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.