NYC - Exploding Costs for Employees Health Insurance

In the June 6th, 2025 issue of the Chief, the New York City announced the start of negotiations with EmblemHealth/UnitedHealthcare for a new health insurance plan for employees and non-Medicare retirees.

Warning: United Healthcare is being investigated by the federal government for Medicare/Medicaid fraud ae per a WSJ article May 15, 2025.

The City's current carrier is EmblemHealth/Anthem-Empire Blue Cross. The City will still be using EmblemHealth but has changed from Anthem to UnitedHealthcare for hospital coverage.

Current Cost Problems

It is clear from the chart below (based on NYC-OLR data) that the City has a serious cost inflation problem with the current EmblemHealth insurance coverage. It is, however, not clear whether this is an industry problem or is it a problem made worse by EmblemHealth's operations. In either case the City has an exploding cost problem.

Another scary piece of data is that it appears that Emblemhealth is almost totally dependent on the City for revenues.

EmblemHealth had reported premium revnue of:

• $8.33B in 2022 and
• $7.726B in 2023.

See report on page 6.

The City (plus HHC and Housing) paid EmblemHealth (GHI and HIP) $9,678M in FY-2024 as per OLR's reporting.

The primary problem with the NYC GHI-CBP health insurance plan for employees and non-Medicare retirees is increasing costs.

• In 2014 the City paid $3.416 billion in premiums for GHI-CBP and
  
• in 2024 that amount had increased to $7.927 billion.

That is an 113% increase over 11 years with a 13,000 decrease in employees and an increase of 5,000 in non-Medicare retirees.

Medicare vs EmblemHeath

In contrast to EmblemHealth, in 2015 Medicare spent $10,581 for both Part A plus Part B benefits per beneficiary and in 2023 Medicare spent $14,253 per beneficiary.

That is a 34.7% increase. (2024 Medicare Trustees Report – page 195).

As of the 2015 - 2023 period, the City’s total cost for GHI-CBP was $3.772 billion in 2015 and $6.861 billion in 2023.

That is an 81.9% increase.

In addition to lower cost increases, Medicare is a more effective plan than GHI-CBP and covers a higher risk population.

It would be very interesting if Medicare were able to administer the health claims for the City's employees and non-Medicare retirees and the City reimbursed Medicare.

The Participation Problem

There is also a secondary problem of a shrinking group of participating doctors and hospitals:

• In the NYC metro area
• In the rest of the USA.

I assume these issues are tied into the reimbursement schedules and operating problems between providers and Emblemhealth.

Over the last 11 years the City has obviously not been able to resolve this cost issue between the City and Emblemhealth and it is not clear how the City can resolve it now.

Employers Should Hire Medicare to Manage Health Insurance Benefits

Proposal

Major employers who want to provide health insurance to their employees should seriously consider pushing for a process to enable Medicare to manage paying the medical bills for their employees and then have the employer reimburse Medicare for the charges with a 3% administrative charge. The employer can choose to cover the full cost or have the employees contribute part of the cost.

Medicare is accepted by most doctors and hospitals all over the United States. In my opinion Medicare is arguably the best health insurance in the US even at 80% coverage. The non covered 20% can be purchased at approximately $200 per month. There are no pre-approval obstacles for needed treatments. Medicare has a good reputation for paying promptly. And the reimbursements to Medicare would be significantly lower than the payments for commercial health insurance. The trend line for Medicare annual cost increases is much lower than commercial insurance.

Annual Medical Cost Data for NYC Employees and Retirees

I recently posted a note outlining the increased cost for health insurance for NYC employees and retirees for the FY-2014 to FY-2023 period. I have done further analysis on the cost data from OLR for the period from 2014 to 2024 period.

Using the GHI charge for Senior Care (20% of the amount paid by Medicare) the health insurance cost for the average Medicare retiree & family in FY-2014 was $12,999 based on the $2,599 payment to Senior Care.

The full cost in FY-2024 was $16,404 based on the $3,280 payment to Senior Care. That was a 26% increase over ten years.

In contrast, the cost for the average employee and family was $10,949 in FY-2014 and $24,325 in FY-2024 (GHI coverage). That is a 122% increase over ten years

The cost of the average non-Medicare retiree and family was $13,080 in FY-2014 and $28,539 in FY-2024 (GHI coverage). That is a 118% increase over ten years.

Medicare retirees usually have more health benefit claims than employees but have smaller families. So, the levels of claims are probably very comparable but not the costs. EmblemHeath administers GHI coverage for NYC. NYC pays EmblemHeath 96% of its $8.4B annual health insurance costs.

Recap

NYC Average Annual Health Insurance Costs

	FY-2014	FY- 2024	% increase over 10 years
Senior Care Costs (20%)	$2,599	$3,280	26%
100% Medicare Retiree Costs	$12,999	$16,404	26%
Employee Costs	$10,949	$24,325	122%
Non- Medicare Retiree	$13,080	$28,539	118%

Reality Finally Caught Up With the NYCERS Budget: FY-2004 to FY-2025

In a June 17, 2022 posting, I outined the history of NYCERS administrative budget.

On May 9, 2024, the NYCERS trustess adopted the FY-2025 admin budget.

It was a 0.05% increase over the FY-2023 budget. See the updated table below. The City finally put the brakes on the NYCERS administrative budget.

Interestingly, the fringe benefit amount increased by 20.74% from the FY-2024 amount. In a very contrary way, NYCERS has significantly underspent its budget appropriation since 2019:

• 2023 - $105.8M
• 2022 - $105.0M
• 2021 - $84.4M
• 2020 - $77.7M

History of NYCERS Admin Budget 1996-2025

Fiscal Year	F/T Count	P/T Count	College Aides / Hourly	PS Budget	OTPS Budget	Fringe	Total	% Increase
2025	501	30	16	$53,679,194	$95,900,865	$16,461,953	$166,042,012	00.05%
2024	501	30	16	$54,290,508	$98,040,138	$13,633,903	$165,964,549	13.37%
2023	485	30	16	$43,016,089	$90,436,500	$12,942,144	$146,394,733	7.92%
2022	483	30	16	$38,397,943	$85,531,063	$11,719,465	$135,648,471	37.94%
2021	474	27	16	$36,842,549	$50,210,145	$11,283,945	$98,336,639	7.10%
2020	438	27	16	$35,262,139	$45,862,557	$10,689,350	$91,814,046	4.97%
2019	428	5	30	$33,592,612	$43,532,302	$10,344,565	$87,469,479	39.44%
2018	415	5	30	$31,704,410	$21,832,718	$9,194,015	$62,731,143	3.55%
2017	401	5	30	$31,056,080	$20,916,796	$8,605,288	$60,578,164	4.81%
2016	392	5	30	$30,233,989	$19,407,619	$8,155,517	$57,797,125	4.70%
2015	392	5	30	$29,131,972	$18,154,572	$7,915,476	$55,202,020	3.68%
2014	383	5	30	$26,813,635	$18,761,240	$7,669,819	$53,244,694	2.18%
2013	380	5	20	$26,623,635	$17,951,822	$7,532,499	$52,107,956	1.93%
2012	372	12	0	$25,756,827	$18,781,428	$6,603,649	$51,122,139	1.14%
2011	372	12	0	$26,046,827	$18,492,228	$6,006,573	$50,545,628	2.76%
2010	372	12	0	$26,046,827	$17,777,228	$5,362,640	$49,186,695	1.88%
2009	371	13	0	$25,189,842	$18,208,861	$4,879,903	$48,278,606	6.22%
2008	371	13	0	$23,597,857	$17,259,313	$4,799,066	$45,656,236	10.80%
2007	364	13	0	$22,616,783	$14,258,471	$4,375,788	$41,251,042	5.73%
2006	342	13	0	$20,255,911	$14,683,855	$4,076,823	$39,016,589	1.01%
2005	342	13	0	$19,737,687	$14,851,355	$3,887,624	$38,476,666	***
2004	334	13	0					***
***								***
1996	154	0	30	$6,199,709	$2,573,715	na	$8,773,424	***

History: Health Insurance Costs for NYC Employees and Retirees for FY-2023 and FY-2014

Based on reports from the NYC Office of Labor Relations, NYC spent the following amounts on helath insurance for FY-2023 and FY-2014.

