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.

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.

More Haze Over Long Island City

In September I wrote about the adoption of the NYCERS budget for FY-2014 at the March 14, 2013 NYCERS Board of Trustees meeting. I pointed out the scant reference to the issues surrounding the disaster recovery site at Long Island City (L.I.C.) in the executive director's written presentation on the budget. In a terse sentence she implied that the L.I.C. disaster recovery project was now functioning after an seven year delay.

I was curious whether any of the trustees had any questions at the meeting about this fiasco. So I made a FOIL request of the public minutes of the board meeting where the $52.2M budget was approved. This is the relevant exert form the minutes of the March 14, 2013 NYCERS Board of Trustees regular meeting:

CHAIRPERSON WOLPERT:
All in favor?
(A chorus of "Ayes.")
Any opposed?
Motion carries.
Item 2 on the agenda is a report by the budget committee, of which I am chair, so I will report on that.

I think NYCERS really did an incredible job presenting their budget to us. There was beautiful and substantively informative PowerPoint presentation. All of the really knowledgeable staff was there to answer any questions we had. For me, I think everything was in order.

I don't know if anybody on the budget committee or anybody else has any questions?

MS. O'CONNELL (DC-37):
A comment to echo your comments, Carolyn. I think Diane and staff did an excellent job of keeping the focus on member services, and also moving the institution forward in terms of technology and making progress in that regard. So I thank the executive director and staff for their efforts.

CHAIRPERSON WOLPERT:
With that, a motion to approve the budget?

MS. D"ALESSANDRO(executive director):
...Then we move into the actual proposed budget for fiscal 2014 which is 2B(i) in your packet, and essentially it is the administrative budget for fiscal 2014 with $26,620,635 for PS expenses; $17,951,822 for other than personal expenses; qnd a total budget of $44,575,457 for fiscal 2014. (there is an additional $7.6M in fringe costs)

CHAIRPERSON WOLPERT:
Any questions on this resolution?
Is there a motion to approve?

MS. O'CONNELL:
Motion.

MS. STRYKER(Local 237, Teamsters):
Second.

CHAIRPERSON WOLPERT:
All in favor?
(A chorus of "Ayes.")
Any opposed?
Motion carries.

As you can see from the quoted text above, that there was no substantive discussion about this major expenditure. The text is devoid of any concrete information other than the fact that the regular NYCERS admin budget for FY-2014 will be $44.5M. (actually $52.2M)

One thing that caught my attention was the comment about the "beautiful and substantively informative PowerPoint presentation". I thought that it would be wonderful to read the presentation given to the budget committee. So I made a follow up FOIL request for it. That was on October 18, 2013. I made a second request on November 11, 2013 and on December 3, 2013 I received the following response from NYCERS.

Please be advised that your request under the Freedom of Information Law for NYCERS PowerPoint presentation outlining the FY-2014 administrative budget given to the Trustees budget committee is being denied.

The information you are seeking is considered inter-agency or intra-agency materials. Said materials were not presented to the Board of Trustees or listed as an Agenda Item at any NYCERS Regular/Investment meeting.

If you wish to appeal this denial, please contact Diane D’Alessandro, (Executive Director) of NYCERS.

It is clear to me that this reason for denial is evasive and incorrect. Listed below is the exact wording from the state web site about this specific reason for denying a FOIL request:

(g) are inter-agency or intra-agency communications, except to the extent that such materials consist of:
i. statistical or factual tabulations or data;
ii. instructions to staff that affect the public;
iii. final agency policy or determinations; or
iv. external audits, including but not limited to audits performed by the comptroller and the federal government;

As per the meeting minutes, the Chairperson points to the PowerPoint presentation as the basis of the budget committee's recommendation for approval of the proposed budget.I think it is safe to say the document was the basis of a final agency policy or determination, the adoption of the agency's $52.2M FY-2014 administrative budget.

In addition, I suspect that the Budget Committee falls under the N.Y.S. Open Meetings Law. That means material provided to the committee is public record. I don't think the committee had any reason to conduct its meeting in executive session.

Needless to say, while I will never see this PowerPoint presentation, I am sure that the N.Y.S. Department of Financial Services auditors will demand to see this presentation. They should also demand a physical inspection of the L.I.C. site and observe actual full disaster drill, not some empty "trust me" claim.

You would think that NYCERS management would have been anxious to provide the public a clear picture of the status of the Long Island City disaster recovery site. Now, because of this failure to disclose, it seems reasonable to conclude that the PowerPoint presentation is inaccurate and a poor basis for adopting the FY-2014 budget. Besides the mess at Long Island City what other disasters are the NYCERS management hiding.

State Insurance Audit Checklist

Since July 29. 2013 the State Insurance Department (NYS DFS) has accessed my blog 29 times. So I thought I would provide them with a suggested reading list. Below is a starting list. If I see something else that looks interesting, I'll add to the list.

• Who got the $140M?
• Why was the Transit Operating Force death benefit changed?
• The former chair of the NYCERS Board of Trustees
• Why is NYCERS paying the Comptroller?
• The civil service qualifications for the current NYCERS executive director
• Unaccounted investment fees , background , and more
• Investment madness
• Lack of disclosure on private equity and real estate transactions
• Hedge funds
• Private equity managers
• Delays in processing loans
• Examples of SPD errors ( A , B )
• NYCERS perjury
• D.O.I. and the perjury charge
• Funny wrinkle to the perjury and corruption story
• The WC offset nightmare
• Denial of due process
• The assumed interest rate
• Finally 7%, sort of
• Delays in pension benefit revisions
• The Met-Life building
• Disaster recovery site at L.I.C.
• Allegra Capital and lack of accounting oversight
• Harassment of EMS disabled retirees, and more
• Outside legal services
• Background on past State Insurance Department reports