Adams and Unions Strike Deal on Shift to Cost-Cutting Medicare Plan

This article was published in partnership with THE CITY.

At a meeting Thursday morning, the administration of Mayor Eric Adams and major unions representing municipal employees agreed on a proposal to clear the way for their long-held goal of switching retired city workers to cost-saving private Medicare Advantage plans.

The insurance shift, first reported by New York Focus more than a year ago, would likely save the city hundreds of millions of dollars a year and help pay for current workers’ benefits — but many retirees fear that it could decrease their access to health care.

At the meeting, union leaders agreed to a proposal from the administration to make a joint request to the City Council, asking it to amend city law to allow the city to charge retirees for their current health care plans. That would remove a legal roadblock that has held the switch up in court and led the insurer that had won the contract to administer the plan to back out in July.

“It wasn’t all wildly enthusiastic votes, and people were expressing qualms. But the difficulty is we’re not quite sure what else to do, because there is a financial problem here,” said Robert Croghan, chair of the executive board of the Organization of Staff Analysts, a union representing city office workers across numerous agencies. Croghan estimated that 85% of the dozens of union representatives present voted in favor of the proposal.

Oren Barzilay, president of Local 2507, a union representing fire department employees, told New York Focus that he voted against the proposal. “The law gives us protection in terms of having our current health benefits,” he said. “Why would you open up that Pandora's box not knowing what could happen?”

The city projects that the shift to Medicare Advantage will save $600 million annually, which would go to a fund jointly controlled by the city and the unions that is used to pay for current city employees’ health insurance and other benefits. Without that additional cash, the benefits that the fund provides could be at risk.

The city and union leaders have claimed that retired city workers would receive the same quality of care under a Medicare Advantage plan as they currently receive under Senior Care, the free insurance plan that the city provides to most retirees. But many retirees have raised concerns that a Medicare Advantage plan would provide less coverage and carry greater out-of-pocket costs than Senior Care.

The city had planned to incentivize retirees to switch to Medicare Advantage by requiring them to pay $191 a month to maintain their coverage under Senior Care. In a March decision on a lawsuit filed by retirees to stop the switch, state Supreme Court Judge Lyle Frank ruled the city can’t force retirees to pay for their current care.

Frank’s ruling threatened the viability of the switch as a cost-cutting device. By April, over 65,000 retirees had opted out of the Medicare Advantage plan — more than one out of every five retired employees.

The proposed legislation, endorsed by the mayor’s Office of Labor Relations and the unions’ Municipal Labor Committee, would change the text of the law that Frank based his ruling on to allow the city to force retirees to pay to maintain their current coverage. 

The legislation would also open the door to changes to the health insurance of current city employees. Currently, the city is required to pay for its employees’ health insurance costs up to a certain benchmark: the cost of the HIP HMO Preferred plan, which the city has offered employees for over 60 years. The proposed legislation would allow the city to designate a new benchmark plan. Selecting a cheaper plan than HIP HMO could allow the city to spend less on insurance and potentially leave active employees with narrower coverage.   

The proposal is detailed in a letter from Labor Relations Commissioner Renee Campion to Harry Nespoli, chair of the Municipal Labor Committee, a coalition of city workers’ unions. The legislative change “would help ensure the parties have the necessary flexibility to obtain quality and affordable health insurance coverage for covered individuals,” the letter states. The letter also says that at least one plan for retirees and active employees would remain premium-free, as Senior Care and HIP HMO Preferred currently are.

Frank’s ruling allowed the city to eliminate Senior Care entirely, but the city hasn’t given any indication that it is considering that step.

The Adams administration is appealing Frank’s ruling. But if the City Council adopts the Office of Labor Relation’s proposed legal change, then getting the ruling overturned might be unnecessary.

“It’s an end run around the court decision, in a sense,” Croghan said.

The unresolved Medicare Advantage situation is likely to be a significant sticking point in upcoming contract negotiations between the unions and the city, City & State reported on Wednesday. If the unions think that their health care costs are likely to go up, they may ask for larger raises, which would cost billions of dollars. That could be an ask that the city is reluctant to grant, especially since current projections show it is already likely to face multi-billion-dollar budget gaps in upcoming years.

Croghan predicted that the City Council will approve the proposed change. 

“It’s something that Adams wants, and now the Municipal Labor Committee says they want it too. Why would the City Council not go along with it?” he said.

Barzilay said that public opposition to the plan, which has been vocal in the past, could present an obstacle.

“There’ll be people testifying for it, and people testifying against it. It’s just a matter of who’s more persuasive to the City Council,” he said.

This story has been updated to include information on how the proposed legislation could affect current city employees' healthcare.