The amounts do not include payment for the Housing Authority (HA) or the Health and Hospitals Corp. (HHC).
It also does not include payments to retirees for refunds of Part B premiums that the retirees pay to Medicare every month (est. $415M from City funds for FY-2023).

Health Insurance Costs

Group	FY-2023		FY-2014
Employees	$5.580B		$3.009B
Non-Medicare Retirees	$1.619B		$0.787B
Medicare Retirees	$0.452B		$0.357B
Total	$7.651B		$4.152B

It is clear that the City's costs for health insurance are rising. But what the City doesn't make clear is that it is the costs for employees and non-Medicare retirees that have gone up significantly. While the costs for Medicare retirees has increased $100M over ten years, the number of Medicare retirees increased by 22,400.

Average annual cost per contract:

• Employees
  • 2014 -- $10,862
  • 2023 -- $21,107
• Non-Medicare Retirees
  • 2014 -- $13,271
  • 2023 -- $25,571
• Medicare Retirees
  • 2014 -- $2,550
  • 2023 -- $2,840

Number of Contracts including HHC and HA

Group	FY-2023		FY-2014
Employees	325,434		335,381
Non-Medicare Retirees	76,376		71,434
Medicare Retirees	191,536		168,657
Total	593,346		575,472

Emblemhealth

In 2005, GHI and HIP merged to form Emblemhealth. In FY-2023, the City paid 96% of its health insurance costs to Embelemhealth ($7,488 out of $7,651).

Average annual cost for GHI anf HIP per contract including HHC and HA:

• Employees
  • GHI
    • 2014 -- $10,949
    • 2023 -- $22,616
  • HIP
    • 2014 -- $10,517
    • 2023 -- $17,913
• Non-Medicare Retirees
  • GHI
    • 2014 -- $13,080
    • 2023 -- $26,546
  • HIP
    • 2014 -- $14,140
    • 2023 -- $20,266
• Medicare Retirees
  • GHI
    • 2014 -- $2,599
    • 2023 -- $3,277
  • HIP
    • 2014 -- $2,318
    • 2023 -- $129

The $129 amount is not a typo. In 2022, Emblemhealth changed the monthly amount per contract for the HIP Mediacre Advantage coverge to $7.50. Why? I suspect that it was because of competitive pressure.

How to Do Investment Fees the Right Way - TRS and Its TDA Fund

TRS is one one the five NYC pension funds, the one that covers NYC teachers. Actually TRS is two funds, a defined benefit fund (DB) and a defined contribution fund (DC). TRS calls its DC fund the TDA Program. The TDA program is funded by payroll deductions (approximately $1.0B/year) from the teachers. This fund is teachers' money, not tax payers' money. Well not really. The DB fund guareantees a 8.25% and 7% rate of return on fixed income assests in the TDA fund. But that is another story for another day.

The following list is the closing balances of the two funds as of June 30th of following years:

• Year - DB Fund - TDA Fund
• 2020 -- $59.3B -- $37.0B
• 2021 -- $78.3B -- $43.0B
• 2022 -- $64.0B -- $42.2B
• 2023 -- $67.9B -- $45.4B

You can see from the numbers that the TDA fund runs a tighter ship than the DB fund. The TDA fund grew by 22.7% over the three years while the DB fund only grew by 14.5%. Eeven though the TDA rate of return is is impressive compared to the DC fund, what rally is superhuman is the investment fees that the TDA fund pays versus the DC fund. See the fees for the two funds over the four years listed below:

• Years - DB Fund - TDA Fund
• 2020 -- $290.8M -- $0.6M
• 2021 -- $405.7M -- $13.7M
• 2022 -- $535.3M -- $24.2M
• 2023 -- $518.9M -- $11.2M

How does the TDA spend so little on fees and does so much better that the DB fund???

Court Stay for Retirees Fighting the City's Medicare Advantage Scam

On July 7, 2023, the trial court issued a stay stopping the City from terminating Medicare supplemental insurance, Senior Care, for 139,442 city retirees on Medicare and their estimated 50,000 spouses. As part of the termination the City is jamming these retirees and their spouses into a private Medicare Advantage insurance plan offered by Aetna.

The following is a reported response to the stay from the Mayor:

Mayor Eric Adams’ office said the city is considering appealing the injunction. “We are extremely disappointed by this misguided ruling,” it said in a statement. “The city’s Medicare Advantage plan, which was negotiated in close partnership with the Municipal Labor Committee, improves upon retirees’ current plans, including offering a lower deductible, a cap on out-of-pocket expenses, and new benefits, like transportation, fitness programs, and wellness incentives. Further delay in implementing it will only cause greater uncertainty for our retirees and have a detrimental impact on our city’s budget.”

The statement is at best misleading. The mayor and the Municipal Labor Committee did collude to deprive Medicare eligible retirees of health benefits that have been in place since 1966 since the start of Medicare. The fight over which plan is better is something that the Mayor wants to ignore. The alleged new benefits are not important when compared to access to quality health care, especially when you have serious health issues. The further delay that the mayor is worried about is not a delay but a very real hope that the retirees will keep their health benefits. As I have outlined below the just adopted City budget has sufficient funds allocated to cover the cost of Senior Care for Medicare eligible retirees.

As reported by the actuary in his FY-2022 OPEB report, there are a total of 246,832 city retirees with

• 73,601 (plus 46,510 spouses) who are not eligible for Medicare and
• 173,231(plus 61,646 spouse) who are eligible for Medicare.

When you subtract the 139,442 retirees covered by Senior Care, you are left with 33,789 Medicare eligible city retirees who have elected private health insurance via Medicare Advantage contracts between CMS, the federal Medicare administrator, and private insurance companies. As of January 1, 2022, the City is essentially no longer paying anything for Medicare Advantage contracts (monthly COBRA rate is $7.65). It is not clear why.

The City is currently paying $204.10/month per person for the Senior Care supplemental coverage. (The COBRA premium is $208.18/month).

That adds up to $464M per year - ((139,442 retirees + estimated 50,000 spouses)*$204.10*12).

Note: The Health & Hospitals Corp. and the Housing Authority have 20,205 retirees covered by Medicare supplemental coverage and would have saved money if the termination had gone into effect on Sept. 1, 2023

On June 30, 2023, the City Council adopted the NYC budget for FY-2024. The Mayor had asked for $2.959B for retirees’ health insurance and $5.64B for workers’ health insurance. The final budget cut the retiree health insurance appropriation by $500M down to $2.459B, what appears to be a ballpark number for the Medicare supplemental cost.

