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