Mayor Adams and His War on Older City Retirees - By the Numbers

Every Halloween the Comptroller releases the City's finacial report for the previous July-June budget year.

During the year ending on June 30, 2022 the City spent

• $9.7B on pensions,
• $13.2B on fringe benefits,
• $31.0B on salaries, and
• $52.7B on other than personnel services, the famous OTPS expenses.

Of the $13.2B for fringe benefits

• $8.7B went for health insurance for workers and retirees,
• $2.3B went for Social Security contributions,
• $1.4B went for welfare benefit funds (both city and union),
• $0.13B went for union annuity funds,
• $0.6B went for workers comp insurance and other items.

Of the $8.7B for health insurance,

• $6.5B went for workers health insurance,
• $1.3B went for younger retirees health insurance,
• $0.5B went for older retiress health insurance, and
• $0.5B went for Medicare Part B premium refunds.

Attack on Older Retirees

The Mayor (and the MLC) wants to stop paying for the GHI supplemental health insurance for city retirees and their spouses who are covered by Medicare. The Mayor wants to force all of these retirees into a Medicare Advantage plan. It is an inferior insurance plan as compared to the supplemental plan but, of course, the City does not have to pay for the Medicare Advantage plan.

Last year the City tried to ram this down our throats but it lost its attempt in court. It now wants to cut the law (Section 12-126) that protects retirees health insurance. It also protects workers health benefits.

There are 139,442 city retirees covered by the GHI supplemental plan along with 20,205 retirees who retired from the Health and Hospitals Corp and the Housing Authority.

The monthly cost for each retiree and each spouse in this group is $201. The City's total cost in FY-2022 for the GHI supplemental insurance for city retirees was $425M and $87M for HHC and HA retirees.

Any US citizen eligible for Medicare can signup for a no premium Medicare Advantage plan. The City is offering older retirees something they already have, whether or not they are a city retiree. What the City is really trying to do is to abort its current obligation under law to pay for health insurance coverage for older city retirees and their spouses.

Other Ways for the City to Save Money Without Beating up on Retirees

During FY-2022, the City incurred the following expenses:

1. $269M in administrative expenses for the five pension systems. That cost could be cut in half ($135M) and still improve services. I know, I was the executive director at NYCERS for many years.
2. $1.5B in investment fees at the five pension systems which lost $31.0B during the year. The systems should be required to limit fees to 20 basis points of assets. That would save $1.0B a year.
3. $2.1B to subsidize the teachers deferred compensation plan (403-b plan). No other city employees receive this subsidy. This is in addition to the cost of the teachers regular city pension benefit. This benefit could be radically cut or eliminated with a huge savings to the City. And in a counterintuitive view, members of TRS would probably make more money if they deversified their assets rather than parking them in the guaranteed stable income fund.

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.