As reference, the adopted budget has the following allocations for health insurance:

• Workers $5.644 billion
• Retirees $2.459 billion

Note: The monthly cost for employees and non-Medicare eligible retirees

• without dependents is $923.67, and
• with dependents it is $2,265.67.

Note: The adopted budget also includes

• $896 million for employee welfare fund benefits and
• $449 million for retiree welfare fund benefits.

Just for the reord, that is a total of $9.4 billion for health insurance and welfare benefits for workers and retirees.

Enough Money for Senior Care

The retiree health insurance costs for FY-2024 based on retiree and spouse counts from the actuary’s June-2022 OPEB report breaks down as follows

• Non-Medicare retirees $1.565 billion
• Medicare retirees $0.464 billion
• Part B refunds for Medicare retirees $0.465 billion

The total of these three amounts is $2.494, very close to the $2.459B amount in the adopted budget. It appears that the adopted budget has enough money to pay for the Medicare supplemental coverage for the 139,000 plus Medicare retirees and their spouses, as if the City knew that it was going to have trouble in court.

The Mayor’s initial $500 million request and its final cut seems to have no rationale.

What these numbers show is that the Medicare with Senior Care is the most economical part of the health insurance program for City workers and retirees. In addition, Medicare with Senior Care is the most effective part of that health coverage.

Three Card Monte -- NYC FY-2024 Executive Budget and Health Insurance Costs

On May 31, 2023, retired employees of NYC filed suit against NYC over the termination of their Medicare supplemental health insurance. The City is doing this to save $450.0 million per year. The Health and Hosptials Corp. and the Housing Authority will also save a total $60.0 million per year.

So why is the City so desparate for money that it choose to strip its older city retirees of their health insurance and force them into a second class private insurance plan (Medicare Advatage)? The City could have attacked any number of other programs. Why the retirees?

The City has previously stated that it is giving these savings to the Health Insurance Satbilization Fund (HISF) which in turn allows the City labor unions to funnel the money into their welfare funds. This is already getting comfusing but this may be why the unions sold the retirees down the river.

The City Budget - FY-2022 to FY-2024

In FY-2022, the City adopted a budget of $98.7B. This year, FY-2024, the City is proposing a budget of $106.7B. See chart below.

Health Insurance Costs from FY-2022 to FY-2024

Health insurance and welfare fund costs are embedded in the personal service category.

Again if you refer to the chart below, you can see that the City's health insurance costs have increased significantly from 2022 to 2024: the City spent

1. $5.0B on employee health insurance in 2022
2. $5.2B on employee health insurance in 2023
3. $5.6B on employee health insurance in 2024

Why did employee health insurance increase $400M in 2024? Is this the money that is going to be given to the union welfare funds?

1. $2.1B on retiree health insurance in 2022
2. $2.0B on retiree health insurance in 2023
3. $3.0B on retiree health insurance in 2024

And why did the retiree health insurance costs go up $1.0B in 2024? Isn't the City saving $375M ($450M full year) by terminating insurance for retirees on Medicare.

Welfare Fund Costs from FY-2022 to FY-2024

The welfare funds have dropped since 2022 but not radically. Quite different from health insurance.

1. $1.118B on employee welfare fund benefits in 2022
2. $0.858B on employee welfare fund benefits in 2023
3. $0.876B on employee welfare fund benefits in 2024

1. $0.494B on retiree welfare fund benefit in 2022
2. $0.442B on retiree welfare fund benefit in 2023
3. $0.449B on retiree welfare fund benefit in 2024

Health Insurance and Welfare Fund Costs for NYC

Category	FY-2022 Adopted Budget	FY-2022 Modified Budget	FY-2023 Adopted Budget	FY-2023 Modified Budget	FY-2024 Executive Budget
Total Budget
Personal Service	$53.4B	$54.4B	$52.9B	$52.5B6	$55.6B
Other Than Persanal Service	$45.9B	$53.4B	$47.7B	$52.4B	$48.3B
Debt Service	$1.3B	$6.3B	$2.4B	$4.5B	$4.8
Less: Intra -City Expenditures	-$1.9B	-$2.3B	-$2.0B	-$2.3B	-$2.0B
Net Total	$98.7B	$111.8B	$101.1B	$107.1B	$106.7B
Fringe Costs
Health Ins.-Employees	$5.880B	$5.061B	$5.399B	$5.164B	$5.640B
Health Ins.-Retirees	$2.142B	$2.142B	$2.260B	$1.969B	$2.959B
Welfare Funds-Employees	$1.040B	$1.118B	$0.938B	$0.858B	$0.876B
Welfar Funds-Retirees	$0.491B	$0.494B	$0.442B	$0.442B	$0.449B
Pensions	$9.921B	***	$9.305B	***	$9.525B

Let the Old Folks Die But Let's Take Care of Wall Street

I've recently written about the City's new attack on the health care of city retirees. It is almost certain that some retirees will die because of the City's actions and complicity of the retirees' former labor unions. All this so that the City can save $460M a year. Talk about blood money.

But every year the City and the unions are more than happy to squander money on Wall Street.

Below are copies of the income statements from 2002 and 2022 for the City's five pension funds. That spans a 21 year period in which the penion funds have gone crazy with throwing money at Wall Street.

In 2002 the pension funds spent $102M on investment fees. In 2022 they spent $1.509B. That amount is over 14 times more than what they spent 2002. Just in case you think that is because the assets of the five funds have increased 14 times - no. They increased less than 3 times their value in 2002, $93.5B versus $263.2B.

I defy anyone to put forward an honest reason for this craziness. Not for nothing - the pension funds lost almost $32B in FY-2022

Lets Get Something Straight About the Health Insurance Stabilization Fund - It's the City That Is Raiding It, Not Senior Care.

I just read a letter written by the president of the local representing NYC correction officers. He was trying to defend his vote to sell out retirees health benefits. He starts out moaning about the Health Insurance Stabilzation Fund (HISF). He states that rising health care costs are diminishing the HISF.

The City and the unions have been crying over the HISF ever since this attack on retirees started. So below is the income statement chart for the fund since 2012. I've only included the main items.

The fund has only paid GHI $378M over the eleven year period.

But over the same period the HISF fund has paid:

1. the City $1.889B ($77M every year plus a $1.0B bonus in 2015).
2. the union welfare funds $996M and
3. other discretionary benefit providers $654M.

Payments to the City, the welfare funds, and the other benefit providers are controlled by the unions and the city subject to collective bargainning. You know collective bargainning, where the unions fight with the City to get what they deserve and not give things back to the City.

