Linn says union health care savings on target, but some doubt figures

Presenting an update to the New York City Council on Friday, the Mayor’s Office of Labor Relations reported that the city was on track to meet or exceed a projected $3.4 billion in health savings over the four fiscal years 2015 through 2018, secured through negotiations with city workers’ unions. 

“We are excited to report on the success of the Municipal Labor Committee and the city towards meeting these goals,” said Robert Linn, commissioner for the office. “Not just for the current fiscal year 2016, but also for fiscal year 2017.” The city will meet its goal of saving $700 million this year and $1 billion next year, he explained, the result of “unprecedented changes to the city’s health plans.”

“As you’ll recall, when Mayor de Blasio took office in January 2014, every single contract with municipal workers had expired,” Linn said. “As of today, we’ve reached agreement with 95 percent of the workforce.”

Linn repeatedly stressed that the savings were historic and described the collaborative effort between the city and the unions as remarkable after years of rancor. “For 24 years labor and management were yelling at each other that they wanted to change health benefits,” he said. “And now we have an agreement.”

City Council members expressed both appreciation and skepticism at the commissioner’s report, praising him for bargaining effectively with the unions while quizzing him exactly how the savings were tabulated.

City Council Finance Committee Chairwoman Julissa Ferreras-Copeland was particularly strident in her opening remarks. She challenged Linn’s office to explain why it was necessary for the city to transfer $58 million for 2016 from a health care fund jointly controlled by the union and city in order to meet the $700 million savings target.

“It is unclear to this committee how spending city dollars to fill the gap could accurately be described as a savings,” Ferreras-Copeland said.

A spokesperson for the mayor said the characterization was inaccurate.

The “stabilization fund” at issue is the Health Insurance Premium Stabilization Fund, established in 1984 when the city agreed to pay into the fund to make up the difference in the cost of health insurance premiums which are paid by the city on behalf of unionized city workers. The fund ensured that workers weren’t forced to pay the difference for the higher premium plan.

Responding to reporters’ questions after the hearing, Linn said, “When you say, ‘Taking money out that you’ve already paid in,’ we have no access to that (money) – it’s a collective bargaining fund. It cannot be withdrawn without union agreement. The money that comes out of that fund closes budget gaps. There is nothing incorrect about those dollars. The full budget savings of $700 million are real, they are there, and they have been identified.”

“People can say, I like these savings, I don’t like these other savings,” Linn continued. “The savings are real.”

But budgetary watchdog groups took issue with how the savings are being counted.

Maria Doulis, vice president of the Citizens Budget Commission, said the original purpose of these reforms was to “bend” the health care cost curve, or save money on health care spending into the future. Instead, Doulis said, the city is subtracting the actual premium costs from “rosy projections” and counting that as savings – totaling $1.1 billion from fiscal year 2015 through 2017, or more than half of the projected $2.1 billion in savings for that time period.

Moreover, Doulis said, if Linn’s office tallies a savings total that exceeds the stated savings goals – and Linn said he expects to – according to their brokered deal with the city, the union “will be receiving a bonus even though it really hasn’t joined with the city in making some of the health care changes to really provide savings on a long-term basis.”

Regarding the $58 million transfer from the stabilization fund that Ferreras-Copeland called into question, Doulis flatly said it should not count.

“It is not a savings,” Doulis said. “There needs to be more transparency to that fund. Its transactions should be more closely monitored. And there should be, at a minimum, questioning what’s the purpose of this fund existing. We would say it should be eliminated.”

George Sweeting, deputy director of the New York City Independent Budget Office, also weighed in during his testimony, saying that “the savings achieved so far have less to do with controlling health insurance costs than with budget accounting and one-time actions.”

“If the savings targets are not achieved, there are additional steps that come into play, including arbitration to choose from a menu of more onerous ways to meet the savings targets, including employee contributions for health insurance,” Sweeting said in his prepared remarks.

Despite the criticisms, both Sweeting and Doulis applauded Linn’s efforts to reform the health care plans for the city’s workers and noted that although they didn’t agree with how all the savings were computed, Linn’s office had achieved substantial savings for the city and labor unions had made important but difficult compromises.

By way of explaining the new set of health care policies he had negotiated with the unions, Linn said his team was actually the first to employ city-specific data in the Office of Labor Relations.

“Data analysis is new, as extraordinary as that may seem,” Linn said. After he was appointed, he was surprised that there was “no data analysis that was conducted by the city,” he said. “The unions were against sharing that data, until we had agreements about it. And so the data was not provided to the city” – one more reason why the collaboration with the unions is important, he noted.

Looking forward, that data can be used to judge the effectiveness of their policies, Linn said, and the data his office has already analyzed helped inform the new policies.

Linn said the data showed that city “employees are not making the best use of their benefit plans to protect their own health and the health of their families.” They made an unusually high number of visits to emergency rooms, urgent care walk-in clinics, specialists and physician offices for radiology and pathology procedures. Meanwhile, workers too infrequently took advantage of outpatient preventive services, such as colonoscopies and mammograms.

In order to correct this, the city’s new plan employed a set of incentives and disincentives. For example, it raised co-pays for emergency room visits from $50 to $150 (although it’s waived if the patient is admitted), while reducing the co-pay for preventive services to $0.

Council members expressed concern, however, that such policies might dissuade low-income city employees from going to the emergency room when they should.

“I know a lot of my constituents that have kids that suffer from asthma are in those emergency rooms quite often,” Ferreras-Copeland said. “And when you have a co-payment of $50 going up to $150, a parent on a tight budget may think twice about going into the emergency room. And that is a big fear that I have.”

The city’s plans also include a suite of other offerings designed to reduce costs, including a smartphone app, ZocDoc, specially tailored for city employees that helps workers find doctors and make appointments.

After an at-times contentious meeting, the hearing closed amicably.

 Responding to concerns from the City Council that city workers may not be prepared for the changes, Linn assured the panel that both the labor relations office and unions were working to educate their members of the upcoming changes, which will take effect on July 1.

Ferreras-Copeland said she and her colleagues would be happy to help get the word out as well. “We’re partners …r emember?” she quipped.