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Mayor Issues Ultimatum on Retiree Health Care, Seeking End to Standoff

City Council must enable budget-cutting new health insurance options for retirees, warns Eric Adams’ chief labor negotiator — or City Hall will eliminate existing insurance plans.

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Mayor Eric Adams speaks at City Hall about signing bills to aid maternal health, Aug. 29, 2022.

Ben Fractenberg/THE CITY

This story was published in partnership with New York Focus, an independent, investigative news site covering New York state and city politics. Sign up for their newsletter here.

Mayor Eric Adams is giving employee unions and the City Council an ultimatum, aiming to end a standoff over retirees’ health insurance that could cost the city budget billions.

The Council must either allow his administration to switch retired city workers to a private Medicare Advantage plan, with an option to opt out for a price, or the Adams administration will unilaterally discontinue all health insurance plans that currently cover retired city workers and replace them with a Medicare Advantage plan, according to a letter sent Friday by Office of Labor Relations Commissioner Renee Campion.

The administration says it will pull the plug on the current insurance plans unless the City Council immediately comes up with a gameplan this week to pass legislation allowing the city to charge retired city workers for the insurance that they currently get for free. 

For over a year, many retirees have bitterly resisted the city’s attempt to switch their health insurance to Medicare Advantage, a program in which private companies work with the federal government to offer plans similar to Medicare, the federal government’s health insurance program for Americans who are 65 or older, or disabled. 

Retirees fear a Medicare Advantage plan will cover fewer services and have a smaller network than the plan most of them are currently enrolled in, which is traditional Medicare plus a supplemental plan known as Senior Care. A New York Times report earlier this month found that every year, tens of thousands of people enrolled in Medicare Advantage plans nationwide are denied necessary medical care that would likely have been covered were they enrolled in traditional Medicare. 

The city had planned to save an estimated $600 million a year, largely by tapping into federal subsidies for Medicare Advantage — all part of a cost-saving program negotiated between unions and former Mayor Bill de Blasio.

If the administration can’t achieve those savings, current workers could pay the price. In recent discussions with union leadership, the Adams administration had already warned that if Medicare Advantage doesn’t move forward, it will push to impose insurance premiums on active city employees, said Michael Mulgrew, president of the United Federation of Teachers and vice-chair of the Municipal Labor Committee, a coalition of city unions. 

A spokesperson for Adams confirmed that the administration is considering measures that would affect active employees’ health insurance. 

“Unless the legislation mutually supported by the city and the Municipal Labor Committee is passed, the city will need to achieve the necessary savings through other measures that will impact both active employees and retirees,” Adams spokesperson Jonah Allon wrote in a statement.

In that scenario, the premium contributions for active employees would be about $1,500 a year, according to the United Federation of Teachers, a hefty sum for city workers on the lower end of the pay scale, which bottoms out around $30,000 a year for full-time employees. 

Allon noted that the city is currently facing “significant fiscal uncertainty,” with potential deficits of billions of dollars in upcoming years. “The Medicare Advantage Plan is part of a comprehensive solution to that challenge,” he said.

A spokesperson for City Council Speaker Adrienne Adams said that the Council is currently considering the ultimatum.

“The Council is discussing this internally and understands the urgency and need to protect health care for our current municipal employees and retirees. There are many considerations surrounding this issue, and we will let you know of our plans when ready,” the spokesperson said.

Mulgrew said that any deal that would lead to active employees being required to pay insurance premiums is off the table for him, and that the best option is preserving premium-free plans for retirees and active employees by moving retirees to Medicare Advantage.

“I am not going to pit my retirees against my in-service workers,” he said.

According to the Organization of Public Service Retirees, a group that sued the city to stop the Medicare Advantage switch, that’s what the Adams administration and the unions are already doing.

“Nobody’s against health care savings, but you don’t do it in the dark and on the backs of the most vulnerable people,” said Steve Cohen, lawyer for the Organization of Public Service Retirees.

Where’s the Money?

When it unveiled the planned switch last year, the city offered retirees a choice: they could switch to a premium-free Medicare Advantage plan, or they could pay $191 a month to retain their coverage under Senior Care. But in March, Manhattan Supreme Court Judge Lyle Frank ruled that forcing retirees to pay for Senior Care would violate the city charter, putting the planned switch on ice. 

In September, the Adams administration and the unions asked the Council to change the section of the charter that Judge Frank based his ruling on, in order to allow the city to proceed with the budget-cutting switch. But earlier this month, the Daily News reported that the Council was “lukewarm” on implementing the change. The Office of Labor Relations letter, dated Oct. 28 and addressed to MLC chair Harry Nespoli, said that no legislation to make the change has been introduced yet.

The letter also said that unless there is a “swift timeline” for changing the law by the end of this week, the Adams administration will unilaterally impose a Medicare Advantage plan on retirees, and eliminate all other plans currently available, including Senior Care.

That aggressive move would likely be legal, because of a 2018 agreement between the unions and the de Blasio administration that pledged to save $600 million on health care costs annually, starting in 2021. The agreement contained several potential ways to achieve the savings, including switching retirees to Medicare Advantage. 

According to the 2018 agreement, if the unions and the city fail to achieve those savings, the city is allowed to ask an arbitrator to impose a solution that saves the agreed-on amount. One way the arbitrator could do that is mandating a switch to Medicare Advantage and eliminating all other health care plans.

Marianne Pizzitola, the president of the New York City Organization of Public Service Retirees, said that the city should convene a commission to look for other ways to save the money, with representation from the city, the unions, and retirees. 

Pizzitola claimed that her group has already identified ways to save the city at least $350 million a year in health care costs, such as auditing the membership of the insurance plans. An 2014 audit saved the city over $100 million by terminating the coverage of people who were incorrectly enrolled in city-funded insurance. 

“There’s money to be found if you do it responsibly, and what the MLC and the individual unions are doing now is absolutely irresponsible,” said Cohen, the retiree group’s lawyer.

A Reluctant Council

Mulgrew said that he and other union leaders have been holding “a lot” of meetings with councilmembers to push for the legal change, but declined to name any members who are considering introducing legislation to change the charter.

Pizzitola said that she has heard that Speaker Adams is considering introducing the legislation herself. Adams’ office declined to comment.

Pizzitola said that multiple Council members, whom she declined to name, have said that union leaders have told them that if they don’t support the change to the charter, the unions will not support them in their reelection campaigns next year. A spokesperson for the United Federation of Teachers denied this claim.

Mulgrew said that he hopes to convince the Council to pass legislation by the end of November. The letter from the Office of Labor Relations said that the Adams administration originally hoped to have legislation passed by Nov. 23, but since no bill had been introduced as of Friday, that is now “virtually impossible.”

If the switch to Medicare Advantage moves forward, the city and the unions will need to find an insurance company to administer the plan. The contract was initially awarded to the Retiree Health Alliance, a partnership between insurance companies Elevance Health and Empire BlueCross BlueShield, but the Alliance pulled out in July, citing the uncertainty caused by the ongoing lawsuit against the switch.

Mulgrew said that the unions and the city have not selected a company to administer a new Medicare Advantage plan, but noted that they are currently in talks with Aetna, which had the runner-up bid for the original contract.

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