Income Statement History for the HISF

Fiscal Year	Opening Balance	1984 HBA City Contib Pay In	City Liability Pay In: GHI less than HIP	Other Benefit Pay Out	Welfare Fund Pay Out	2009 HBA City Refund Pay out	GHI Pay out: GHI greater than HIP	CBA City Refund Pay out	Closing Balance
2012	$587M	$35M	$465M	$48M	$38M	$112M	$0.0M	$0.0M	$894M
2013	$894M	$35M	$0.0M	$39M	$38M	$112M	$0.0M	$0.0M	$744M
2014	$744M	$35M	$1.162B	$40M	$38M	$112M	$50M	$0.0M	$1.706B
2015	$1.706B	$35M	$336M	$45M	$38M	$112M	$100M	$1.0B	$789M
2016	$789M	$35M	$1.202B	$43M	$52M	$112M	$8M	$0.0M	$1.829B
2017	$1.829B	$35M	$54M	$57M	$188M	$112M	$0.0M	$0.0M	$1.586B
2018	$1.586B	$35M	$232M	$57M	$38M	$112M	$2.0M	$0.0M	$1.643B
2019	$1.643B	$35M	$136M	$27M	$81M	$112M	$39.3M	$0.0M	$1.587B
2020	$1.587B	$35M	$0M	$83M	$171M	$112M	$3.9M	$0.0M	$1.369B
2021	$1.369B	$35M	$154M	$74M	$160M	$112M	$175.9M	$42.8M	$1.031B
2022	$1.031B	$35M	$0.0M	$136M	$100M	$112M	$0.0M	$0.0M	$900M

The MLC (DC-37 and UFT) and the City Attack on Senior Care

Along with the garbage about the HISF, this president had the gall to say that the MLC only voted to adopt the Aetna Medicare Advantage plan and not the termination of Senior Care. The City was required by a collective bargainning agreement to get the approval of the MLC before it terminated the GHI Senior Care contract. This union wants to hide the fact that it was part of the crime.

I hope every Correction Officer, who has to retire on disability and collect Social Security benefits, knows that he/she will get hammered with the Medicare Advantage crap. This is not about Aetna, all Medicare Advatage plans are inferior to Medicare with a supplemental plan.

I hope I don't have to tell anyone how to deal with statements from insurance companies. We have a massive legal industry based on this situation.

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.

Appellate Win - Now the Political War at the City Council over Section 12-126

On November 22, 2022, a NY appeals court decided in favor of the Medicare eligible city retirees in their fight with the City to keep their Medicare supplemental insurance coverage. The City had attempted force the retirees into a Mediacer Advatage plan that the City did not have to pay for.

The Stabilization Fund and Age Discrimination

In a previous post about the Medicare Advantage Scam I highlighted a document from OLR to the former Mayor. It went into great detail about the Health Insurance Stabilization Fund, the HISF.

In 1983 the City and its labor unions agreed to set up the HISF to equalize HIP and GHI insurance rates.

In 2005 HIP and GHI merged into Emblemhealth. The City fought this merger in court but lost the fight.

The HISF Agreement

The following is part of a section from the UFA's 2008-2010 labor contarct with the City that recites the HISF agreement:

Section 3.

A. Effective July 1, 1983 and thereafter, the City's cost for each employee and each retiree under ager 65 shall be qualized at at the community rated basic HIP/HMO plan payment rate as approved by the State department of Insurance on a category basis of individual or family e.g.the Blue Cros/GHI-CBP payment for family coverage shall be equal to the HIP/HMO payment for the family coverage.

B. If a replacement plan is offereed to employees and retirees under age 65 which exceeds the cost of the HIP/HMO equalization provided in Section 3a, the City shall not bear the additional costs.

C. The City (and other related Employers) shall continue to contribute on a City employee benefits program-wide basis the additional annual amount of $30 million to maitain the health insurance stabilization reserve fund which shall be used to continue equaliztion and protect the integrity of health insurance benefits.

The health insurance stabilization reserve fund shall be used: to provide a sufficient reserve; to maintain to the extent possible the current level of health insurance benefits provide under the Blue Cross/GHI-CBP plan; and if sufficient funds are available , to fund new benefits.

The health insurance stabilization reserve fund shall be credited with the dividends or reduced by the losses attributable to the Blue Cross/GHI-CBP plan.

Pursuant to paragraph 7 of MLC Healt benefits Agreement, notwithstanding the above in each of the fiscal years 2001 and 2002, the City shall not make the annual $35 million contributions to the health insurance stabilization fund.

It appears that this agreement violates the federal age discrimination law (ADEA - 1967) by giving a benefit to a subset of a group based only on their age. Why didn't the agreement provide equaliztion for retirees age 65 and older?

How Come?

Actually, there was no need to provide an equalization mechanism for retirees age 65 or older. The cost of their health insurance, both for GHI Senior Care and HIP-Medicare, has always been significantly less than the HIP/HMO benchmark.

In fact, the City has always used the GHI Senior Care cost as the internal benchmark cost for Medicare eligible city retirees. This was done administratively without reference to Section 12-126 which had set up the HIP/HMO benchmark. With the start of Medicare in July 1966, the HIP/HMO health care service model conflicted with the original Medicare indemnity model, whereas the GHI/CBP indemnity model was a better match.

Starinting 1965, the City contracted with GHI to provide an alternative health insurance plan. other than HIP, to employyes and retirees. GHI was built to handle claims coming in from out of network doctors and hospitals.

In 1966, Medicare began paying 80% of doctors and hospital costs for enrolled retirees over age 65. Very quickly most doctores and hospitals began particpating in Medicare. HIP was not equiped to pay claims from independent doctors and non-HIP hospitals. The City adapted the GHI/Blue Cross plan Over the years, GHI Senior Care has become the dominant choice of city retirees enrolling in Medicare with a 84% share while the HIP Medicare plan has a 12% share

The Phantom $600M and the Medicare Advantage Scam - Update

Phantom $600M

As the details about the Medicare Advantage scam have become clearer, one number keeps popping up, the $600M that the City is claiming it is going to save by ramming all the old retirees into a “Joe Namath” Medicare plan. The City, however, is not going to save anything. It is giving the money to the Health Insurance Stabilization Fund which is committed to city workers and pre-Medicare retirees. This is clearly a discriminatory benefits structure excluding Medicare retirees. The Fund is controlled by the city unions and the City. The NYC taxpayers have no control.

In addition, it appears that the $600M is an inflated number. As of June 30, 2021, there were 243,978 retirees that are eligible for city funded health insurance.

The Actuary's FY-2021 Retirees Benefit Report

As reported by the NYCERS Actuary in her 2021 Other Post Employment Benefits (OPEB) report, this number breaks down into two main parts, 72,962 non-Medicare eligible participants (plus 46,483 spouses) and 171,016 Medicare eligible participants (plus 60,602 spouses).

The City saves nothing with respect to the 72,962 participants. They are not yet part of the scam. Their turn will come later.

The 171,016 Medicare retirees breaks down into four coverage groups:

1. GHI Senior Care 137,755
2. HIP VIP Medicare Advantage 18,127
3. Other (mostly Medicare Advantage) 6,905
4. Waived Coverage 8,229

Note: Emblemhealth controls both GHI Senior Care and HIP VIP as well as their companion products for workers and pre-Medicare retirees. The "Other" catergory is made up of an Aetna Medicare Advantage plan plus other minor carrires both Medicare Advanatge and Medicare Supplement plans.

Obviously, the City has never paid anything for the waived class. So, there are no new savings there.

HIP-VIP and the $7.50 Premium

The HIP and Aetna plans are strange situations. Out of the blue as of January 1, 2022 the City is only paying $7.50 per month per retiree for these two plans. Participants can stay in these plans with no change in their zero monthly premiums, but the City has been able to cut its cost from $184.95 and $204.53 per month to $7.50 with these two vendors. This is a real magic trick, the same coverage for almost no charge. Why didn’t the City do this years ago? Assuming all the "Other" class is covered by Aetna, this change produces a $54.96M annual savings.

