More on the War on Older City Retirees and the Tsunami of Health Insurance Costs for NYC

In the middle of the City's war on Medicare city retirees and their inexpensive and high quality health insurance, the City is being hit by a tidal wave of rising health insurance for its employees and younger retirees.

In FY-2014 the City spent $5.0B on health insurance. In FY-2018 it spent $6.9B. In FY-2022 it spent $8.7B. In three years, that amount could easily be $12.0B surpassing pension costs.

On a more personal level, the annual cost for family coverage for the basic health insurance plan for employees and younger retirees has exploded over the last 25 years as outlined in the table below:

Annual Costs for Family Health Insurance Coverage 1997-2022

Date	Annual GHI-CBP Cost	Annual HIP-HMO cost
July 1, 1997	$4,601.53	$4,356.00
Jan 1, 2006	$8,986.12	$8,687.76
July 1, 2011	$13,791.41	$15,391.06
July 1, 2013	$14,330.82	$17,607.41
July 1, 2014	$15,838.00	$17,826.94
July 1, 2015	$16,933.29	$18,358.94
July 1, 2016	$17,997.88	$19,241.18
July 1, 2017	$19,603.88	$20,749.53
July 1, 2018	$19,603.88	$22,236.35
July 1, 2019	$21,485.88	$23,106.35
July 1, 2021	$26,904.59	$25,306.12
July 1, 2022	$26,904.59	$27,250.12
Oct 1, 2022	$29,577.53	$27,057.06

In contrast, over the 25 year period from 1997 to 2022 the City's annual cost per Medicare retiree's supplemental insurance has risen from $1,063.76 to $2,388.82.

Loss of Coverage

On top of these increases, the level of coverage has decreased. In addition to the introduction of copays for both HIP-HMO and GHI-CBP, many doctors have been deciding to stop accepting payment from GHI because of the plan's deficient payment for services. GHI is the main plan for employees and younger retirees. Based on documents from OLR 73% of employees/retirees use GHI while 19% use HIP. Both plans are run by Emblemhealth. Another drawback is that employees who work or live outside the NYC metro area very often have to sign up for plans with added premiums to get coverage where they live.

Response

Up until now the City has not addressed the macro problem. It has dicked around the edges but has not challenged Emblemhealth to provide better coverage at less cost. Why not?

In FY-2022 the City paid Emblemhealth $8.4B out a total of the $8.7B total of its health insurance costs, not including the payments to Emblemhealth for prescription drugs coverage. Drug coverage is paid by many employees out of their paychecks or by the unions out of their welfare funds.

It is not clear whether the cost explosion is Emblemhealth's fault or the general cost of health care. I suspect that a new insurance vendor will not solve the problem. I suspect that every US employer is facing this problem.

Consolidating with the New York State government health insurance plan may help somewhat but the scale of this problem appears to demand a national solution.

How CMS-Medicare Could Help

CMS is the largest payor of health care costs in the US. It is highly efficient in making these payments. That is why most doctors accept Medicare patients.

Maybe the City could enter into an agreement with CMS to make payments for City employees and non-Medicare retirees, and in turn the City reimburse CMS for the payments plus administrative costs.

Structurally, CMS pays 80% of its scheduled fees for medical services to Medicare enrolled persons. The City could agree to reimburse 100% of scheduled fees to satisfy its Section 12-126 obligation. Or it could get an agreement with all from all parties to a lower percentage and change the benchmark in Section 12-126 to a percentage of the CMS fee schedule instead of the current private sector benchmark.

This would eliminate the insurance company overhead/profit, improve coverage, and expand the number of care providers.

In the long term, hopefully, CMS will be able to constrain the rise in health care costs for everyone. Health care is not a free market.

Note

City managerial employees/retirees pay for their drug coverage. The City should push for employees/retires to also pay for their drug coverage on an income scale basis in place of the City funded union welfare funds.

Medicare Advantage: Attack on Medicare

Because of the City's attempt to cut and run on health insurance benefits for NYC retirees, I've started to do research on Medicare and Medicare Advantage (MA) programs.

By statute New York City is required to pay the entire cost for the health insurance of its workers, retirees and their dependents with an upper limit equal to the cost of HIP-HMO plans. Prior to reaching age 65 the basic cost of that insurance is $775 per month for each worker or retiree. If the worker or retiree has a family, the cost is $2,035 per month. These amounts are current as of FY-2021. Interestingly, city workers and retirees have to pay for their own drug coverage.

When the retiree reaches age 65, the retiree becomes eligible for Medicare and is required to enroll in Medicare. The City then only has to pay the cost of Medicare Supplemental (Medigap) insurance ($194.14 per month). Medigap insurance, GHI Senior Care, covers the 20% of costs that traditional Medicare does not pay. There are some other plans available at 65. You can more info in the Actuary's report

The City is also required by statue to refund to the retiree the Medicare Part B monthly premiums ($146.97 as of 2021) that the retiree must pay for Part B Medicare coverage. If the Medicare retiree still has younger family members that are entitled to paid health insurance, I strongly suspect that the City doesn't need to pay the $194.14 per month because the City is still paying the $2,035 per month family premium to Emblemhealth GHI.

