plan was cash- flow positive."

While producers won't talk about their bargaining stance, they signaled their approach at a background-only press conference on March 30, where they maintained that studios and networks are not as profitable as labor negotiators believe.

The consortium cited a report by Motion Picture Association of America President Jack Valenti showing the average cost to produce and market a film totaled $102.9 million in 2003--the first time the figure topped $100 million. Studios say most of those pictures fail to generate a profit.

The outcome of the WGA contract will likely influence next year's talks between producers and other creative artists, where health care is likely to be a source of contention.

The Directors Guild of America, Screen Actors Guild and the American Federal of Television and Radio Artists all have contracts expiring in June 2005. SAG wants to begin early talks in October, and the DGA wants to start in December.

SAG officials acknowledge that their health fund is running at a deficit. SAG last year had to raise its annual eligibility earnings minimum for families to $13,000 from $9,000 on its regular plan and $26,000 from $20,000 for its extended plans, forcing several thousand members to drop coverage.

Dramatic Tension

Major issues in talks between writers and producers.

Writers Guild of America

* More producer contributions needed toward health care benefits

* Revise royalty agreement for DVD and video sales and rentals

* Ability to represent all writers on "reality" and animation shows

Alliance of Motion Picture and Television Producers

* Movies are not as profitable as writers believe

* DVD and video revenues make up for losses in theaters

* Reality and animated shows are not scripted with dialogue