1. 18,127 * ($184.95 - $7.50) * 12 = $38.60M
2. 6,905 * ($204.95 - $7.50) * 12 = $16.36M

The City has already started saving this $54.96M as of January 1, 2022. They have not been open about this savings but HIP and Aetna may back off their reductions after evaluating the court decision.

The GHI Senior Care Scam

Finally, let’s look at the big GHI Senior Care class of 137,755 participants. The coverage for this class is a Medicare supplemental insurance plan on top of traditional Medicare. If the participants in this class, however, want to keep their current coverage, the City is shifting $191.57 of its $199.07 per month cost to the retirees and their dependents. Prior to the court decision the City was planning to pay $7.50 per month for the GHI Senior Care plan. This is exactly the same amount that the City will be paying for the “Joe Namath” MAP plan being run by Emblemhealth and Anthem but only for the first year of the five year contract. The following years were going to be free.

This shift in costs would create a $316.68M annual savings (137,755 * ($199.07 - $7.50) * 12 = $316.68M) for the retirees.

Assuming that 67% of the spouses are covered by GHI Senior Care, also charging each of the spouses $191.57 creates a $91.95M annual savings (40,000 * ($199.07 - $7.50) * 12 = $91.95M).

In total, this creates a possible $463.599M annual savings ($54.96M + $316.68 + $91.95M). This is far short of the $600M. How did the City get this number so wrong?

Failed Strategy

In closing, the City has been very secretive about the internal costs figures for the Medicare Advantage scam. I suspect that the City was afraid that this information would expose what the City was doing with Emblemhealth.

Section 12-126 of the NYC Admin Code requires the City to pay the entire cost of health insurance up to 100% of the full cost HIP-HMO on a category basis. Category basis means individual or family. The City has tried to argue that law considers Medicare a category basis also.

After reading a 1995 report on the City's health insurance from the Citizens Budget Committee wriiten with the cooperation of OLR, I discovered that the City has, for many years, been using the GHI Senior Care premium as its cost control for Medicare retirees' health insurance. See the quote below:

The City's contribution for insurance for Medicare-eligible retirees is set at the premium cost for a GHI supplemental benefit policy, or $1,104 annually in fiscal year 1995. The City also pays an equal amount for coverage for a Medicare-eligible spouse of a retiree. If the spouse of a retiree is under age 65, the City pays the HIP rate for individual coverage ($1,780). A retiree and their spouse must choose the same plan if they are both Medicare- eligible or a plan from the same carrier if one is not Medicare-eligible.

I was able to match up the COBRA rates and retirees required premiums for six health insurance vendors for 2018, 2020 and 2021. The City started reporting COBRA rates for HIP-VIP in 2021. So 2021 has sven vendors.

For 2018 the City's cost was $172.42 for all plans, the full amount for GHI Senior Care. In 2020 the City's cost was $189.43. In 2021 the City's cost was $204.53, the full GHI Senior Care cost but the HIP-VIP cost was $184.95. It is clear that the City was using GHI Senior Care as its Section 12-126 cost control plan but was not being very public about it.

In addition to being deceptive about its cost limit for Medicare retirees, the City in order to circumvent the force of Section 12-126 of the NYC Admin Code had to get the HIP-VIP rate as close to zero as possible. It couldn't be zero because zero contracts are not valid. So the $7.50 rate was born. You see it in both of the Emblemhealth plans, the new MAP plan and the HIP-VIP plan.

The City only told the court about the new $7.50 premium on March 2, 2022, the day before the court made its decison. After testifying on March 1, 2022 and reviewing that testimony the following day, the City realized that in trying to hide its deal with Emblemhealth, it had also withheld the knowledge of the new $7.50 charge for HIP-VIP and without that knowledge, the court was going to disallow the $191.57 charge to the retirees.

The City's last minute go for broke strategy failed and the court decided against the City.

Aetna is a different story. I have another suspecion but it is not strong enough to comment on.

The Health Insurance Stabilization Fund and the Federal Age Discrimination Law (ADEA - 1967)

In a previous post about the Medicare Advantage Scam I highlighted a document from OLR to the former Mayor. It went into great detail about the Health Insurance Stabilization Fund, the HISF.

In 1983 the City and its labor unions agreed to set up the HISF to equalize HIP and GHI insurance rates.

In 2005 HIP and GHI merged into Emblemhealth.

The HISF Agreement

The following is part of a section from the UFA's 2008-2010 labor contarct with the City that recites the HISF agreement:

Section 3.

A. Effective July 1, 1983 and thereafter, the City's cost for each employee and each retiree under ager 65 shall be qualized at at the community rated basic HIP/HMO plan payment rate as approved by the State department of Insurance on a category basis of individual or family e.g.the Blue Cros/GHI-CBP payment for family coverage shall be equal to the HIP/HMO payment for the family coverage.

B. If a replacement plan is offereed to employees and retirees under age 65 which exceeds the cost of the HIP/HMO equalization provided in Section 3a, the City shall not bear the additional costs.

C. The City (and other related Employers) shall continue to contribute on a City employee benefits program-wide basis the additional annual amount of $30 million to maitain the health insurance stabilization reserve fund which shall be used to continue equaliztion and protect the integrity of health insurance benefits.

The health insurance stabilization reserve fund shall be used: to provide a sufficient reserve; to maintain to the extent possible the current level of health insurance benefits provide under the Blue Cross/GHI-CBP plan; and if sufficient funds are available , to fund new benefits.

The health insurance stabilization reserve fund shall be credited with the dividends or reduced by the losses attributable to the Blue Cross/GHI-CBP plan.

Pursuant to paragraph 7 of MLC Healt benefits Agreement, notwithstanding the above in each of the fiscal years 2001 and 2002, the City shall not make the annual $35 million contributions to the health insurance stabilization fund.

It appears that this agreement violates the federal age discrimination law (ADEA - 1967) by giving a benefit to a subset of a group based only on their age. Why didn't the agreement provide equaliztion for retiree age 65 and older?

Anthem - US Department of Justice - Medicare Advantage Scam

I just stumbled on the following notice from DOJ. Within the press release you can find 112 page complaint. You can read the opening paragraph below:

Department of Justice
U.S. Attorney’s Office
Southern District of New York
FOR IMMEDIATE RELEASE
Friday, March 27, 2020

Manhattan U.S. Attorney Files Civil Fraud Suit Against Anthem, Inc., For Falsely Certifying The Accuracy Of Its Diagnosis Data

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that the United States filed a civil fraud lawsuit today against ANTHEM, INC. (“ANTHEM”), alleging that ANTHEM falsely certified the accuracy of the diagnosis data it submitted to the Centers for Medicare and Medicaid Services (“CMS”) for risk-adjustment purposes under Medicare Part C and knowingly failed to delete inaccurate diagnosis codes. As a result of these acts, ANTHEM caused CMS to calculate the risk-adjustment payments to ANTHEM based on inaccurate, and inflated, diagnosis information, which enabled ANTHEM to obtain millions of dollars in Medicare funds to which it was not entitled.

Why is the notice significant? Well, Anthem is the company NYC has contracted with to ramrod NYC retirees into a Medicarae Part C plan (aka Medicare Advantage). You can read the opening of the proposed NYC/Anthem contract below. This raises serious questions about the integrity of this whole process.

