The City Wants Lower Insurance Costs. It Needs a Basic Rethink.
New York City government wants to buy a new basic insurance plan for more than one million beneficiaries (City employees and their dependents). It wants to cut the nearly $10 billion a year it currently pays for coverage by $1 billion annually, maintain the same level of coverage, and keep it premium-free for members.
Achieving all that is about as easy as finding an affordable three-bedroom apartment in Greenwich Village.
The search began 18 months ago and involves both the administration of Mayor Eric Adams and the Municipal Labor Committee (MLC), the umbrella collective bargaining group for the vast majority of unionized City workers. Together they invited insurers to make their best offer for a plan “to reduce the cost of delivering healthcare by at least 10% while continuing to provide efficient, high-quality healthcare to all City employees and pre-Medicare retirees without significant increases in member out-of-pocket cost.”
Two contenders are still in the hunt: Aetna, a large national company that is also the City’s preferred provider for its retiree health insurance plan; and the odd couple matchup of UnitedHealthcare, the nation’s largest company, partnered with homegrown EmblemHealth, one of the incumbent insurers in the current array of providers available to City workers.
With Michael Mulgrew, president of the roughly 200,000-member United Federation of Teachers, promising that no plan would be selected unless it “is the same or better than the one we have,” and the Adams administration focused on savings, the process has, not surprisingly, stalled. The City has pushed for Aetna and the MLC for United/Emblem.
The dispute was then presented to an outside arbitrator who, despite being paid a cool $7,500 per day, was unwilling to settle it. Instead, he sent it back to the disputants last December, with instructions to solicit savings guarantees from Aetna and UnitedHealth/Emblem. The City and the MLC have gone back to the insurance companies with more questions; their answers are expected in March.
However, any resolution even then could be in doubt. That’s because Empire Blue Cross (Anthem), the City's principal current incumbent insurer, has gone to State Supreme Court asking it to haul the Adams Administration, Emblem, Aetna, and UnitedHealthcare in to explain their actions. If the judge hearing the case agrees, everything stops while the legal wrangling plays out.
Under any scenario, cutting $1 billion from the City’s health insurance tab without degrading benefits in the next fiscal year is, frankly, next to impossible. The City could, however, do a much better job of using its considerable market power (it insures roughly one-fourth of all city residents who are enrolled in private insurance plans) to maximize the value of what is spent and also contain some cost drivers.
Here are three ideas:
More aggressively monitor fraud. The U.S. Government Accountability Office estimates conservatively that three percent of health care spending is fraudulent. The City administers its $9.4 billion program, serving 1.25 million beneficiaries and paying thousands of providers, with fewer than 20 staff. That’s just jaw-dropping.
Follow the example of most other major public employers and self-insure. The savings on administrative costs might be modest (in the one-to-two percent range), but self-insuring would increase the City’s flexibility. It could design benefits that better meet the needs of its participants while also being less wasteful. The City’s plan could be an enormous workshop within which to test various techniques to reduce the 10-20 percent of spending that goes to low-value care (prescribing costly name-brand drugs instead of identical generics, for example, or performing surgery when physical therapy would be just as effective), and instead directs its money towards services proven to reduce suffering and early death.
Seek State regulation of health care spending. Rather than continuing to dicker with insurance companies to guarantee the unachievable, the City should use its considerable political muscle to push the State to do as a dozen other states have done: implement programs to control health care spending.
New York was actually one of the first states to regulate health care spending. From 1978 until 1996, the State, not insurance companies, set all payer hospital reimbursement rates. Then Governor George Pataki deregulated, and New York became one of the most expensive states in which to get health care. In 2020, New York ranked second only to Alaska (which has a unique set of issues) with an average of $13,012 in annual health care costs per resident. There is a direct line from health care spending to health insurance costs. New York ranks first of the 50 states in the average employer cost for single coverage, at 18 percent above the national average.
New York City government should deliver a health plan to its employees that sets the standard for the city, the state, and the country. It does not require more money. It does take the courage to change and to challenge prices and spending that do not make people healthier.
Barbara Caress has worked for many years in non-profit, union, and public agency health care and administration. She teaches health policy at Baruch College.
Photo by: Wikimedia
