PROVIDENCE – City officials and union leaders are headed to the bargaining table after a hearing yesterday in R.I. Supreme Court.

They are slated to meet Friday at 10:30 a.m. to begin seeking agreement on Providence’s plan to switch health-benefit administrators, according to Karen Southern, a spokeswoman for Mayor David N. Cicilline. She declined to comment further, telling Providence Business News that “both sides have agreed not to discuss the matter, at the request of the judge.”

At issue is which companies will provide administrative services for the City of Providence’s municipal and school health care and pharmacy benefit plans as of Jan. 1.

Although the city is self-insured, it hires an outside agency to administer its health and prescription plans and give it access to lower reimbursement rates.

Until now, those functions have been handled by the nonprofit Blue Cross & Blue Shield of Rhode Island. But the labor contracts with all but one of the city’s unions allow Providence to switch to a new administrator so long as it offers “equivalent services.” (The exception is the firefighters, whose lapsed contract is the subject of a bitter, years-long dispute.)

And in October, the City of Providence signed three-year deals with two companies: UnitedHealthcare of New England, the local unit of the Minnesota-based UnitedHealth Group (NYSE: UNH), to handle health-care benefits; and Caremark Pharmacy Services, the pharmacy-benefits management (PBM) division of Woonsocket-based CVS Caremark Corp. (NYSE: CVS), to handle the city’s prescription-drug plans.

Providence expects to save about $11 million under the new agreements, between network discounts offered by UnitedHealthcare and additional savings from plan changes the health insurer contends were previously negotiated with city labor unions but never implemented by Blue Cross. (READ MORE)

But city labor unions contend that Caremark and UnitedHealthcare won’t be offering “equivalent” benefits. So they asked the courts to force the city into binding arbitration.

This Monday, an R.I. Superior Court judge ruled that Providence cannot change benefits administrators without negotiation and issued a temporary restraining order against the city. (READ MORE) City officials immediately appealed that ruling to the state Supreme Court.

The dispute affects benefit plans for about 5,000 Providence school and municipal employees, 4,500 retirees and their covered family members.

It also affects city coffers, which Cicilline this week said will lose $58,000 per week in missed savings so long as the new agreements are delayed. Those figures are disputed, however, by BCBSRI President and CEO James E. Purcell, who said that his company’s bid “is a better economic deal for the city.”

News and information from the City of Providence are available at www.ProvidenceRI.com. Information about the R.I. Supreme Court, the R.I. Superior Courts and their actions is available from the R.I. Administrative Office of State Courts at www.courts.ri.gov.