Medicare Advantage Group Agreement

This NYC Medicare Advantage Plus Plan Group Agreement (hereinafter "MA Agreement") is entered into as of January 1, 2022 (hereinafter “Effective Date”) by and between

the City of New York (“City”) acting through Mayor’s Office of Labor Relations – Employee Benefits Program on behalf of the Labor Management Health Insurance Policy Committee for the New York City Health Benefits Program with an office at 22 Cortlandt Street, 12th Floor, New York, NY 10007 (hereinafter "Group") and

Anthem Insurance Companies, Inc. doing business as Empire BlueCross BlueShield Retiree Solutions, on behalf of itself and the Alliance, defined below (hereinafter “Empire” or the “Alliance”) sponsor of the NYC Medicare Advantage Plus Plan (hereinafter "MA Plan"). Empire and The Group each are sometimes referred to herein as a “Party” and collectively as the “Parties.”

WHEREAS,

the City and Municipal Labor Committee (“MLC”), an umbrella organization for municipal unions, negotiate on a variety of matters, including collective bargaining regarding health benefits pursuant to their obligations under the New York Collective Bargaining Law;

WHEREAS,

to aid in the administration of the negotiated health benefits agreements, the City and the MLC established the Labor Management Health Insurance Policy Committee (“Committee”) for the MLC and City representatives to meet on a regular basis to discuss City health insurance benefits; and

WHEREAS,

the Employee Benefits Program (“EBP”) is a division of the Mayor’s Office of Labor Relations (“OLR”), and OLR is acting under the authority of the New York City Administrative Code Section 12.126(d) as the administrator of the New York City Health Benefits Program (“HBP”); and

WHEREAS,

on October 30, 2020 OLR’s request for authorization to enter into a Negotiated Acquisition to solicit a Medicare Advantage plan under Medicare Part C for the Medicare eligible retirees and dependents of the City of New York who are eligible for the City’s Health Benefits Program was approved by the City Chief Procurement Officer; and

WHEREAS,

OLR issued a public notice for a negotiated acquisition (EPIN:0021N002) in conformance with the New York City Procurement Policy Board Rules (“PPB”) and had otherwise advertised in order to solicit vendors through the Notice of Intent to provide health benefits services in the form of a Medicare Advantage plan under Medicare Part C for the Medicare eligible retirees and dependents of the City of New York who are eligible for the City’s Health Benefits Program; and

WHEREAS,

the Retiree Health Alliance (“the Alliance”), a strategic alliance between Empire and EmblemHealth Plan, Inc. (“EmblemHealth”) and their affiliates, submitted a response for such services, as provided for in the public notice for a negotiated acquisition, in the form of an expression of interest to OLR; responses were evaluated by an evaluation committee pursuant to PPB Section 3-04; and

WHEREAS,

OLR determined the Alliance’s proposal to be most advantageous to the City, taking into consideration technical expertise, price, contract terms, M/WBE Utilization Plan and other factors set forth in the negotiated acquisition solicitation; and

WHEREAS,

the City desires to appoint the Alliance to provide a Medicare Advantage Plan Under Medicare Part C for City of New York Retirees, and their Dependents, and

NOW, THEREFORE,

in consideration of the terms and conditions contained herein, the parties hereby agree as follows:

  ARTICLE 1 - PURPOSE
The Alliance will provide health insurance coverage to the Group’s eligible retirees and other eligible individuals as described in this MA Agreement. Empire is accountable for the operations, compliance, and performance of the MA Plan. EmblemHealth is an entity contracting with Empire to administer portions of this co-branded product to help ensure the City’s retirees receive continuity of care and membership support.

Specifically, EmblemHealth will co-manage the account, provide a professional network in the downstate New York area, deliver care through Neighborhood Health Centers, and support Empire in multiple areas of plan performance. ...

Emblemhealth – the Big Winner in the Medicare Advantage Scam.

Please refer to previous postings on the City’s attack on its retirees’ Medicare benefits and the bogus Medicare Advantage Plus (MAP) plan.

History

Since the mid 1940’s GHI and HIP have been the main health insurance providers for NYC workers and retirees. In 2005 these two firms announced their merger to form Emblemhealth. Interestingly, the City fought the merger in federal court on antitrust grounds claiming it would increase its health insurance costs. The City lost the case.

Cash Flow

In FY-2021, the City paid approximately $4.821B for city workers health insurance and $2.773B for city retirees’ health insurance. This is approximately 5% of the City’s total budget. Almost all of the $7.5B was paid to Emblemhealth via GHI and HIP. The City is Emblemhealth’s primary client. Because of the amounts of money involved and the time length of the relationship, there is a serious potential for corruption between the City and Emblemhealth. And city unions!

This is a huge business for Emblemhealth. Can you just imagine if Aetna started to tap into this gold mine?

Oversight

The NYC Office of Labor Relations (OLR) is the statutory administrator of health insurance benefits (Section 12-126.d of NYC Admin Code). From my long experience in administering NYC pension benefits, it is my opinion that OLR is quite effective in negotiating labor contracts but incapable of managing large scale data intensive employee benefit operations. OLR contracts out all this type of work with minimal "oversight".

The following is a recent notice from AM Best, a firm that monitors the credit worthiness of insurance companies.

April 28, 2021 09:32 AM Eastern Daylight Time OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of C+ (Marginal) and the Long-Term Issuer Credit Ratings of “b-” of Health Insurance Plan of Greater New York (HIP), EmblemHealth Insurance Company, EmblemHealth Plan, Inc. (EHPI) and ConnectiCare, Inc. (ConnectiCare) (Farmington, CT). All companies are subsidiaries of EmblemHealth, Inc. and domiciled in New York, NY, unless otherwise specified. The outlook assigned to these Credit Ratings (ratings) is negative.

The removal of the ratings from under review follows the completion of AM Best’s assessment of the consolidated financials of the group through year-end 2020 and assessment of the capital restoration plan.

The ratings reflect EmblemHealth Group’s balance sheet strength, which AM Best assesses as very weak, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management….

Wasn’t this the exact time that the City/Municipal Labor Council (MLC) were negotiating with Emblemhealth for the MAP contract?

New Deductibles and Copay for GHI Senior Care

The week before Christmas I received a letter as a NYC retiree from Emblemhealth. It was dated December 17, 2021 and signed by a George Babitsch, a senior vice president.

The letter was a notice of changes to my GHI Senior Care Medigap insurance plan. The changes were to be effective January 1, 2022. These changes have an immediate impact of retirees over age 65 and future impact on all current city retirees and workers.

Babitsch claims the changes were based on negotiations between the NYC Office of Labor Relations (OLR) and city unions via the Municipal Labor Committee (MLC). City unions have no collective bargaining authority over current retirees, only current workers. If the unions want to negotiate reductions in the health insurance benefits of current workers, they are free to negotiate those benefits.

There is, however, a statutory guarantee that the City pay the entire cost of health insurance coverage for workers, retirees and there beneficiaries limited only by the cost of the HIP-HMO benefit.

There is also an added statutory protection for retirees who retired from the NYC Department of Education or the old Board of Ed. See the quote below from the legislative history of this law.

The law provides that school districts may reduce neither the level of health insurance coverage nor their contribution toward its cost for retirees, unless the reduction applies equally to active employees. This protects retirees by in effect making them part of the collective bargaining process.

