New York City provides health insurance to its municipal workforce and retirees through a system that is significantly more generous than those offered by private employers or other public jurisdictions. This page covers CBC’s work on premium sharing for active employees and retirees, the consolidation of union-administered welfare funds, the transition to Medicare Advantage plans, the management of long-term retiree health liabilities, and the impact of health benefit costs on the municipal budget.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
The City should implement the agreement to transition retirees to the Medicare Advantage Plus plan to restrain cost growth and reduce other postemployment benefit liabilities.
The City Council should pass Introduction 874 to allow the agreement between the City and the Municipal Labor Committee to move forward.
The law governing health benefit specificity should be repealed in its entirety because such specific benefit levels should not be codified.
The City and the Municipal Labor Committee should undertake a comprehensive review of health and welfare benefits for employees and retirees to reduce costs to more manageable levels.
Future policy changes should include premium sharing for employees and pre-Medicare retirees, the elimination of Medicare Part B reimbursements, and the consolidation of union welfare fund benefits.
Key Data
In a January 2023 testimony, the CBC highlighted that New York City's health insurance costs were budgeted to increase at a rate of 8.5% per year between fiscal years 2023 and 2026.
In February 2022, the CBC noted that 95% of New York City municipal employees choose health insurance plans with no premium contributions, whereas New York State employees contribute between 12% and 31% of their premiums.
A November 2021 report showed that New York City's employee and retiree health and welfare benefit costs totaled nearly $7.2 billion a year, having grown at an average rate of 4.2% per year since fiscal year 2014.
In an October 2021 testimony, the CBC reported that New York City's retiree health benefits generated a $122 billion long-term fiscal liability for other postemployment benefits (OPEB).
In a September 2020 report, the CBC highlighted that New York City makes contributions to 73 distinct welfare funds administered by individual unions, with total payments projected to exceed $1.3 billion in fiscal year 2020.
New York City's budget plan should incorporate $1 billion in anticipated savings derived from the rebidding of the municipal health insurance plan. This adjustment is part of a broader strategy to address a projected fiscal year 2027 budget gap that may approach $8 billion.
Recommendations related to Employee Health Benefits
The City's spending plan should reflect the reported $1 billion in savings from rebidding the City’s health insurance plan.
Key Data
$1 Billion
— Projected savings from rebidding the City’s health insurance plan.
The Citizens Budget Commission's 2025 Mayoral Candidate Questionnaire asks candidates for their positions on city employee health insurance premiums and potential cost-sharing or benefit reductions for retiree health benefits. The document serves as a platform for candidates to outline their fiscal approaches to these specific labor and benefit-related issues.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
The Metropolitan Transportation Authority needs to address rising operating costs by modernizing labor contracts, including transitioning retirees to a high-quality Medicare Advantage plan to control health care expenses. These adjustments, alongside improvements in work rules and scheduling, are essential to stabilizing the transit system's budget while maintaining service quality for riders.
Recommendations related to Employee Health Benefits
The MTA and TWU should follow the lead of New York City and its recent contract negotiations by switching retirees to a high quality Medicare Advantage plan.
Ballooning health care costs should be restrained.
New York City faces significant budget gaps that require restructuring and prioritizing high-impact services rather than relying on tax increases or service cuts. To achieve necessary savings, the city should pursue efficiencies such as consolidating welfare-benefit funds, which could generate $150 million in savings.
Recommendations related to Employee Health Benefits
The city should consolidate welfare-benefit funds to achieve $150 million in savings through improved efficiency and purchasing power.
Key Data
$150 million
— Potential annual savings from consolidating welfare-benefit funds.
New York City's health insurance costs for employees and retirees are projected to rise by 8.5 percent annually through 2026, necessitating structural changes to ensure fiscal sustainability. Proposed reforms include implementing the Medicare Advantage Plus plan, repealing restrictive laws regarding benefit specificity, and conducting a comprehensive review of benefits to introduce premium sharing and consolidate union welfare funds.
Recommendations related to Employee Health Benefits
The City should implement the agreement to transition retirees to the Medicare Advantage Plus plan to restrain cost growth and reduce other postemployment benefit liabilities.
The City Council should pass Introduction 874 to allow the agreement between the City and the Municipal Labor Committee to move forward.
The law governing health benefit specificity should be repealed in its entirety because such specific benefit levels should not be codified.
The City and the Municipal Labor Committee should undertake a comprehensive review of health and welfare benefits for employees and retirees to reduce costs to more manageable levels.
Future policy changes should include premium sharing for employees and pre-Medicare retirees, the elimination of Medicare Part B reimbursements, and the consolidation of union welfare fund benefits.
Key Data
8.5 percent
— The projected annual increase in health insurance costs between fiscal years 2023 and 2026.
$200
— The approximate monthly premium for retirees who choose to remain in their current Medigap program.
$600 million
— The estimated annual reduction in City costs if the Medicare Advantage plan is implemented.
New York City's municipal employee and retiree health benefits are significantly more generous than those of other public and private employers, with nearly all employees paying no premiums. Implementing cost-sharing measures for premiums and consolidating union welfare funds could generate substantial annual savings for the city.
Recommendations related to Employee Health Benefits
In negotiating the next round of contracts, the administration and unions should modernize employee benefits, eliminate outdated salary differentials, and change contractual work rules that impede efficient service delivery.
The city could save $675 million annually if city employees shared premium costs slightly below the level of state employees.
Consolidating the roughly 75 separate union welfare funds could save $160 million annually through administrative efficiencies and greater purchasing power.
Key Data
$53.6 billion
— Amount of the city's budget that funds wages, health insurance, and pensions.
95%
— Percentage of city employees who elect health insurance plans with no premium contributions.
12% to 31%
— Range of premium contributions required from New York state employees.
$675 million
— Potential annual savings if city employees shared premium costs slightly below the level of state employees.
$160 million
— Potential annual savings from consolidating the roughly 75 separate union welfare funds.
New York City's health and welfare benefit costs have grown by an average of 4.2 percent annually since 2014, reaching nearly $7.2 billion, while retiree benefits account for one-third of this spending and contribute to a $122 billion long-term liability. To address these fiscal challenges, the City should negotiate premium-sharing agreements with labor unions, consolidate separate welfare funds, and implement modest cost-sharing for retiree benefits.
Recommendations related to Employee Health Benefits
The City should bring health and welfare benefit costs to sustainable levels, which requires negotiating changes with municipal labor unions.
The City should implement reasonable premium sharing at rates lower than those paid by New York State employees to reduce City costs significantly.
The City should structure premium sharing rates so that lower-compensated workers pay a smaller relative share and more highly-compensated employees pay a larger portion.
The City should implement modest retiree health benefit cost sharing to substantially reduce the City’s annual cost and long-term liability.
The City should consolidate the more than 100 separate union-managed welfare funds to provide comparable or better benefits at lower costs.
Key Data
$7.2 billion
— The City’s total annual costs for employee and retiree health benefits.
4.2 percent
— The average annual growth rate of health and welfare benefit costs since fiscal year 2014.
$122 billion
— The City’s long-term fiscal liability for other postemployment benefits (OPEB).
one-third
— The portion of the City’s health insurance spending comprised by retiree health benefits.
New York City's retiree health and welfare benefits cost $3.1 billion annually, with a long-term liability of $122 billion, yet recent efforts to reduce these costs through a new Medicare Advantage plan fail to provide fiscal relief because the savings are diverted to a stabilization fund. To address these rising expenses, the City should implement structural changes like premium sharing and ensure that savings directly benefit the municipal operating budget.
Recommendations related to Employee Health Benefits
The City should reduce the cost of retiree health benefits by 50 percent through premium sharing for Medicare and pre-Medicare eligible retirees.
The City should implement the elimination or reduction of Part B premium reimbursement to help rein in spending.
The City should ensure that savings from changes to retiree health benefits flow to the City’s bottom line as part of the annual budget process rather than being used to bolster other labor-related costs.
The City should use the change in how benefits are financed to pave the way for employee premium contributions for health insurance coverage.
Key Data
$3.1 billion
— Annual cost of retiree health and welfare benefits for the City.
$122 billion
— The City's current liability for retiree health benefits, also known as other postemployment benefits (OPEB).
$600 million
— Annual reduction in the City's cost of retiree health insurance under the new approach.
5.5 percent
— Average growth of retiree health insurance costs from fiscal year 2014 to fiscal year 2022.
4.3 percent
— Annual average increase for employee health insurance costs.
45 percent
— Percentage of Medicare beneficiaries in New York State enrolled in Medicare Advantage Plans.
The Metropolitan Transportation Authority faces a structural deficit that requires significant cost-saving measures, including reducing employee and retiree health care spending by $663 million. These savings are proposed through aligning premium cost sharing for retirees and the active workforce with other New York State employees, alongside a redesign of health plans.
Recommendations related to Employee Health Benefits
The MTA should reduce employee and retiree health care spending by aligning premium sharing to other New York State employees.
The MTA should implement Retirees: Premium Cost Sharing Parity to help achieve necessary cost savings.
The MTA should implement Active Workforce: Premium Cost Sharing Parity to help achieve necessary cost savings.
The MTA should pursue Value-Based Plan Redesign to reduce health care spending.
Key Data
$663 million
— Total potential annual savings from reducing employee and retiree health care spending.
$263 million
— Annual savings from implementing Retirees: Premium Cost Sharing Parity.
$130 million
— Annual savings from implementing Active Workforce: Premium Cost Sharing Parity.
$270 million
— Annual savings from Value-Based Plan Redesign.
The next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
New York City should require employees and retirees to contribute to their health insurance premiums, a change that would generate $560 million in recurring savings. Implementing a phased-in contribution structure, similar to New York State's model, would help manage the city's annual health insurance costs, which currently exceed $7 billion.
Recommendations related to Employee Health Benefits
The City should require that employees and retirees share some of the cost of health insurance premiums to reduce recurring labor costs.
