Officials in Mayor Bill de Blasio’s administration have trumpeted New York City’s healthcare savings program.
Budget watchdogs pass it off a series of accounting tricks.
The Independent Budget Office and Citizens Budget Commission raised red flags to the de Blasio initiative at a recent joint meeting of the City Council’s committees on finance, and civil service and labor.
In June, the administration and the Municipal Labor Committee, an umbrella group of city labor unions, announced a commitment to generate $1.1 billion in employee healthcare cost savings over fiscal 2019 through 2021, supplementing $1.3 billion in recurring savings generated under a $3.4 billion savings agreement for 2014 through 2018.
"We've accomplished some substantial, major, innovative changes," said city labor relations Commissioner Robert Linn. "This establishes new labor-management goals."
Jonathan Rosenberg, director of budget review at the New York City Independent Budget Office, was less enthused.
“It is disappointing that the vast majority of savings realized to date have come in the form of paper gains from lower-than-expected premium increases and other accounting maneuvers,” he said.
The June 28 agreement targets savings of $200 million in 2019, $300 million in 2020 and $600 million in 2021. At least $600 million of the total savings must be recurring. These savings are intended to defray some of the cost of wage increases in the current round of collective bargaining.
“These savings goals, an average of $367 million per year, are less ambitious than the $850 million-per-year requirements of the previous agreement, although with more realistic healthcare cost growth projections, the initiative should result in measurable progress in controlling health insurance costs,” Rosenberg said.
According to CBC vice president Maria Doulis, savings against high projections should be used for general operating needs, rather than claimed as a savings against labor costs. “Attributing these savings to the health agreement essentially is claiming credit for work not done,” she said.
The new agreement, said Doulis, “loses the momentum of the last and provides minimal impetus to tackle the challenges that remain, including the fragmented and inefficient provision of prescription drug, vision, and dental care via welfare funds; the antiquated and wasteful Health Insurance Stabilization Fund; and the costly provision of health insurance to retirees with no contribution to the cost of care.”
City health insurance costs have skyrocketed in recent years. In 2000, it spent over $1.6 billion on health insurance for employees. By 2017, it soared to $6.3 billion before a slight dip to $6.2 billion in FY18. Even adjusting for inflation, health insurance expenses have soared 163% since FY2000.
The city offers three insurance plans to all employees and retirees at no cost for basic coverage. The plans are Group Health Insurance – Comprehensive Benefits Plan, a preferred provider plan; Health Insurance Program of New York, a health maintenance organization; and most recently MetroPlus Gold, a health maintenance organization.
Meaningful changes, according to Doulis, included switching the funding structure of the GHI plan and adjustments to provider networks and co-pay structures to incentivize greater use of primary care while reducing overreliance on emergency rooms, urgent care centers, and specialists.
The latest agreement calls for a new Tripartite Health Insurance Policy Committee to debate further tweaks to insurance plans. “The stated topics of discussion for the committee are largely common-sense reforms with tangible financial consequences,” Rosenberg said.