The changes are

• 1) an imposition of an added $50 annual deductible on top of the regular Medicare Part B deductible of $233 for 2022, and
• 2) $15 copay for every medical service.

There are 157,381 NYC retirees covered by Senior Care (see below). If these changes go into effect, they will cost retirees $31.4M per year which in turn will increase Emblemhealth's annual profit. How does the City escape paying for these changes?

Litigation and the MAP Plan

Partly because of these changes, the City is in a legal fight with the retirees over the attacks on their benefits. I’m quite sure that the City did not expect the retirees to fight back.

Along with the Senior Care changes, the City and Emblemhealth are also trying to force these 157,381 retirees into the Medicare Advantage Plus (MAP) plan.

If that effort is successful, the City will no longer have to pay for the retirees’ Senior Care coverage ($194/month) and Emblemhealth stands to increase its regular annual profit of $36.6M for Senior Care plan into an annual profit of $207.7M for the MAP plan.

The retirees will lose their traditional Medicare benefit. Also MAP, as Medicare Advantage plan, will force retirees to buy their Part D drug coverage from the MAP plan.

Speaking of Part D, in New York State, you can get an excellent Part D plan from Aetna for $77.20 per month as opposed to the $125 that Emblemhealth is charging in the MAP plan and the Senior Care plan(2022). It was $150.30 in 2021. You may be starting to see a pattern in the relationship between the City and Emblemhealth.

Opting Out of the MAP Plan

If the retirees opt out of the MAP plan, the retirees will have to pay $191 per month for Senior Care plan and double that if their spouses are covered. This is in addition to the $125 per month charge for the retiree and the spouse each for Part D coverage. If the retiree chooses to buy Part D on the open market, they will lose any subsidy that they receive from their welfare funds.

Now that retirees are paying for Medigap insurance, shouldn't they be free to pick the plan that thet want? Well not really. If the retiree wants to switch from the GHI Senior Care (Medigap Plan A) and buy a less expensive and more effective Medigap Plan A in NYS(chart), the City is threatening to block the refunds for Part B premiums that retirees pay Medicare each month. The refunds, like like health insurance covergae, are mandated by Section 12-126 of the NYC Admin Code. Why would the City make this threat? Is the City trying to protect Emblemhealth's market share?

I can see if the City was paying for the Medigap insurance that it would want to control who the vendor was. But once the retiree is paying the cost for the insurance, why would the City care who the company was?

Of course the City is doing the same thing with the MAP plan. If the retiree dares to go to another Medicare Advantage plan, he/she will lose their Part B premium refund.

Where the Money Comes From

In a Medicare Advantage plan, CMS, the federal Medicare administrator, will give Emblemhealth roughly $1,100 a month per captured retiree and CMS only requires Emblemhealth to pay out 85% of that amount in health benefits. You can easily do the arithmatic. With a 10% profit margin you generate $207M per year. That does not include whatever it can pull in from its charges for the Part D coverage. I am beginning to become very suspicious of this deal.

As stated before, Emblemhealth is now offering the City a new Medicare Advantage plan that will cost the City nothing. Only for the first year of the five-year contract is there a token monthly premium of $7.5 per retiree. I suspect that the lawyers inserted this trivial amount to ensure that the contract is valid.

HIP-HMO for Medicare Eligible Retirees

As of June 30,2021, there were 22,404 Medicare eligible city retirees covered by HIP-HMO. This is a Medicare Advantage (MA) plan that has been in place for years. It is a voluntary plan as opposed to the MAP plan.

It is not clear what is going on with the future coverage for retirees in the HIP-HMO (MA) plan.

It is also not clear what is going on generally with the charges for Medicare retirees with families who are not Medicare eligible.

Comparing the number of participants in the Senior Care and the HIP-HMO plans, you can easily see that Senior Care is the dominant plan for Medicare eligible retirees and that has been true for decades.

You might wonder what has been going on with HIP-HMO Medicare Advantage plan for all these years? Why was there a cost for the HIP-HMO (MA) plan when the new MAP plan is now free or precisely, why did the HIP-HMO (MA) cost the City $48.8M per year for 22,404 retirees and the MAP plan for 157,381 retirees will cost the City nothing?

Stats from the Actuary’s 2021 OPEB Report

As per the OPEB report for 2021 from the NYCERS’s actuary the following is the major breakdown NYC retirees and health insurance coverage. A small portion of retirees (10,478) chose other plans that have added charges,

• Medicare eligible retiree:
  • a. 157,381 retirees covered by GHI Senior Care (Medigap – Plan A)
    • i. Monthly cost per retiree and spouse: $194.14 each
    • ii. Monthly cost per retiree with younger family: $2,035.61
  • b. 22,404 retirees covered by HIP-HMO (Medicare Advantage)
    • i. Monthly cost per retiree and spouse: $181.58 each
    • ii. Monthly cost per retiree with younger family: $1,901.23
• Non-Medicare eligible retiree:
  • a. 62,779 retirees covered by GHI-CBP/EBCBS
    • i. Monthly cost per single retiree: $775.66
    • ii. Monthly cost per retiree/family: $2,035.61
  • b. 9,169 retirees covered by HIP-HMO
    • i. Monthly cost per single retiree: $776.01
    • ii. Monthly cost per retiree/family: $1.901.23

That adds up to the following annual revenue paid by the City to Emblemhealth for just retirees:

• a) Medicare eligible retirees (assuming no younger families) of
  • a. $48.8M for HIP-HMO
    • ($181.58 * 12 * 22,4040) and
  • b. $366.6M for Senior Care
    • ($194.14 * 12 * 157,381)
• b) Non-Medicare eligible retirees (assuming 50% with families)
  • a. $144.6M for HIP-HMO
    • ($776.01/$1,901.23 * 12 * 9,169)
  • b. $1,040.3M for GHI-CBP/EBCBC
    • ($775.66/$2,035.61 * 12 * 62,779)

All these plans are run by Emblemhealth.

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!

NYS Medigap Rate Chart for 2022 and the NYC Medicare Advantage Scam

New York State and Medigap Insurance

If you click on the link below, you will see the all the Medicare Supplememt(Medigap) insurance plans available in New York State for 2022 along with their monthly premiums. These plans are avalilable on the open market to everyone covered by traditional Medicare. I have always found when you get to see everyting laid out in chart, it all comes into focus.

NYS Medigap Rate Chart for 2022

Medigap inurance is what the City currently provides for retired City workers who are eligible for and covered by Medicare. The City pays a $194 premium per month per retiree to EmblemHealt/GHI. If the retiree is married the City also pays another $194 per month for the spouse if he/she is also eligible for Medicare.

This Medigap insurance, GHI Senior Care, appears to be a Plan A type of Medigap insurance based on its cost. This is the lowest cost Medigap insurance that CMS, the federal Medicare administraror, allows to qualify as Medicare Supplemental insurance. Medigap insurance basically covers the 20% of medical costs that Medicare doesn't cover.

As compared to Plan A, Plan F is the best type of Medigap insurance that you can buy as you can see in the chart. You can bet your ass that the City wasn't going to provide a Plan F type Medigap insurance for its retirees. You can see all the premium rates for all the plans in the NYS chart. The NYS Department of Financial Services (DFS) oversees the Medigap insurance plans sold in the state. DFS does not have authority over Medicare Advantage plans.