The City should phase in employee and retiree contributions over three years, with lower-paid employees paying a smaller share than those more highly compensated.
The City should ensure that retirees also contribute to their health insurance premiums, which includes pre-Medicare health benefits, Medicare Part B premiums, and supplemental Medicare policies.
Key Data
$7 billion
— The City’s annual cost for health insurance for employees and retirees.
$560 million
— The amount of recurring health insurance premium savings the City would realize from implementing modest employee contributions.
8 percent
— The portion of the City’s health insurance premium expenses that would be saved through the recommended contribution plan.
$273
— The annual contribution for single coverage for an employee making less than $65,000 in fiscal year 2024.
$936
— The annual contribution for family coverage for an employee making less than $65,000 in fiscal year 2024.
$624
— The annual contribution for single coverage for an employee making more than $65,000 in fiscal year 2024.
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New York school districts spend significantly more on employee benefits than the national average, with total annual spending on health insurance reaching $7 billion. By aligning employee health insurance premium contributions with those of New York State employees, school districts could achieve $846 million in annual savings.
Recommendations related to Employee Health Benefits
New York’s 673 school districts should examine all areas of spending, including the high rate of spending on public school health benefits, to find efficiencies and contain costs.
School districts should align employee health insurance premium contributions with those of New York State employees to achieve significant annual savings.
School districts should identify savings to offset the impact of State aid actions by adjusting health insurance premium-sharing rates.
Key Data
$846 million
— Annual savings school districts could achieve if employees contributed the same share of premiums as State employees.
$7 billion
— Total annual spending by New York school districts on health insurance for employees, their families, and retirees.
$6,813
— Amount spent per pupil on benefits in New York, which is 116 percent higher than the national average.
14%
— Average employee premium contribution rate for single coverage for school districts outside of New York City.
16%
— Average employee premium contribution rate for family coverage for school districts outside of New York City.
21.3%
— Average employee contribution rate for single coverage in New York's private sector in 2019.
The Metropolitan Transportation Authority faces a severe fiscal crisis with a $15.9 billion budget gap, necessitating difficult choices like service cuts and potential debt. To help mitigate these drastic measures, the agency should pursue operational efficiencies, including equalizing employee and retiree health benefit contributions to those of State employees to save $200 million annually.
Recommendations related to Employee Health Benefits
The MTA should equalize employee and retiree health benefit contributions to those of State employees to generate savings.
Key Data
$200 million
— Annual savings potential from equalizing employee and retiree health benefit contributions to those of State employees.
New York City's municipal labor costs are significantly higher than other public and private employers, largely due to generous health insurance benefits that require little to no employee premium contributions. To address the city's fiscal crisis and achieve necessary savings, the city should implement premium-sharing arrangements for both active employees and retirees, bringing benefits more in line with other jurisdictions.
Recommendations related to Employee Health Benefits
The City should reinvigorate the joint committee on health insurance with the goal of implementing a new premium-sharing arrangement.
A contribution of 16 percent of the premium for pre-Medicare retirees in fiscal year 2021 would save about $224 million.
The City should eliminate Medicare Part B premium reimbursement and the income-related monthly adjustment amount (IRMAA) to save about $400 million a year.
The City should work with the Municipal Labor Committee to consolidate welfare funds to leverage economies of scale for prescription drugs and other medical benefits.
Contributions for health insurance can be structured in many ways, including consistent contributions across employees, either as a share of the premium or a flat amount.
Key Data
$9,300
— Annual cost to the City in fiscal year 2021 for an employee with no dependents who selects a health insurance plan requiring no employee contribution.
$23,000
— Annual cost to the City in fiscal year 2021 for an employee with dependents who selects a health insurance plan requiring no employee contribution.
$2.2 billion
— Annual cost of pre-Medicare retiree health insurance benefits and Medicare Part B reimbursement in fiscal year 2020.
$400 million
— Annual savings to the City from eliminating Medicare Part B premium reimbursement and the income-related monthly adjustment amount.
$1.3 billion
— Projected City payments to union-administered welfare funds in fiscal year 2020.
New York City's municipal employees currently pay nothing toward their health insurance premiums, a benefit that costs the city over $9,300 annually for individual coverage and approximately $23,000 for family coverage. To address fiscal challenges, the city should implement premium-sharing arrangements and consolidate union-administered welfare funds to better align benefits with those offered by other public and private employers.
Recommendations related to Employee Health Benefits
The City should implement a new premium-sharing arrangement for health insurance, as even modest employee contributions can generate significant savings.
The City should work with the Municipal Labor Committee to consolidate welfare funds to leverage economies of scale for prescription drugs and other medical benefits.
The City could require pre-Medicare retirees who are eligible for insurance through an employer to enroll in that plan instead of relying on city-funded benefits.
The years of service required to be eligible for health insurance could be increased for current employees.
The City should seek to eliminate Medicare Part B premium reimbursement and the income-related monthly adjustment amount to achieve significant annual savings.
Key Data
95 percent
— Percentage of City municipal employees who select health insurance plans that require no employee contribution toward the cost of the monthly premium.
$9,300
— Annual cost to the City in fiscal year 2021 for an employee with no dependents.
$23,000
— Annual cost to the City in fiscal year 2021 for an employee with dependents.
$2.2 billion
— Annual cost of pre-Medicare retiree health insurance benefits in fiscal year 2020.
7.0 percent
— Annual average growth rate of health insurance premium costs from fiscal year 2009 to fiscal year 2019.
21.1 percent
— Average premium contribution for single coverage at large firms in New York State.
Watch the original segment here . Budget watchdogs say labor and City Hall should target health care costs first. "The city pays the full premium for employees, retirees and their families. It's a deal that no other New Yorker in the private sector has," said Maria Doulis, vice-president at the…
New York City employees and retirees currently receive health insurance without premium contributions, a benefit that exceeds private sector and state standards. Implementing a premium-sharing arrangement for both active employees and retirees could generate over $1 billion in annual savings for the city.
Recommendations related to Employee Health Benefits
Implementing a health insurance premium-sharing arrangement would provide significant recurring savings while ensuring the City continues to provide attractive benefits.
If retirees contributed 16% of the premium for pre-Medicare insurance and 25% of the premium for Medicare Part B and Supplemental Medicare coverage, the City would reduce annual costs by about $350 million when fully implemented.
If employees with salaries less than $65,000 contributed 6% of premiums for single coverage and 8% for family coverage, and those with salaries greater than $65,000 contributed 14% of premiums for single coverage and 16% for family coverage, the City would save more than $700 million annually when fully implemented.
Key Data
$350 million
— Annual savings from retiree health benefit premium sharing when fully implemented.
$700 million
— Annual savings from active employee health benefit premium sharing when fully implemented.
16%
— Proposed retiree contribution for pre-Medicare insurance.
25%
— Proposed retiree contribution for Medicare Part B and Supplemental Medicare coverage.
6%
— Proposed contribution for single coverage for employees with salaries less than $65,000.
14%
— Proposed contribution for single coverage for employees with salaries greater than $65,000.
New York's Health Care Reform Act (HCRA) taxes significantly increase health insurance premiums, costing the average family about $1,000 annually and reducing employee wage growth. These taxes, which are increasingly used to offset general Medicaid costs rather than their original public health purposes, place a substantial financial burden on both the state and privately insured residents.
Recommendations related to Employee Health Benefits
HCRA tax increases should be avoided as a strategy for balancing the Medicaid budget because that action increases the cost of health insurance premiums and likely depresses wage growth for a majority of New Yorkers.
As lawmakers negotiate this year’s budget and evaluate the State’s five-year financial plan, they should review HCRA’s role in health care funding and its impact upon privately insured New Yorkers.
HCRA taxes should not be increased in the upcoming budget negotiations.
Key Data
$1,000
— Statewide average annual cost of HCRA taxes for family coverage.
$350
— Statewide average annual cost of HCRA taxes for individual coverage.
4.3 percent
— Combined impact of HCRA taxes on health insurance premiums.
$6 billion
— Approximate annual HCRA revenue.
$700 million
— Annual amount the State pays via HCRA taxes.
80 percent
— Portion of HCRA revenue used to pay for the State’s share of Medicaid in recent years.
The Metropolitan Transportation Authority's new labor contract with the Transport Workers Union includes increased compensation and benefits, alongside initiatives to generate savings through changes to health insurance and employee availability. While these savings are intended to offset costs, there is a significant risk they will not materialize, potentially increasing the agency's four-year budget shortfall.
Recommendations related to Employee Health Benefits
To keep the financial plan impact neutral, the agreements should include greater savings, including workrule changes, to offset the impact of these increased costs.
The labor-management productivity committees established in the TWU contract should establish productivity targets and provide public quarterly reports on savings to ensure accountability.
The MTA should not miss the opportunity to include workrule changes in other collective bargaining agreements.
Similar committees should be established with other unions if workrule changes are not directly negotiated in the other collective bargaining agreements.
Key Data
$64 million
— The estimated cost of non-wage benefits over four years.
$27 million
— The estimated annual health savings from the contract.
$176 million
— The total estimated health savings over four years.
$730
— The estimated health cost savings per TWU employee.
$4 per month
— The increase in the employer contribution toward enhanced optical and dental benefits.
$1.8 million
— The annual cost of the increased employer contribution toward optical and dental benefits.
The state legislature has passed 18 bills that would expand pension and disability benefits, potentially undermining previous fiscal reforms like progressive health insurance contributions. These measures carry a projected first-year cost of at least $71 million and should be vetoed to maintain fiscal stability and prevent further benefit expansions.
Recommendations related to Employee Health Benefits
The Governor should veto all 18 bills to avoid undermining past reforms like negotiating progressive health insurance contributions.
The state should maintain fiscal discipline by rejecting unwarranted expansions of employee and retiree benefits.
