New York City expects to save $3.4 billion on health care by 2018 — including $400 million in fiscal 2015 — through agreements with public employees, its director of labor relations said Wednesday.
"Nearly as important as the actual cost savings implications, is the cooperative framework in which these discussions are now taking place," Robert Linn told the City Council. "The City and the [Municipal Labor Committee] are working collaboratively on developing the strategies that will achieve the $3.4 billion health cost savings goal for fiscal years 2015-2018."
The Municipal Labor Committee is an umbrella group of city unions.
Since taking office in January 2014, Mayor Bill de Blasio, who inherited expired contracts for all municipal workers, has reached agreements with 76% of the workforce, representing both civilian and uniformed employees.
Maria Doulis, the director of city studies for the Citizens Budget Commission watchdog organization, said the city's four-year financial plan, consistent with past trends, projected health insurance spending to increase at an annual rate of 9%; but its actual rate increase for fiscal 2016 will be 2.89%.
"As a result, savings that would have normally been reserved for general budget needs-such as funding libraries or maintaining public parks-and are attributable to a national slowdown in health care costs, are now being credited to the health savings agreement,"
CBC estimates that if city officials repeat this process in future years-claiming savings for low rate increases against a 9% percent projected growth rate-the cumulative impact would be another $1.2 billion. "Thus, total savings attributed to the MLC agreement could equal $2.5 billion of the $3.4 billion cumulative target- without any affirmative actions to improve the delivery of health care," said Doulis.
According to commission research, the city's health insurance plan has expanded rapidly over the last decade. Since fiscal 2005, costs doubled from $2.6 billion to $5.3 billion in fiscal 2015 and now consume 6.7% of the 2015 budget-more than what the city pays for police salaries.
The administration's four-pronged approach to "bend the health care cost curve for the city's health plans," said Linn, includes funding-structure changes in the city's GHI plan, reducing Empire Blue Cross Blue Shield administrative charges, and auditing dependent eligibility.
In settling contracts, the city has been following a pattern established by its May 2014 agreement with the United Federation of Teachers.
"The financial plan assumes that outstanding civilian and uniformed contract settlements will reflect those already settled," said Moody's Investors Service, which assigns an Aa2 rating to the city's roughly $40 billion of general obligation debt. Fitch Ratings and Standard & Poor's rate the debt AA.