NYC Eligible Retirees - Traditional Medicare With Secondary Medigap insurance

Medicare is a federal benefit that workers and retirees pay taxes for. Retirees have paid into the Medicare system for their entire careers with all employers that they worked for whether or not they it was the City. The City has no right to this benefit.

The current health insurance arrangement for NYC retirees requires the retirees to register with Medicare when they turn 65 and to notify OLR that they are now being covered by Medicare. Then based on the plans offered by OLR, the retiree picks which secondary insurance that they want. The vast majority of retirees pick GHI Senior Care. This is a Medicare Supplement insurance (Medigap) plan.

Medigap plans are run by private insurance companies and are required to conform to structures defined by Medicare. In New York State these plans are subject to oversight by the NYS Department of Financial Services. It appears that GHI Senior Care is a Type A Medigap plan based on its cost. OLR has never been very transparent about this whole process. Needless to stay it is the cheapest plan available. FYI: There are 10 Medigap plans defined by Medicare.

In spite of the limits of GHI Senior Care and the cost of drug coverage, city retirees after age 65 have excellent health covereage at a very reasonable cost.

The Medicare Advantage Invasion - Private Sector Insurance

From my reasech it is clear that for many years the health insurance industry has been attempting to infiltrate the successful government Medicare payment system. Medicare Advantage is the program that allows private insurance to accomplish this infiltration.

CMS is the federal government agency that administers Medicare and pays the bills for Medicare eligible retirees health costs. CMS pays the bills directly for traditional Medicare and funds the insurance companies when the retiree has elected a Medicare Advantage plan. The name Medicare Advantage is a marketing ploy. This is a private insurance plan.

This attack on Medicare is driven by greed and survival. The insurance companies very quickly realized that Medicare, passed in 1965, was going to over take their business model because of it effectiveness and the fact that they were being completely left out of the payment cycle of health costs for retirees.

The insurance companies knew that they had to get into the payment cycle between CMS and retirees so that they can get a cut of the action. We are talking about private companies getting a significant potion of the taxes paid by workers and retirees over their careers and into retirement for their health care.

Even with Medicare Advantage retirees most still pay Medicare Part B premiums out of their Social Security checks. They may also have to pay a premium to the MA insurance company even though some MA plans have no premiums.

In traditional Medicare, CMS pays 80% of a retiree's Medicare approved health costs. It spends only 2% of its expenses on administrative costs.

In a MA plan, the MA insurance company uses money that CMS allocates to the company to pay retireess' health care costs. That amount is based on the number and the health status of retirees enrolled in its plan. In the NY area, that amount is roughly $1,100 per month per eligible retiree. The company is allegedly required to pay out 85% of that amount to cover 100% of retiree's Medicare approved health costs. They can keep the rest to cover costs and profit.

Assuming a 10% profit margin, the new Emblemhealth/Blue Cross Medicare Advantage plan will clear $110 per month per captured retiree. That is $198M per year if the City can deliver 150,000 retirees. Not bad for an inferior product. You start to get very suspicious when there is this much money floating around.

Sounds like a win/win deal? The MA process is supposed to be better than the one run by CMS but you kind of know it isn't.

The MA system doesn't work as straight forwardly as the traditional Medicare plan run by CMS. Insurance companies must make a profit or they go out of business. So how do they make 80% cover 100% of costs. They inflate adjusted payments from CMS for each retiree by claiming that the retiree has significant health problems, they reduce and delay payments to doctors and hospitals, and they charge retirees for unapproved costs and copays. 

The key to this strategy is that the insurance company takes control of the decision process of what medical treatment retirees receive and what actual payments are made to doctors and hospital. This puts the retiree at the mercy of the insurance company. If you are healthy, this generally is not a problem. If, however, you have serious health issues which many retirees do, you will problems. Problems which will very often force you back into traditional Medicare and maybe without the option of an affordable Medigap insurance plan.

The Attack is Getting More Intense

As you can read in the following critique, private interests are increasing their attacks on Medicare. This stuff is frightening and I suspect is a residue of the Trump administration.

Another threat is involuntary auto enrollment into a MA plan. Without the forced enrollment the City's Medicare Advantage plan would get only a trivial number of voluntary enrollees and none if the City had not reneged on its commitment to pay for Medigap insurance.

Conclusion

The City and the leaders of major unions agreed to degrade retirees and workers Medicare benefits to funnel the savings into the unions' welfare funds. I suspect that when workers get a clear understanding of this betrayal, these leaders will be in for a reckoning.

Assuming a 10% profit and 150,000 captured retirees, Emblemhealth stands to increase its annual profit from $34.92M to $198.00M by shifting from Senior Care to the Medicare Advanatage plan.

Who do you think was pushing for this plan? Not the workers and retirees!