The Governor should send a strong message that past reforms will not be overturned by vetoing these bills.
Key Data
$71 million
— Projected first-year cost of the 18 benefit sweetener bills.
$41 million
— First-year cost of the most expensive bill, A4431/S5207, which establishes a 20-year retirement plan for certain state law enforcement positions.
$15.7 million
— First-year cost of A7874-A/S5905-A, which would require New York City paraprofessionals to join the Teachers Retirement System.
$5.6 million
— Annual cost of A7620-A/S5903-A, which allows New York City police officers to receive retirement credit for time spent as cadets.
$2.76 million
— First-year cost of A5940/S3659, which allows Tier 6 uniformed court officers and peace officers to retire without early age reduction.
$2.1 million
— First-year cost to Nassau County for A5324/S5133, which grants enhanced disability benefits to ambulance medical technicians.
The 2019 Benefit Sweetener Scorecard tracks 189 legislative bills, including several proposals regarding public employee health insurance, such as mandates to maintain benefit levels for retirees and requirements for dental coverage. These legislative efforts aim to modify or protect various health insurance provisions for state and local government employees, though most fiscal impacts remain to be determined.
The proposed New York Health Act would require an unprecedented tax increase of at least 156 percent, totaling $139 billion in its first year, to shift health care spending from the private to the public sector. This legislation would force over 10 million New Yorkers to switch from private plans to a public plan, while potentially facing legal challenges from self-insured firms regulated under federal law.
Recommendations related to Employee Health Benefits
The State should implement a mandate requiring individuals to have insurance, which would likely increase coverage and lower uncompensated care costs.
The State should create a new, low-cost public plan that a defined population of individuals and groups could purchase at their own expense.
The State should increase the use of mechanisms that promote competition and transparency, such as reference pricing and value-based provider payments.
The State could explore expanding insurance subsidies to noneligible immigrants and to those earning between 200 percent and 400 percent of the federal poverty level.
The State could pilot a geographic global budget by paying a coalition of providers a lump sum to care for the population in their area.
Key Data
156 percent
— The minimum tax increase required by the New York Health Act to shift spending from the private to the public sector.
$139 billion
— The total cost of the New York Health Act in its first year.
$33.5 billion
— The annual tax revenue the State would lose if just 0.5 percent of top-bracket filers left New York.
10 million
— The number of New Yorkers who would be required to switch from private plans to a public plan under the New York Health Act.
76 percent
— The portion of the State budget that would be allocated to health under the New York Health Act.
The 2019 Benefit Sweetener Scorecard tracks 189 legislative bills that propose expanding benefits for public employees, including changes to death, disability, pension, and health insurance programs. This document serves as a comprehensive inventory of proposed legislation to highlight the potential fiscal impact of these benefit expansions on state and local government budgets.
The 2019 Benefit Sweetener Scorecard tracks 189 legislative bills introduced in New York that would expand public employee benefits, including health insurance, pensions, and leave. These proposals often lack clear fiscal notes, yet many carry significant potential long-term costs for the state and local governments.
The Metropolitan Transportation Authority faces a significant fiscal shortfall, necessitating a reevaluation of labor costs, including employee health insurance contributions which are currently lower than those of other state workers. Aligning these contributions with non-represented staff and adjusting retiree benefit structures could generate substantial annual savings to help stabilize the authority's financial outlook.
Recommendations related to Employee Health Benefits
The MTA should increase employee health care contributions of represented workers to levels similar to the non-represented workforce to defray a significant share of the authority’s health and welfare expenses.
The MTA should increase the health insurance contribution rate to 18 percent of the premium to reduce the authority’s contribution by an estimated $97 million.
The MTA should alter retiree medical benefits through collective bargaining agreements to align with other State retiree contribution levels.
The MTA should apply retiree contribution shares of 12 percent to 16 percent for individual coverage and 27 percent to 31 percent for dependent coverage to MTA retirees to save an estimated $136 million to $165 million.
Key Data
$3.4 billion
— Total amount the MTA spent on fringe benefits for workers and retirees in 2018.
$1,318 million
— Amount spent on health insurance premium payments on behalf of employees and contributions to welfare benefit funds in 2018.
$97 million
— Estimated reduction in the authority’s contribution if the employee health insurance contribution rate were increased to 18 percent of the premium.
$136 million to $165 million
— Estimated annual savings from applying State retiree contribution shares to MTA retirees.
$21,770
— 2017 premium cost for dependent coverage in the New York State Health Insurance Plan (NYSHIP).
$8,670
— 2017 premium cost for individual coverage in the New York State Health Insurance Plan (NYSHIP).
New York State should pursue targeted health care reforms, such as implementing a state individual mandate and expanding value-based payment models for state employee coverage, to improve access and restrain costs. These strategies, alongside bundled payments for state employees, offer a more feasible path forward than a complete system overhaul like single-payer.
Recommendations related to Employee Health Benefits
Implement reference pricing for select services for state employees to control costs.
Require bundled payments for select services for Medicaid and state employee coverage to improve quality and efficiency.
Establish a state individual mandate to ensure individuals have insurance coverage.
Create a new, low-cost public plan that is targeted and affordable.
Support evidence-based behavioral-physical health integration models to improve care coordination.
Key Data
5.7%
— The percentage of New York State residents who were uninsured in 2017.
156%
— The required tax increase to shift $139 billion from individual and firm premiums to tax revenue under the New York Health Act.
$411 million
— The estimated decline in public costs to care for the uninsured if a state individual mandate is implemented.
$70 million to $215 million
— The cost range per 25,000 people covered for expanding insurance subsidies.
The new municipal health insurance agreement sets lower savings targets than the previous plan despite rising costs, relying on accounting decisions rather than structural reforms to meet goals. It fails to address significant inefficiencies like the fragmented provision of prescription drug, vision, and dental care, the wasteful Health Insurance Stabilization Fund, and the lack of retiree contributions to health insurance costs.
Recommendations related to Employee Health Benefits
The City should have maintained the 2018 savings target level to stimulate greater cooperation and movement on reforms.
Any recurrent savings from the prior agreement should have been returned to the general fund.
Savings against high budget projections should be used for general operating needs, rather than claimed as a savings against labor costs.
The City and labor should tackle the fragmented and inefficient provision of prescription drug, vision, and dental care via welfare funds.
The City and labor should address the antiquated and wasteful Health Insurance Stabilization Fund.
The City and labor should address the costly provision of health insurance to retirees with no contribution to the cost of care.
Key Data
$8.1 billion
— Total health benefit expenditures estimated for fiscal year 2019.
$1.1 billion
— Total savings target set by the new agreement spanning fiscal years 2019 to 2021.
$658 million
— Projected savings from lower-than-anticipated premium increases in the HIP rate.
$211 million
— Estimated savings from the prior agreement per year that are being attributed to the new targets.
$3.4 billion
— Health insurance savings target set by the previous agreement spanning fiscal years 2015 to 2018.
$1.9 billion
— Health savings claimed from accounting decisions in the previous agreement.
The Governor vetoed a series of legislative bills that would have expanded retirement and disability benefits for various public sector employees, including a measure affecting retiree health insurance contributions, to avoid significant fiscal costs. These vetoes prevented millions in immediate and annual costs associated with the proposed benefit enhancements.
Recommendations related to Employee Health Benefits
The Governor should veto legislation that expands costly employee and retiree benefits to protect the state's fiscal health.
Key Data
$13.20 Million
— One-time past service cost for enhancing in-service death benefits for State correction officers.
$2.42 Million
— Increased annual contributions and past service costs for accidental disability retirement for law enforcement and park police.
$4.70 Million
— Annual cost increase for removing the limit on overtime pay for calculating final average salary for Tier 6 New York City Transit Authority employees.
$1.50 Million
— Annual and one-time retroactive costs for allowing Tier 6 uniformed court officers to retire without early age reduction.
New York State employee health insurance costs increased by 45 percent between fiscal years 2011 and 2019, rising to an average of $23,456 per employee. Additionally, the state's liability for other postemployment benefits, primarily retiree health insurance, grew by 61 percent to $91.7 billion between fiscal years 2011 and 2017.
Key Data
45%
— Growth in health insurance costs per employee from fiscal years 2011 to 2019.
$23,456
— Average annual health insurance cost per employee in fiscal year 2019.
61%
— Growth in New York's other postemployment benefits (OPEB) liability between fiscal years 2011 and 2017.
$91.7 Billion
— Total other postemployment benefits (OPEB) liability in fiscal year 2017.
$23,000
— Average annual cost of health insurance benefits per employee.
New York City faces a massive $88.4 billion unfunded liability for retiree health benefits, with only 5 percent of the total $93.1 billion obligation currently funded. To address this, the City should implement premium sharing, eliminate Medicare Part B reimbursements, and establish a strict prefunding policy for the Retiree Health Benefits Trust Fund to move away from treating it as a rainy day fund.
Recommendations related to Employee Health Benefits
The City should establish a goal of cutting retiree health benefit costs by 50 percent to address the substantial unfunded liability.
The City should implement premium sharing for retiree health insurance to align benefits with other public and private employers.
The City should eliminate reimbursement of Medicare Part B premiums for retirees to reduce the magnitude of the unfunded liability.
The City should reduce contributions to welfare funds that provide supplementary services like prescription drug, vision, and dental coverage.
The City should develop a policy for deposits and withdrawals to the Retiree Health Benefits Trust Fund that mandates deposits equal to or exceeding the current year pay-as-you-go cost plus the annual service cost.
The City should ensure that withdrawals from the Retiree Health Benefits Trust Fund are limited to paying annual costs and not treated as a rainy day fund.
Key Data
$88.4 Billion
— The City's unfunded liability for other postemployment benefits (OPEB) at the end of fiscal year 2017.
$93.1 Billion
— The City's total other postemployment benefits (OPEB) liability in fiscal year 2017.