Critique of Medicare Advantage Problems

This is a clear critique of the Medicare Advantage business model and who gets the short end of the stick. Read this link, Medicare Advantage critique

Attack on the NYC City Council and the Health Benefits of NYC Workers and Retirees

The battle over health insurance for NYC Medicare eligible retirees is being fought over 126.b.(1) of the NYC Admin Code as well as workers’ contractual rights. This fight, however, effects all NYC retirees and workers.

The key part of Section 12-126 that is in dispute is:

Section 12-126. … b. Payment of health insurance costs. Except as otherwise provided in section 12-126.1 and section 12-126.2 of this chapter, for city employees, city retirees and their dependents: * (1) The city will pay the entire cost of health insurance coverage for city employees, city retirees, and their dependents, not to exceed one hundred percent of the full cost of H.I.P.-H.M.O. on a category basis. Where such health insurance coverage is predicated on the insured's enrollment in the hospital and medical program for the aged and disabled under the Social Security Act, the city will pay the amount set forth in such act under 1839 (a) as added by title XVIII of the 1965 amendment to the Social Security Act. …

The City Council’s Legislative Authority

The City Council is the legislative body for the NYC government.

On June 28, 2001, the NYC City Council unanimously overrode the mayor’s veto and passed Local Law 39 of 2001.This law modified Section 12-126.b.(1) of the Admin Code of the city of New York. Specifically, it made permanent the full refund of Part B premiums to eligible NYC retirees who were paying those premiums to the federal government as part of their Medicare benefits. This vote makes it clear that the City Council has authority over this part of Section 12-126 even in the face of mayoral opposition. As an insight to this law, remember who the mayor was in 2001.

The Proposed MAP Contract

As part of the Medical Advantage Plus (MAP) contract that the City wants to sign with Alliance, there is the following clause (Addendum A, Quoted Stipulations, page 4 ):

“Retirees who opt out of the NYC Medicare Advantage Plus Plan must pay the premium difference between the NYC Medicare Advantage Plus Plan and their selected retiree Medicare health plan, if applicable.”

In its raw form, this an agreement between two parties to damage a third party. The City and Alliance drafted this provision to put in place a mandatory penalty for retirees who choose to leave the MAP plan. The driving force behind Alliance’s profit margin is the number of retirees in the MAP plan. The more retirees that opt out, the less money that comes in from CMS ,the federal Medicare administrator, and the higher the risk of claim losses becomes.

Attack on the City Council

In addition to this attack on retirees, the clause is a secretive attempt to subvert the legislative authority of the City Council. It is my opinion that this clause violates the City Charter. The clause clearly attempts to block the City Council’s legislative authority over Section 12-126 and destroy the purpose of this 54-year-old statute.

At the November 10th City Council contract hearing, the OLR Commissioner made no mention of this penalty clause in the contact. She was there to sell the benefits of the MAP plan and not clearly state the problems with the MAP plan. Specifically, there was no mention of the fact that this would be an almost $4B annual contract. That is the amount that CMS will pay Alliance each year to cover the retirees’ health benefits. According to the stipulations in the contract, the City will only pay a trivial $14M in the first year of this five-year contract ($7.50 per month per retiree). This a dump and run scam if I ever saw one.

What would happen if the City Council chose to begin action to modify Section 12-126.b.(1) explicitly requiring the City to pay for the Senior Care premiums for eligible NYC retirees, like the action it took with Local Law 39/2001?

Would the Law Department argue that the mayor’s contract prevents the Council from passing such a law? I am beginning to think that this contract is illegal as it is currently drafted.

Stupidity and the Medicare Advantage Scam

I am assuming that all NYC retirees and workers know that the City is trying to screw with retirees Medicare benefits. Enough with abuse of power and illegal actions, let's look at the City's stupidity.

Cross Over Retirees

Consider a current 66 year old male NYC retiree with traditional Medicare and GHI Senior Care coverage. He has a 62 year old wife. With respect to Part D coverage at age 65, he continued his family drug coverage with GHI which he started when he retired at age 62. He pays the the family GHI-CBCBS drug premium ($149.96), not the Senior Care family drug premium ($300.60).

In FY-2021 the City paid $2,023.61 per month to GHI for CBP/EBCBS family health insurance. This was for workers and retirees with non-Medicare eligible dependents. This means that the City is paying GHI $2,023.61 for this retiree's family health insurance even though he is Medicare eligible. I am almost dead sure that the City is not paying GHI the $194.14 per month individual Senior Care premium for this retiree, since it is already forking over the $2,023 each month.

Now consider that in 2021 this retiree and his wife adopted two newly born children. The retiree now has three dependents on his health insurance coverage and the City now has a 25 year liability for family GHI CBP/EBCBS health insurance costs. As I stated above the monthly cost for the GHI family coverage is $2,023.61. That is $24,283 per year. Even when the retiree's wife turns 65, the City will still have to pay the $2,023 per month

The New MAP Plan for January 1, 2022 - With a Court Stay in Place

On January 1, 2022 the City wants to jam this retiree, along with all other Medicare eligible retirees (not HIP-HMO), into a Medicare Advantage plan with the express purpose of avoiding paying the Senior Care $194.14 per month premium. Of course, the City is not actually paying for this retiree. The City then wants to give the "savings" to the union welfare funds (the MLC).

In fact the City will probably never save any money on this retiree.

Political Blowback

Since the City can not escape paying the $2,023.61 per month for this retiree, would it not be more politically advantageous to leave this retiree in his current "Senior Care". You know this family is going to be radically motivated to rip the heart out of the scum that are screwing up their health insurance. Of course all effected retirees are going to want to get revenge but the City is not even getting any "savings" in this case.

I created this exaggerated case to highlight the complications of the Medicare Advantage scam. There about 158,000 Medicare eligible city retirees covered by Senior Care. I guarantee you that 25% of those retirees fall into this cross over scenario to some extent. Just think of a 66 year old retiree marrying a 55 year old. Happens all the time. All of a sudden the cost goes from zero to $24,283 per year.

Catch-22

The City has created a Catch-22 for the Medicare eligible retirees. The City will not be saving anything on these cross over retirees and yet the City is punishing them by reducing their benefits.

The retirees are either forced into the new inferior "free MAP" plan or pay the Senior Care $191 a month premium each for themselves and everyone of their Medicare eligible dependents plus $125 month each, for Part D coverage, for themselves and everyone of their Medicare eligible dependents.

Of course the new free MAP plan is not totally free since the drug coverage will cost $125 per month each for the retiree and any of his/her Medicare eligible dependents. In addition, the retiree can not choose to buy the Part D drug coverage on the open market since CMS gives Medicare Advantage plans a monopoly on Part D coverage. Interestingly, the retiree in Senior Care plan can shop for a better Part D drug plan.

How About a Little Intelligence

The City has pressure on it health insurance costs. Instead of picking on a party that the City thinks it can walk over, how about bringing all parties together. That means the insurance companies, the workers, and the retirees. Get the insurance companies to offer better coverage at lower cost and require all the workers and the retirees to make a monthly payment. That would also mean that the City would have to be totally transparent. That is a big problem. Don't feel sorry for the City. The federal government gave the City $1.02B in FY-2022 to pay for workers health insurance.