Overview of NYC employee/retiree health care
In the last 20 years, according to the U.S. Bureau of Labor Statistics, national hospital costs have tripled, and other medical charges have more than doubled, far outpacing increases in average family income. In the last 10 years New York City’s spending on health care for its employees has nearly doubled, going from $6.4 billion annually to $11.8 billion.
In the U.S. health coverage has traditionally come through employers, but the pressure of rising healthcare costs means that families around the country are now paying on average $21,000 a year for healthcare coverage because employers are now passing on the price increases on to workers in the form of premiums.
New York City’s health care plans cover three different groups:
- Active employees and their families;
- Retirees not eligible for Medicare and their families;
- Retirees who are covered by Medicare and their families.
The plans help cover hospitalizations, doctor visits, various outpatient medical procedures, mandated categories of pharmaceuticals, and other products and services. (Members of unions also receive benefits from each union’s welfare funds, typically covering services like prescription drugs, eyeglasses, hearing aids, and dental visits.)
Healthcare negotiations are handled for all individual unions and other city employees by the Municipal Labor Committee.
New York City Local Law 28 of 1984 established a “benchmark” plan under which the city will “pay the entire cost of health insurance coverage.” It is the plan now known as HIP. The premiums for this coverage — paid for entirely by the city — come to roughly $775 per month per individual and triple that number for family coverage.
The HIP plan for active employees and pre-Medicare retirees is a “comprehensive” plan, meaning it covers all services.
The Medicare-eligible retiree situation is different. The federal government covers most of the insurance costs for retirees through Medicare, so the city pays far less — about $180-$190 a month — for each individual for insurance that supplements Medicare coverage; under Local Law 28, it also pays each retiree’s Medicare Part B premium, roughly $110 a month.
In addition to the premium-free plans, the city offers “pay-up” plans that require individuals to pay premiums, ranging as high as nearly $700 a month with drug coverage included.
But most city employees and retirees opt for “premium-free” plans, including the HIP HMO, GHI-CBP and the GHI Senior Care program for Medicare-eligible retirees. While the city pays the premiums for such plans, they also generally include co-pays that individuals must spend for doctor and emergency room visits.
Challenging rising medical costs
Keeping such plans premium-free as medical costs skyrocket is a constant challenge.
The biggest players in New York City’s hospital industry have been raising their prices 6% to 10% every year, even before the COVID pandemic.
Meanwhile, health insurance companies account for their own share of rising costs, whether through profits for their investors, huge bureaucracies, or extravagant executive salaries, even for not-for-profit operations.
The municipal unions have created what amounts to one of the largest customer bases in the nation — roughly 1.25 million employees, retirees, and dependents. As a consumer group of this size, we have the leverage to resist some rising charges, whether from hospitals, provider groups, or from insurers.
In fact, while national hospital costs have risen an average of 10 percent per year over the last eight years, our bargaining power has enabled the city to save billions in projected hospital and other healthcare costs over the same period.
The UFT’s Welfare Fund, for instance, negotiated deals that lowered potential pharmaceutical costs for members by more than $18 million a year.
Under the MLC we have also instituted in recent years a series of initiatives to control costs, such as higher co-pays for expensive emergency room visits that don’t result in hospital admission.
Individual unions have joined with SEIU Local 32BJ to pressure hospitals whose prices are out of line with competitors for many procedures (why should a C-section cost $55,000 at Montefiore Hospital and $30,000 at Mt. Sinai?) and backed a union-supported bill in Albany to limit what out-of-network hospitals could charge patients.
As part of its continuing efforts to maintain premium-free health care for retirees, the MLC last year sought to increase the city’s access to federal healthcare dollars by creating its own Medicare Advantage plan.
The plan was designed not just to mirror the benefits of the current GHI Senior Care Medigap plan, but also to expand many other services, including new catastrophic coverage.
The projected savings from the new Medicare Advantage plan was $600 million a year, money that would be re-invested in city employee/retiree health care.
As part of the transition to the new plan, the city offered to keep the current GHI Senior Care option, but to add GHI Senior Care to the six current retiree “pay-up” plans that charge a premium (in this case less than $200 a month).
This spring New York State Supreme Court Judge Lyle Frank ruled that the city’s Administrative Code mandated that in effect all the Medicare supplement plans — those that do not exceed the cost the city pays for the much more expensive active-duty plans — must be premium-free. The city is appealing that ruling.
If upheld, Judge Frank’s ruling could lead the city to eliminate the many choices that city retirees now have among Medicare supplement plans, leaving only one plan that might not meet the needs of every retiree.
While Judge Frank’s ruling is being appealed, the city and its unions have asked the City Council to change the city’s Administrative Code provisions applicable to this case. The change would ensure that the city and the MLC could create a new premium-free retiree plan, and also additional “pay-up” or premium-charging plans that retirees could choose if they so desired.