5%
— The portion of the total other postemployment benefits (OPEB) liability that has been funded.
$2.3 Billion
— The amount paid from the City's annual budget for retiree health bills in fiscal year 2017.
$6.9 Billion
— The amount the actuary determined was needed in fiscal year 2017 to meet commitments to both current and future retirees.
$126,000
— The unfunded other postemployment benefits (OPEB) liability per member in New York City in 2016.
7.42% is the compounded salary and wage increases for members of DC37, the City’s largest municipal union for civilian workers, under a new contract that sets the pattern for negotiations with other labor unions. NYC Labor Commissioner Bob Linn joins the podcast to discuss this deal, the dynamics of negotiating…
New York City's fiscal year 2019 budget includes a $100 million deposit into the Retiree Health Benefit Trust, which remains underfunded relative to the city's $93 billion liability for providing retiree health insurance. To address long-term fiscal risks, the city should prioritize securing substantial health care savings during labor negotiations and develop a policy to increase the trust's size to better fund this liability.
Recommendations related to Employee Health Benefits
In negotiating new collective bargaining agreements, the City should hold firm that substantial health care savings must be secured.
The City should focus on retiree health insurance benefits to help reduce its other postemployment benefits (OPEB) liability.
The City should develop a policy to increase the size of the Retiree Health Benefit Trust to fund its long-term liability.
Key Data
$93 billion
— The City's liability for providing health insurance to its retirees.
$100 million
— Deposit made into the Retiree Health Benefit Trust (RHBT) in the fiscal year 2019 budget.
$4.35 billion
— Total balance of the Retiree Health Benefit Trust.
5 percent
— The portion of the long-term liability that the Retiree Health Benefit Trust balance covers.
Several vetoed legislative bills would have expanded pension, disability, and medical benefits for public sector employees, including provisions for in-service death benefits and accidental disability retirements. These measures carried significant fiscal implications, with specific proposals requiring $13.20 million in past service costs for death benefits and $2.42 million for accidental disability retirement adjustments.
Key Data
$13.20 Million
— One-time past service cost for the in-service death benefit enhancement for state correction officers.
$2.42 Million
— Increased annual contributions and immediate past service cost for accidental disability retirement for law enforcement and other specified officers.
The Long Island Rail Road faces higher operating costs than Metro-North, partly due to legacy expenses like retiree health insurance and underfunded pension plans. While recent labor agreements have introduced employee contributions to health insurance and pension costs, further productivity reforms are needed to address these financial inefficiencies.
Recommendations related to Employee Health Benefits
The MTA should prioritize productivity reforms in future collective bargaining agreements to address rising labor costs, including those driven by health benefits and pensions.
Management should pursue standardizing work rules across the LIRR and Metro-North to generate savings and reduce inefficiencies.
The MTA should continue to negotiate employee contributions to health insurance and pension costs to mitigate the impact of legacy expenses on operating budgets.
Key Data
$60 million
— LIRR retiree health insurance expense in 2017.
$33 million
— Metro-North retiree health insurance expense in 2017.
$9,487
— LIRR retiree healthcare cost per position in 2017.
$4,902
— Metro-North retiree healthcare cost per position in 2017.
$16,141
— LIRR healthcare cost per position in 2017.
$17,005
— Metro-North healthcare cost per position in 2017.
New York City contributes over $1 billion annually to union-administered benefit funds, which often suffer from excessive administrative costs, unnecessary reserves, and mismanagement. Consolidating these supplemental health and non-health benefits into centralized city programs could improve efficiency and generate significant taxpayer savings.
Recommendations related to Employee Health Benefits
The Office of the Comptroller should give higher priority to auditing union-administered benefit funds.
Corresponding benchmarks and indicators are needed that can trigger enforcement powers for benefit funds.
The Office of Labor Relations, in negotiation with labor unions, should expand the Comptroller’s oversight and enforcement authority over union-administered benefit funds.
The City should consolidate the provision of supplementary health benefits, such as prescription drug, dental, and optical coverage, within the City’s health insurance program.
The City should provide non-health related benefits through a centralized cafeteria plan to allow for benefits to be tailored to an individual rather than an entire union.
Key Data
$1.1 billion
— Projected taxpayer contribution to 108 union-administered benefit funds in fiscal year 2018.
$160 million
— Potential savings for the City from restructuring how supplemental benefits are provided.
$109.3 million
— Amount spent on administrative expenses by 91 benefit funds in fiscal year 2014.
8.9%
— Administrative expenses as a percentage of all benefit fund expenditures in fiscal year 2014.
$6.3 billion
— Projected spending by New York City on health insurance benefits in fiscal year 2018.
$7.2 billion
— Total net assets of annuity funds in fiscal year 2014.
This episode's datapoint is $95 billion, the current value of all of the future retiree benefits, except pensions, already earned by current retirees and employees of NYC. This amount, referred to as OPEB, or 'Other Post-Employment Benefits,' is primarily the cost of health insurance for NYC employees, their spouses and…
New York City faces a $95 billion debt for other post-employment benefits (OPEB), primarily retiree health insurance, which is currently funded on a pay-as-you-go basis that shifts costs to future generations. To address this, the city should significantly reduce the cost of its benefit package to align with other municipalities and implement more systematic prefunding policies.
Recommendations related to Employee Health Benefits
Require workers who retire before Medicare eligibility to pay 50 percent of their health insurance premium.
No longer reimburse for Medicare Part B premiums to eliminate annual normal costs and lower current annual outlays.
Lower Medicare Part B reimbursement from full reimbursement to 50 percent reimbursement.
End benefits for spouses of retirees to reduce the normal cost and current annual outlays.
Reduce to 50 percent the premium payments for Medicare supplemental insurance to lower the normal cost and current annual outlays.
Replace the full premium payments on behalf of retirees and spouses with a voucher to be used for purchase of insurance.
Increase the retirement age for police and firefighters to match teachers’ retirement age of 55 to reduce the pre-Medicare AAL.
Provide a fixed payment to municipal employee unions and authorize them to provide retiree health benefits.
Key Data
$95 billion
— Total OPEB debt owed by New York City.
$4.9 billion
— Annual normal cost for OPEB benefits.
$2.5 billion
— Current annual PAYGO amount for retiree health benefits.
$150,000
— Average OPEB liability per member.
$831 million
— Estimated annual reduction in normal cost from requiring pre-Medicare retirees to pay 50 percent of their health insurance premium.
$1.78 billion
— Estimated annual reduction in normal cost from ending benefits for spouses of retirees.
New York City employee compensation is projected to rise as the total headcount increases, with fringe benefits like health insurance significantly driving up the average cost per employee. By 2021, the average compensation for a city worker is expected to exceed $158,000, reflecting the substantial impact of non-salary benefits on the total expenditure.
New York State faces a $78 billion liability for retiree health insurance and other post-employment benefits, which it currently funds on a pay-as-you-go basis. To address this, the state should adopt proposed reforms to increase retiree premium-sharing and establish a formal, funded trust to manage these long-term obligations.
Recommendations related to Employee Health Benefits
The Legislature should adopt the three proposals to increase employee and retiree premium-sharing to reduce the State’s OPEB liability.
The Legislature should develop a plan to require regular deposits to the OPEB trust fund to ensure it is not an empty account.
The State should develop a plan for making regular deposits into the Trust to improve government finances and credit ratings.
The State should develop a plan for when withdrawals from the Trust are appropriate to ensure the benefits of the fund are realized.
Legislators should include a plan for funding the proposed OPEB Trust Fund to promote fiscal prudence and equity.
Key Data
$78 billion
— The total value of the State's OPEB liability for providing retiree health coverage to employees, retirees, and their dependents.
$28.2 billion
— The total reduction in the State's OPEB liability if the three proposed cost-sharing actions are taken together.
$1.3 billion
— The current annual cost of the State's 'pay-as-you-go' approach to paying retiree health insurance premiums.
$450 million
— The reduction in the State's OPEB liability resulting from the proposal to eliminate additional Medicare Part B premium reimbursements for high earners.
$10.6 billion
— The reduction in the State's OPEB liability resulting from the proposal to freeze Medicare Part B premium reimbursements.
$17.6 billion
— The reduction in the State's OPEB liability resulting from the proposal to create tiered cost-sharing for future retirees.
Key fiscal questions for the upcoming New York City preliminary budget include whether the financial plan will account for a bonus for the Municipal Labor Committee due to health care savings. Other critical issues include whether shelter funding will exceed the $1.5 billion budgeted in fiscal year 2017 and how the city will address $17 billion in unmet capital needs for the Housing Authority.
The Mid-Year Update to the Fiscal Year 2017 Financial Plan reveals that while tax revenue projections have dropped by $1.4 billion since the adopted budget, the state has failed to provide details on how it will collaborate with the Public Employees Federation to reduce employee health insurance costs. Additionally, the update shows that out-year budget gaps are continuing to grow, with the fiscal year 2020 gap increasing by almost $1.4 billion to $8.9 billion.
New York City's legacy costs, which include debt service, pension contributions, and retiree health benefits, are projected to grow to over $20 billion by fiscal year 2020, outpacing other budget spending. To mitigate this growth, the city should reform retiree health benefits by requiring premium contributions, consolidating union welfare funds, and eliminating Medicare Part B reimbursements.
Recommendations related to Employee Health Benefits
Retirees should share the cost of health premiums to bring retiree health costs in line with those of other state and local governments.
The City should consolidate supplementary health care benefits under the city’s health plan to address the inefficiency and lack of accountability in union welfare funds.
The City should eliminate Medicare Part B premium reimbursements, as this benefit is unheard of in the private sector and uncommon among public employers.
Key Data
$2.9 billion
— Annual cost of retiree health benefits by fiscal year 2020.
$700 million
— Increase in the annual cost of retiree health benefits between fiscal year 2016 and fiscal year 2020.
