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:
| 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.
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