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Contrary to city officials’ contentions, giving municipal retirees the option to keep their preferred, premium-free health-care benefits would yield substantial cost-savings for the city, a policy expert is arguing.
According to calculations by Barbara Caress, a health-policy professor at Baruch College, the city would realize nearly $350 million in health-care savings if it were to choose a Medicare Advantage plan that gives retirees the ability to opt out in favor of a supplemental care plan.
A spokesperson for Mayor Eric Adams’ administration had said choosing that option — so-called Option C among three included in an imminent agreement with managed-care company Aetna — “would result in minimal savings” and essentially nullify the budget-reducing reasons for switching retirees from traditional, government-administered Medicare to a private Medicare Advantage plan. “As a result, we do not intend to offer this option to retirees,” the spokesperson said in an e-mailed statement. The spokesperson had not yet seen Caress’ computations.
Caress, a member of the Professional Staff Congress, released her calculations March 23. The city is expected to inform Aetna which of the three plan options it will choose April 1.
According to Caress, switching all roughly 222,000 retirees into a so-called full replacement Aetna plan would save the city an estimated $522 million. But choosing Option C, which would give retirees the option of supplemental health coverage, albeit at a an additional cost to the city of $20 per month per retiree, would still yield savings of $342 million when estimating that 60,000 would opt out of the Aetna plan in favor of the supplemental plan, Caress calculated.
“And in what universe is it no savings?” she said during a March 24 interview. “Don't dismiss that as minimal. That's not minimal, that's a lot of money.” The Professional Staff Congress has also suggested alternative routes to health-care savings for the city.
‘A surprise to many of us’
The PSC’s president, James Davis, said the very existence of Option C and its terms, which only came to light this week, was a revelation to most labor leaders and City Council members.
The city’s pending agreement with Aetna received a solid endorsement from the Municipal Labor Committee, the umbrella organization of public-sector unions, earlier this month.
“I think that it came as a surprise to many of us in organized labor to realize that eliminating Senior Care was not a precondition of the city signing the contract with Aetna because that is how it had been represented to us,” Davis said, referring to the retirees’ current supplemental plan. “So I think what's happening now is that it's taking time for the fact of this Option C to become known and some of the implications to sink in,” including for labor leaders as well as for the City Council, which could yet have a say in how health care is allocated to municipal retirees.
Among the three options, it appears that the administration will choose what Aetna is calling the “full replacement option,” which would entail a switch of all municipal retirees into its Medicare Advantage plan. That step will essentially culminate a years-long effort by city officials to realize what they have estimated would be annual savings of about $600 million.
The savings, in the form of federal subsidies, would be funneled into the city’s Joint Health Insurance Premium Stabilization Fund, which helps finance unions’ welfare fund benefits, among other purposes.
City labor officials have long insisted that any private Medicare plan would be as good or better than the retirees’ current plan and Mayor Eric Adams said as much following the MLC’s vote. Aetna’s plan, he said, “improves upon retirees’ current plans.” He noted that it includes a lower deductible, a cap on out-of-pocket expenses as well as added benefits such as transportation, fitness programs and wellness incentives.
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