$3.4 billion
— Total savings expected from the City and Municipal Labor Committee partnership to achieve savings in health care costs.
$2.1 billion
— Savings announced to date from the City and Municipal Labor Committee partnership.
$1.6 billion
— Potential savings from the three recommended changes to retiree health benefits by fiscal year 2020.
The New York State Legislature has passed ten bills that would increase disability and retirement benefits for various public sector employees, including police, firefighters, and correction officers. These measures provide costly enhancements without improving services for taxpayers, leading to calls for the Governor to veto the legislation.
Recommendations related to Employee Health Benefits
The Governor should veto the legislation that provides expensive benefit enhancements to public sector workers and retirees without improving services for taxpayers.
Key Data
$6.1 million
— The cost in 2017 for the bill increasing disability payments for New York City firefighters.
$12.6 million
— The annual cost by 2021 for the bill increasing disability payments for New York City firefighters.
75 percent
— The current disability benefit limit for state police officers and correction officers.
5 years
— The new filing deadline for firefighters outside New York City to apply for disability benefits due to certain cancers.
2 years
— The previous filing deadline for firefighters outside New York City to apply for disability benefits due to certain cancers.
New York City's current policy of fully funding health insurance premiums for employees and retirees, without requiring any contributions, places a significant financial burden on taxpayers and contributes to a $70 billion liability. This practice is out of step with the private and public sectors, making the rapidly rising costs of these benefits increasingly difficult to sustain as the economy faces potential downturns.
Recommendations related to Employee Health Benefits
The city should require employees and retirees to contribute to their health insurance premiums to align with the private and public sectors.
Key Data
$2.1 billion
— Projected savings realized through fiscal year 2017 from the initiative to control health expenses.
33%
— The rate at which employee health insurance spending is projected to increase through the financial plan period.
$2 billion
— The total dollar increase in employee health insurance spending through the financial plan period.
$5,700
— The amount by which health insurance premiums are set to increase per employee.
$70 billion
— The city's total liability for retiree health insurance costs and other post-employment benefits, excluding pensions.
Health insurance spending is the fastest-growing component of personal service expenditures, projected to increase by more than 41% or $2.2 billion between fiscal years 2014 and 2020. This growth in fringe benefits, which includes health insurance, contributes to a $7,190 increase in compensation costs per employee over the same period.
Key Data
41%
— The rate at which health insurance spending is projected to increase between fiscal years 2014 and 2020.
$2.2 billion
— The total dollar increase in health insurance spending projected between fiscal years 2014 and 2020.
$7,190
— The increase in fringe benefits, including health insurance, per employee between fiscal years 2014 and 2020.
New York City's efforts to achieve health care savings through collective bargaining have yielded mixed results, with significant portions of claimed savings stemming from lower-than-expected premium increases rather than structural reforms. To improve long-term fiscal health, the City should prioritize recurring cost-reduction measures, such as regular audits of dependent eligibility and ending unnecessary deposits into the Health Insurance Stabilization Fund.
Recommendations related to Employee Health Benefits
The City and MLC should gain authority to conduct audits of dependent eligibility regularly as a matter of managerial discretion.
The City and MLC should work together to end further deposits by the City into the Health Insurance Stabilization Fund.
The City and MLC should continue to pursue reforms that reduce overutilization and have the potential to improve health outcomes for city employees.
Key Data
$1.1 billion
— Savings claimed from lower-than-projected premium rate increases, representing 52 percent of the total savings.
$477 million
— Savings anticipated from changes that reduce healthcare costs on a recurring basis, accounting for 23 percent of the three-year, $2.1 billion target.
$1 billion
— The current balance of the Health Insurance Stabilization Fund, which continues to receive large deposits despite no longer serving its original purpose.
$85 million
— Estimated savings in fiscal year 2017 resulting from the transition from the existing HIP HMO plan to the HIP HMO Preferred plan.
$147 million
— Expected savings in fiscal year 2017 from converting the GHI plan to a minimum premium plan with new co-pays.
$48 million
— Annual cost of preventative services funded by withdrawals from the Health Insurance Stabilization Fund.
New York school districts face significant budget constraints due to the rapid growth of employee fringe benefits, which have increased at a much faster rate than teacher salaries. Because many of these costs, such as pension benefits and retiree health insurance, are mandated by the State Legislature or collective bargaining, schools struggle to reallocate funds toward essential educational investments.
Recommendations related to Employee Health Benefits
The State Legislature should include employee benefits in the conversation as it debates its role in public education.
Policymakers must act to curb the high growth rates of employee benefits to prevent them from consuming an ever-greater share of school budgets.
Key Data
22 percent
— of 2013 budgets allocated to instructional staff fringe benefits in New York schools.
15 percent
— national average of school budgets allocated to instructional staff fringe benefits.
$4,412
— per student spent on fringe benefits for the average New York school district in 2013.
$1,609
— national average per student spent on fringe benefits.
9.4 percent
— average annual growth rate of instructional employee benefits from 2003 to 2013.
3.4 percent
— average annual growth rate of teacher salaries and wages from 2003 to 2013.
New York's public education spending is driven by high costs for employee fringe benefits, which grew at an annual rate of 9.4 percent between 2003 and 2013. These benefits, including health insurance and retirement plans, account for 22 percent of school budgets, significantly exceeding national averages and contributing to higher per-student expenditures across the state.
Key Data
22 percent
— Portion of 2013 school budgets allocated to instructional staff fringe benefits, compared to a national average of 15 percent.
$4,412
— Average cost per student for instructional staff fringe benefits in New York school districts in 2013, nearly triple the national average.
$5,342
— Average fringe benefit cost per pupil in New York City, the highest among the state's regions.
9.4 percent
— Average annual growth rate of instructional employee benefits from 2003 to 2013.
$4,136
— Amount spent per student on instructional employee benefits in Buffalo, 157 percent higher than the national average.
$2,962
— Lowest amount spent per student on teacher fringe benefits among New York's largest districts, recorded in the Rochester suburb of Greece.
New York City's health insurance costs doubled from $2.6 billion in fiscal year 2005 to $5.3 billion in fiscal year 2015, prompting a $3.4 billion savings agreement with the Municipal Labor Committee. However, current savings are largely attributed to lower-than-expected premium increases rather than structural changes, leading to concerns that the city is failing to implement necessary reforms like reducing emergency room utilization and managing chronic conditions.
Recommendations related to Employee Health Benefits
The City should "bend the cost curve" by establishing premium-sharing with employees and retirees, reducing per enrollee utilization of services, better managing chronic conditions, or lowering provider payments.
The City should ensure savings are counted clearly and honestly by excluding lower national and regional health care inflation, temporary premium rate "freezes," and unusually low premium increases from the credited savings.
The City should prioritize initiatives such as reducing emergency room utilization and improving chronic disease management as the basis for meeting health savings targets.
Key Data
$2.6 billion
— Cost of the City's health insurance plan in fiscal year 2005.
$5.3 billion
— Cost of the City's health insurance plan in fiscal year 2015.
6.7 percent
— Share of the 2015 budget comprised by health insurance costs.
$3.4 billion
— Total savings target agreed upon between the City and the Municipal Labor Committee for fiscal years 2015 through 2018.
$1.2 billion
— Savings credited to the Municipal Labor Committee agreement in the November modification.
2.89 percent
— Actual rate increase for health insurance in fiscal year 2016.
New York City's agreement with the Municipal Labor Committee aims to achieve significant health insurance savings through structural reforms rather than temporary measures. To ensure these savings are real and recurring, the city must implement objective measurement systems, focus on premium cost sharing, and avoid counting artificial funding shifts or inflation-related changes toward the savings targets.
Recommendations related to Employee Health Benefits
An objective system for measuring savings should be established that focuses on recurring savings that bend the curve in health care costs.
Savings measures should be associated with specific changes in the plan benefit structure that either reduce provider payment levels or reduce utilization of a particular service.
The City should have a reliable mechanism for recouping amounts of planned savings not actually achieved during a fiscal year.
Savings calculations should be based on an agreed-upon baseline number of people covered, meaning increases or decreases in covered lives should not affect the calculation of savings.
Options for changing the status or eligibility of retirees, such as moving them to the New York State Health Exchange with federal subsidies, should be studied.
Key Data
$1.3 Billion
— Total health insurance savings targeted under the agreement with the Municipal Labor Committee.
$1 Billion
— Amount already in the Health Insurance Stabilization Fund that should not be counted as new savings.
1,000,000
— Number of enrollees used in the hypothetical illustration for calculating savings.
$100
— Fiscal year 2014 average payment per service used in the hypothetical savings calculation.
Legislative proposals in 2014 included numerous pension and benefit enhancements, such as increased disability pensions and service credit adjustments, which collectively impose significant fiscal burdens on state and local budgets. These measures, including a $1.1 Billion past service cost for pension formula changes and a $617.9 Million increase in actuarial present value for police disability benefits, highlight the substantial long-term financial impact of expanding public employee benefits.
Key Data
$1.1 Billion
— Past service cost associated with replacing the current benefit of 1.5% of final average salary with a 2.0% benefit for Tier III, IV, and V members.
$617.9 Million
— Increase in the Actuarial Present Value of benefits in fiscal year 2019 for conforming Ordinary Disability Retirement and Accidental Disability Retirement benefits for New York City Tier III police members.
$374 Million
— One-time costs for allowing members of Tiers III and IV one month of additional service credit for each year of service after 10 years credit in NYSERS, NYSTRS, NYCERS, and NYCTRS.
$1,699 Million
— Total estimated state costs for the benefit sweetener bills listed in the 2014 scorecard.
The agreement between New York City and the Municipal Labor Committee regarding health insurance relies on temporary accounting adjustments and projected inflation trends rather than structural reforms that improve system efficiency. These measures fail to produce sustainable, recurring savings and instead attribute broad market trends to specific policy initiatives.
Recommendations related to Employee Health Benefits
The city should prioritize initiatives that lower health care costs by making the system more efficient to achieve substantial, recurring savings.
The city should avoid one-time or temporary savings measures like artificial rate caps or adjustments to the City's contribution to the Health Insurance Stabilization Fund.
The city should calculate savings based on actual results of specific initiatives rather than relative to Financial Plan projections.
To achieve sustainable health insurance savings, the city should implement an objective measurement system that focuses on structural changes to lower costs, such as reducing utilization or per-service payments, rather than relying on temporary rate freezes or transfers from the $1 billion Health Insurance Stabilization Fund. This approach requires establishing clear, fixed baselines for coverage and utilization to ensure that only verified, recurring savings are credited toward fiscal targets.
Recommendations related to Employee Health Benefits
An objective system for measuring savings should be established that is recurring and of a nature that truly "bends the curve" in health care costs by making the system operate more efficiently.
Savings calculations should be rooted in data from the plans on previous payment amounts and utilization rates to provide a basis for reasonable baseline projections.
The City should have a reliable mechanism for recouping amounts of planned savings not actually achieved during a fiscal year.
Savings should be based on an agreed upon baseline number of people covered, meaning policy decisions such as increases or decreases in headcount should not affect the calculation.
Additional funding taken from the Health Insurance Stabilization Fund beyond the $1 billion already agreed upon should not count as savings.
Key Data
$1 billion
— The amount already agreed upon in the Health Insurance Stabilization Fund, which should not be exceeded for savings calculations.
$100
— The fiscal year 2014 average payment per service used in the hypothetical centralization of radiation services.
$527,748
— The projected savings in fiscal year 2018 from the hypothetical centralized radiation services program.
1,000,000
— The baseline number of enrollees used in the hypothetical savings calculation model.
New York State's public elementary-secondary education spending significantly exceeds the national average, driven largely by high teacher compensation and rapidly growing fringe benefit costs. While most districts require employee contributions to health insurance premiums, New York City remains a notable exception, contributing to the highest regional fringe benefit costs in the state.
Key Data
$4,233
— average instructional employee fringe benefits per pupil in New York
$1,573
— national average for instructional employee fringe benefits per pupil
169%
— amount by which New York's instructional employee fringe benefits exceed the national average
$5,102
— average fringe benefit costs per pupil in New York City
6.8%
— growth rate of fringe benefits for teachers from 2011 to 2012
10.2%
— largest year-to-year increase in instructional employee fringe benefit cost per pupil, occurring in Western New York
NY1 The tentative agreement between Mayor Bill de Blasio and the city's teachers union cleared a significant hurdle Friday, but some budget watchdogs are questioning whether a key provision of the deal, to cut health care costs, will actually work.
A tentative labor agreement between the city and the teachers union relies on achieving $3.4 billion in health care savings to remain affordable. To ensure these savings are realized, the city should require employees and retirees to contribute to their health insurance premiums, aligning with common practices in other public and private sectors.
Recommendations related to Employee Health Benefits
More predictable savings are possible by requiring employees and retirees to share in the cost of their health insurance premiums, just as most public and private employees do.
Key Data
$3.4 billion
— Estimated new health care savings to be determined by city and labor officials.
New York City's health insurance policies for employees and retirees are significantly more generous than those of comparable public and private employers, creating a major fiscal burden. Implementing premium-sharing and eliminating Medicare Part B reimbursements would generate substantial recurring savings to help balance the city's budget.
Recommendations related to Employee Health Benefits
The City should implement premium-sharing for employees to align with private sector and other government standards.
The City should require premium-sharing by retirees, as few private sector employers offer retiree health insurance and public sector peers typically require higher contributions.
The City should eliminate Medicare Part B reimbursement for retirees and their spouses, as this practice is rare among other state and local governments.
Key Data
$1.8 billion
— Projected savings in fiscal year 2014 if recommended health insurance reforms are adopted.
$2.2 billion
— Projected savings in fiscal year 2016 if recommended health insurance reforms are adopted.
$280 million
— Cost to the City in fiscal year 2013 for reimbursing retirees and their spouses for Medicare Part B premiums.
$83 billion
— Estimated unfunded liability for retiree health insurance and other post-employment benefits.
$3.5 billion
— Total cost of employee health insurance premiums to the City in fiscal year 2013.
New York State faces significant challenges in achieving a $2 billion surplus, as limiting annual spending growth to 2 percent requires difficult reductions in areas like agency operations and fringe benefits. Rising costs for debt service and health insurance premiums, which are projected to grow significantly, complicate efforts to contain spending while maintaining essential services.
Key Data
8.5%
— Assumed annual growth rate for health insurance premiums in the mid-year financial plan update.
5.5%
— Average annual increase in fringe benefit costs over the financial plan period.
13.1%
— Fringe benefit costs as a percentage of all other state spending.
$1.2 billion
— Projected increase in spending due to fringe benefit costs over the financial plan period.
10% to 12%
— Premium sharing range for State employees for single policies following the last collective bargaining agreement.
25% to 27%
— Premium sharing range for State employees for family policies following the last collective bargaining agreement.
This presentation was given during CBC's Conference on The Most Important Economic and Fiscal Decisions Facing the Next Mayor , which took place on December 6, 2013.. CBC provides a framework for curbing expenditures effectively and provides 8 options for savings: Implementing health insurance premium-sharing; Consolidating union welfare funds;…
New York leads the nation in public school spending, with instructional salaries and fringe benefits serving as the primary drivers of these high costs. In New York City, per-pupil spending on instructional fringe benefits is among the highest in the state, largely because most employees do not contribute to their health insurance costs.
Key Data
$4,919
— Per student spending on fringe benefits for instructional staff in New York City, which is among the highest in the state.
$3,962
— New York's per pupil spending on fringe benefits for instructional employees.
$1,505
— U.S. average per pupil spending on fringe benefits for instructional employees.
$3,699
— Long Island's average per pupil spending on instructional employee fringe benefits.
New York City Deputy Mayor Caswell Holloway discusses public employees costs and the City's plans to rebid the health insurance plans offered to its employees.
New York City's health insurance costs for employees and retirees are projected to grow by 40 percent, reaching nearly $7 billion by 2016 and consuming 80 percent of the city's projected budget deficit. To address this, the city should implement premium-sharing arrangements and eliminate Medicare Part B reimbursements to achieve $1.7 billion in annual savings.
Recommendations related to Employee Health Benefits
The city must control taxpayers' obligations for health insurance for city employees and retirees through premium-sharing.
The city should require contributions of up to 25 percent from employees toward their health insurance premiums.
The city should require contributions of up to 50 percent from retirees toward their health insurance premiums.
The city should eliminate the Medicare Part B reimbursement for retirees.
Key Data
40 percent
— Projected growth of health insurance costs between fiscal years 2013 and 2017.
$7 billion
— Projected cost of health insurance in 2016.
80 percent
— Portion of the city's projected budget deficit that health insurance costs will equal in 2016.
90 percent
— Portion of the city's workforce enrolled in health plans that require no employee contribution.
$1.7 billion
— Estimated annual savings achievable through premium-sharing and eliminating Medicare Part B reimbursements.
New York City's health insurance costs for public employees and retirees are projected to reach nearly $7 billion annually by 2016, driven by a system where over 90% of the workforce pays nothing toward premiums. Implementing standard premium-sharing practices, such as requiring employees to contribute 10% for individual and 25% for family coverage, could generate billions in savings for the city.
Recommendations related to Employee Health Benefits
City employees should contribute 10% for individual and 25% for family coverage, similar to most U.S. workers.
Retirees should pay for 50% of the premium.
Reimbursement for Medicare Part B should be phased out.
Lawmakers and labor should reach an agreement to implement premium-sharing.
Key Data
$7 billion
— The projected annual cost of health insurance for New York City public employees and retirees by 2016.
90%
— The percentage of the city’s workforce enrolled in health plans that require no employee contribution toward the cost of the premium for individual and family coverage.
$1.8 billion
— The amount of savings in fiscal year 2014 if premium-sharing reforms were implemented.
$2.2 billion
— The amount of savings in fiscal year 2016 if premium-sharing reforms were implemented.
20%
— The average contribution rate for private sector employees for individual health coverage.
23%
— The average contribution rate for private sector employees for family health coverage.
New York City's health insurance policies for employees and retirees are significantly more generous than those of comparable public and private employers, with the city paying the full premium for most workers and retirees. Implementing premium-sharing and eliminating Medicare Part B reimbursements would align the city with national standards and generate substantial recurring savings, projected to reach $2.2 billion by fiscal year 2016.
Recommendations related to Employee Health Benefits
The City should implement premium-sharing by employees to align with national norms in the private sector and other state and local governments.
The City should require premium-sharing by retirees to bring contributions closer to the standards set by other public employers.
The City should eliminate Medicare Part B reimbursement for retirees and their spouses, as this practice is rare among other public employers.
Key Data
$2.2 billion
— Projected annual savings by fiscal year 2016 if the recommended health insurance reforms are adopted.
$1.8 billion
— Projected annual savings by fiscal year 2014 if the recommended health insurance reforms are adopted.
$83 billion
— Estimated unfunded liability for retiree health insurance and other post-employment benefits (OPEB) as of fiscal year 2011.
$6.6 billion
— Projected cost of health insurance benefits for New York City in fiscal year 2016.
$4.8 billion
— Cost of health insurance for New York City municipal employees and retirees in fiscal year 2012.
$3.5 billion
— Total cost of employee health insurance premiums for the City in fiscal year 2013.
New York City faces structural budget deficits driven by rapidly escalating costs for debt service and health insurance, which cannot be unilaterally reduced by the Mayor. To address these fiscal challenges, the City has relied on one-time resources, such as withdrawing $1 billion from the Retiree Health Insurance Trust, rather than implementing the necessary long-term reforms to premium arrangements.
Recommendations related to Employee Health Benefits
The City must prioritize reforming health insurance premium arrangements to reduce the long-term trajectory of rising costs.
City officials should pursue negotiations with public employee unions to implement necessary changes to health insurance benefits.
Key Data
$5.2 billion
— The annual cost of health insurance for the City, which is a major driver of expenditure growth.
$1 billion
— The amount withdrawn from the Retiree Health Insurance Trust to help balance the fiscal year 2013 budget.
Police officers at the Port Authority of New York and New Jersey receive comprehensive health insurance coverage for themselves and their dependents, with the agency paying the full premium cost. In 2009, the annual premium cost for this coverage was $8,832 for individual plans and $23,532 for family plans.
Key Data
$8,832
— The 2009 annual premium cost for individual health insurance coverage for Port Authority police officers.
$23,532
— The 2009 annual premium cost for family health insurance coverage for Port Authority police officers.
New York school districts spend $4.7 billion annually on health insurance for employees and retirees, with premium-sharing requirements often significantly lower than those for state employees. Aligning these contributions with state standards by capping employer coverage at 85 percent for single plans and 75 percent for family plans could generate over $500 million in annual savings for the classroom.
Recommendations related to Employee Health Benefits
The legislature and the Governor should work together to establish a statutory cap on school district employer contributions at 85 percent for single coverage and 75 percent for family coverage.
School districts should change their health insurance premium-sharing arrangements to match those of the State of New York for its employees to redirect savings to the classroom.
Key Data
$4.7 billion
— annual spending by school districts in New York State, including New York City, on health insurance for employees and retirees.
517
— number of school district contracts analyzed in 2010 regarding employee premium sharing.
$500 million
— potential annual savings if school districts changed their health insurance premium-sharing arrangements to match those of the State of New York.
85 percent
— proposed statutory cap on school district employer contributions for single health insurance coverage.
75 percent
— proposed statutory cap on school district employer contributions for family health insurance coverage.
New York school districts spend significantly more on employee benefits than the national average, with health insurance costs rising by 10 percent annually over the last decade. Aligning local school district health insurance premium sharing arrangements with those of the State of New York could generate over $500 million in annual savings.
Recommendations related to Employee Health Benefits
School districts should bargain more successfully with teachers’ unions to give employees a greater stake in cost containment through the sharing of health insurance premium costs.
New York City and school districts across the State should change their health insurance premium sharing arrangements to match those of the State of New York for its employees to generate significant savings.
Key Data
$4.7 billion
— Amount spent by school districts in New York State on health insurance for employees and retirees in 2009.
10 percent
— Average annual increase in health insurance expenditures for school districts over the past decade.
$500 million
— Potential annual savings if school districts changed their health insurance premium sharing arrangements to match those of the State of New York.
$310 million
— Portion of the potential annual savings attributed to the New York City Department of Education.
$220 million
— Portion of the potential annual savings attributed to school districts in the rest of the state.
New York City spends hundreds of millions of dollars annually to fully reimburse retired municipal workers and their spouses for Medicare Part B premiums, a benefit rarely offered by other employers. The City should prioritize funding for essential services like child care and after-school programs by phasing out these overly generous health insurance reimbursements.
Recommendations related to Employee Health Benefits
The City should begin a phase-out of the reimbursement of Medicare Part B premiums for retired municipal workers in next year’s budget.
The City should reduce the reimbursement of Medicare Part B premiums by 50 percent in each of the next two years to save budget resources.
The City should redirect budget resources toward the needs of children and away from the overspending on health insurance benefits for former employees.
Key Data
$100
— Monthly standard premium for Medicare Part B.
$85,000
— Annual income threshold for individuals to pay a higher Medicare Part B premium.
$170,000
— Annual income threshold for married couples to pay a higher Medicare Part B premium.
$320
— Maximum monthly Medicare Part B premium for higher-income individuals.
$280 million
— Cost of Medicare Part B reimbursement for New York City taxpayers in fiscal year 2013.
$380 million
— Projected cost of Medicare Part B reimbursement by fiscal year 2016.
Several legislative proposals aim to protect public employee retiree health benefits by prohibiting reductions in coverage or employer contributions. Additionally, some bills seek to enhance benefits for MTA NYC Transit employees by reducing the vesting period for health care coverage and increasing Medicare Part B reimbursement rates.
Key Data
10 years
— Proposed vesting period for MTA NYC Transit employees to qualify for retirement health care coverage.
25 years
— Current vesting period for MTA NYC Transit employees to qualify for retirement health care coverage.
100%
— Proposed reimbursement rate for MTA employees' Medicare Part B expenses.
50%
— Current reimbursement rate for MTA employees' Medicare Part B expenses.
New York City spends $1 billion annually on union welfare funds that provide supplementary benefits like dental and optical care, often with limited accountability and inefficient management. Consolidating these benefits under the City's existing health insurance program and implementing a centralized cafeteria plan for non-health benefits could generate significant taxpayer savings and improve service delivery.
Recommendations related to Employee Health Benefits
Consolidate Supplementary Health Care Benefits under the City’s Health Insurance Plan to replace the varying and inefficient package of drug, dental, and optical benefits currently provided by multiple welfare funds.
Provide Non-health Related Benefits through a centralized cafeteria plan to achieve economies of scale and allow individuals to select benefits based on their specific needs.
Improve Accountability for any Remaining Union Welfare Fund Expenditures by setting new standards for administrative spending, establishing reserve requirements, and granting the Comptroller new enforcement powers.
Key Data
$1 billion
— Annual City payments to union welfare funds.
$3.7 billion
— Cost to the City for health insurance benefits in fiscal year 2010.
$146 million
— Estimated total annual savings from consolidating supplementary health benefits and administrative functions.
$12.7 million
— Estimated annual administrative savings from consolidating welfare funds.
$117 million
— One-time payment made to union welfare funds in fiscal year 2010.
$254,052,851
— Total City payments made to the District Council 37 welfare fund in 2007.
New York City's reliance on one-time revenue sources and limited union concessions to avoid layoffs fails to address long-term structural budget issues. Implementing structural reforms, such as requiring municipal employees to contribute to their health insurance premiums, is necessary to achieve recurring savings and avoid future layoff threats.
Recommendations related to Employee Health Benefits
The City should revise employee health insurance arrangements by requiring all employees to make premium co-payments of 10 percent for individual and 25 percent for family health coverage, which could save $625 million in fiscal year 2012.
Key Data
$625 million
— Potential savings in fiscal year 2012 from requiring all employees to make premium co-payments of 10 percent for individual and 25 percent for family health coverage.
New York City's budget is increasingly strained by the rapid growth of health insurance, pension, and debt service costs, which are projected to reach $23.1 billion by 2015. To address these structural fiscal issues, the city should implement premium-sharing arrangements for employees and retirees, which could generate over $2 billion in cumulative savings by 2015.
Recommendations related to Employee Health Benefits
The City’s leaders must work with the Municipal Labor Committee to reform health insurance arrangements.
Employees and retirees should be required to pay a share of their premiums in order to both lower taxpayer costs and to give the workers a stake in containing future premium increases.
Adopting a premium-sharing arrangement similar to that of most New York State employees—10 percent for individual and 25 percent for family coverage—would produce $625 million in savings beginning in 2012.
Requiring retirees under age 65 to pay 50 percent of their premium would generate about $700 million.
Eliminating the Medicare Part B reimbursement for retirees over age 65 would save an additional $250 million.
Key Data
$625 million
— Savings produced in 2012 by adopting a premium-sharing arrangement similar to that of most New York State employees.
$700 million
— Amount generated by requiring retirees under age 65 to pay 50 percent of their premium.
$250 million
— Savings from eliminating the Medicare Part B reimbursement for retirees over age 65.
$2 billion
— Cumulative savings from health insurance reforms by 2015.
$11 billion
— Spending on health insurance, pension contributions, and debt service in 2005.
$23.1 billion
— Projected spending on health insurance, pension contributions, and debt service in 2015.
The Health Insurance Premium Stabilization Fund, which holds approximately $500 million, lacks transparency regarding its governance, investment performance, and history of transactions. There is a call for the Comptroller to clarify the fund's oversight and conduct an audit to ensure accountability for these city-deposited funds.
Recommendations related to Employee Health Benefits
It would seem appropriate that this fund be audited by the Comptroller.
We urge action to establish such audit authority, promptly followed by an audit.
Key Data
$500 million
— The approximate balance of the Health Insurance Premium Stabilization Fund.
Reforming health insurance arrangements for city employees and retirees, including implementing premium sharing and ending Medicare Part B reimbursements, could generate over $1.5 billion in savings for fiscal year 2012. These changes would help the city avoid proposed layoffs and service cuts while aligning benefits more closely with standard public and private sector practices.
Recommendations related to Employee Health Benefits
Institute health insurance premium sharing for current employees at 10 percent for individual coverage and 25 percent for family coverage.
Require retirees to pay 50 percent of their premium cost.
End reimbursement of Medicare Part B premiums for retirees over the age of 65.
Key Data
$1.5 billion
— Total savings the City could realize in fiscal year 2012 by implementing three specific health insurance reforms.
$600 million
— Savings in fiscal year 2012 from adopting premium sharing requirements for current employees at 10 percent for individual coverage and 25 percent for family coverage.
$700 million
— Savings in fiscal year 2012 from requiring retirees to pay 50 percent of their health insurance premium cost.
$250 million
— Savings in fiscal year 2012 from ending the reimbursement of Medicare Part B premiums for retirees over the age of 65.
The Health Insurance Premium Stabilization Fund, which has accumulated over $500 million, is being considered as a source to balance the fiscal year 2012 budget, but relying on this one-shot revenue source fails to address the underlying structural budget imbalance. Instead of draining the fund, the City should implement health insurance premium cost sharing, similar to the model used for State employees, to generate $625 million in annual savings and ensure long-term fiscal stability.
Recommendations related to Employee Health Benefits
City and labor leaders should focus their cooperative efforts on meaningful reforms of health insurance instead of diverting money from the Health Insurance Premium Stabilization Fund.
The City should implement cost sharing for health insurance premiums to address the structural imbalance of the budget.
The City should follow the example of State employees, who contribute 10 percent of the premium for individual coverage and 25 percent for family coverage, to provide annual savings of $625 million.
Key Data
90%
— of employees enroll in one of two plans - Group Health Incorporated (GHI) or Health Insurance Plan (HIP).
$500 million
— accumulated in the Health Insurance Premium Stabilization Fund (HISF).
$4.7 billion
— budget gap projected for fiscal year 2013.
$1 billion
— in annual taxpayer contributions to separate union welfare funds.
$117 million
— transferred from the HISF to union welfare funds in 2009.
$150 million
— in savings implemented by the City, mostly from increased deductibles for hospital emergency room visits, in-patient facility admissions, and ambulatory surgery.
New York City faces a choice between maintaining unusually expensive retiree health benefits and preserving essential services like education and fire protection. Reforming these benefits by ending Medicare Part B reimbursements, increasing vesting requirements, and implementing premium-sharing could generate $950 million in savings to help close budget gaps.
Recommendations related to Employee Health Benefits
The city should end reimbursement for Medicare Part B premiums to bring the city in line with the public-sector norm.
The city should increase vesting requirements for the rest of the city workforce, similar to the change made for teachers in 2009.
The city should require retirees to share in the cost of their premiums, as New York state has required since the 1980s.
Key Data
$1.5 billion
— Cost of retiree health insurance in the current year.
$2.2 billion
— Projected cost of retiree health insurance by 2015.
$70 billion
— Amount of the existing unfunded liability for retiree health-insurance obligations.
$250 million
— Potential savings in fiscal year 2012 from ending reimbursement for Medicare Part B premiums.
$700 million
— Potential savings in 2012 if retirees paid half of their health insurance premiums.
$950 million
— Combined value of savings from reforming retiree health insurance benefits.
New York City faces significant budget deficits requiring substantial spending reductions, yet the 'all other' category—comprising debt service, pension contributions, and fringe benefits—remains largely untouched despite accounting for 39 percent of city-funded spending. To avoid further cuts to essential services like education and social programs, the city must pursue structural savings by negotiating new collective bargaining agreements for health insurance and seeking state legislative changes for pension benefits.
Recommendations related to Employee Health Benefits
The city must identify and approve ways to reduce spending for pension fund contributions and health insurance premiums for employees and retirees to avoid substantial new cuts in agency budgets.
The 'all other' category, which consists largely of pension fund contributions and health insurance premiums, should be reduced with new initiatives.
Unions must be willing to accept changes in collective bargaining over health benefits to achieve necessary budget savings.
Key Data
$18 billion
— Planned budget for the 'All Other' category in fiscal year 2009, which includes pension fund contributions and fringe benefits.
39 percent
— Share of the City’s total City-funded spending comprised by the 'All Other' category.
$116 million
— Amount by which the 'All Other' category has been cut.
one percent
— The percentage by which the 'All Other' category has been cut (less than).
Public employee unions should agree to reduce compensation costs, such as by increasing employee contributions to health insurance or switching to less expensive plans, to prevent widespread layoffs. These measures are necessary to address budget gaps alongside broader state efforts to manage Medicaid costs and local government labor expenses.
Recommendations related to Employee Health Benefits
Public employee unions should agree to have employees pay a higher percentage of health insurance costs to avoid layoffs.
Public employee unions should agree to switch to less expensive health insurance plans to avoid layoffs.
Public employee unions should agree to lower wages through furloughs or other mechanisms to avoid layoffs.
Localities need to make changes in pensions and compensation to address labor expenses.
Key Data
70%
— Percentage of expenses for labor in any local budget.
10,000
— Number of potential layoffs threatened for state agencies.
$9 billion
— Amount of serious belt-tightening proposed to close the state's budget gap.
$2.9 billion
— Amount of school aid cuts.
$2.9 billion
— Amount of Medicaid reductions.
$1.4 billion
— Amount of cuts to state agency operations.
New York school districts exhibit a wide range of employee contribution rates for health insurance premiums, with many districts requiring employees to pay between 5% and 20% of costs. These contribution structures vary significantly by district, with some utilizing flat dollar amounts while others rely on percentage-based models.
Key Data
35.0%
— Employee contribution rate for individual and family health insurance premiums in the Clarkstown Central School District.
$386.00
— Individual employee contribution amount for health insurance premiums in the Monroe-Woodbury School District.
5%
— Employee contribution rate for individual and family health insurance premiums in the Poughkeepsie School District.
20.0%
— Employee contribution rate for individual and family health insurance premiums in the Nanuet School District.
8%
— Individual employee contribution rate for health insurance premiums in the Yonkers School District for post-7/1/2007 hires.
$816.00
— Family employee contribution amount for health insurance premiums in the Monroe-Woodbury School District.
Public retirees receive health insurance benefits where taxpayers cover at least three-quarters of the costs. This has resulted in significant unfunded liabilities, including $56 billion for the state and nearly $1 billion for Rochester.
Key Data
three-quarters
— At least this portion of the cost for state and local retiree health insurance benefits is borne by taxpayers.
$1 billion
— The unfunded liability for retiree health benefits in Rochester.
$56 billion
— The unfunded liability for retiree health benefits for the state.
New York City's municipal union welfare funds, which receive $1 billion in annual taxpayer contributions, suffer from poor management, lack of accountability, and inefficient administrative structures. Consolidating these supplementary health benefits into the city's existing health insurance program and centralizing non-health benefits could improve oversight and generate an estimated $146 million in annual savings.
Recommendations related to Employee Health Benefits
The varying and inefficient package of drug, dental and optical benefits provided by the multiple welfare funds should be replaced by a standard set of benefits included under the City's health insurance program.
For non-health-related benefits, a new centralized 'cafeteria' plan should be developed, enabling individuals to select specific benefits with a limit on the dollar value.
Setting standards for fund performance and management and expanding the Comptroller's authority to oversee and sanction funds that don't meet those standards would help to keep remaining funds accountable.
Key Data
$1 billion
— Annual taxpayer contributions to municipal union welfare funds.
$146 million
— Estimated annual savings from consolidating supplementary health care benefits under the City's health insurance program.
8% to 16%
— Portion of current welfare fund expenditures that go toward non-health-related benefits.
48 of 70
— Number of funds analyzed that were cited for issues like excessive administrative costs, high reserves, or insolvency.
4% to 7%
— Average annual increase in payments to municipal union welfare funds.
69
— Number of funds that submitted late filings for fiscal year 2007.
New York City spends $1 billion annually on union welfare funds to provide supplementary benefits, yet these funds often suffer from poor financial management, limited accountability, and inefficient administration. Consolidating these supplementary health benefits under the City's existing health insurance program and utilizing a centralized cafeteria plan for non-health benefits could generate significant taxpayer savings while improving service delivery.
Recommendations related to Employee Health Benefits
The varying and inefficient package of drug, dental and optical benefits provided by the multiple welfare funds should be replaced by a standard set of benefits included under the City’s health insurance program.
A new centralized cafeteria plan should be developed to provide non-health related benefits, which would allow individuals to select benefits based on their needs.
New standards should be set for accountability of existing and any new union welfare benefit funds, including placing limits on allowable administrative expenditures and establishing reserve requirements.
The Comptroller’s Office should be given new enforcement powers to sanction entities that fail to meet standards in an adequate or timely fashion.
Repeated violations of financial standards should result in the removal of fund officials.
Key Data
$1 billion
— Annual City payments to union welfare funds.
$146 million
— Total estimated annual savings from consolidating health benefits and administrative functions.
$12.7 million
— Estimated annual administrative savings from consolidating welfare funds.
$90 million
— Estimated savings from using formularies for pharmaceutical benefits.
$3.7 billion
— Cost to the City for health insurance benefits in fiscal year 2010.
83%
— Percentage of total City payments to funds accounted for by ten large unions.
Legislative efforts to expand public employee benefits, including health insurance, are creating significant fiscal burdens for New York governments. These proposed changes, such as accelerating the vesting of lifetime health insurance benefits, threaten to increase long-term costs at a time when the state and local municipalities are already facing severe financial challenges.
Key Data
10 years
— The proposed vesting time required for lifetime health insurance benefits for employees represented by District Council 37.
25
— The previous vesting time required for lifetime health insurance benefits for employees represented by District Council 37.
The 2010 legislative scorecard highlights numerous bills that expand benefits for public employees, including retirement enhancements and health insurance protections. These legislative "sweeteners" increase long-term taxpayer costs without addressing the underlying fiscal sustainability of the public employee benefit system.
New York City employees currently receive health insurance without paying any premiums, but requiring contributions of 10 percent for individuals, 25 percent for dependents, and 50 percent for retirees could save the city over $1 billion annually. Additionally, the city should stop using the $2.5 billion retiree health benefits trust fund, which faces over $65 billion in future liabilities, as a source for general budget balancing.
Recommendations related to Employee Health Benefits
The Council should support the Mayor’s efforts to bargain with municipal labor unions for contributions to health insurance premiums.
The City should require employee contributions for health insurance that are comparable to other public and private sector employers.
The City should reject the drawdown from the retiree health benefits trust to ensure funds are reserved for their original purpose.
Key Data
$350 million
— Annual savings from the Mayor's proposed 10 percent co-payment for current and retired employees.
$1 billion
— Annual savings achievable by requiring employee contributions of 10 percent for individual coverage, 25 percent for dependents, and 50 percent for retirees.
$65 billion
— Accrued future liability associated with retiree health benefits.
$82 million
— Amount being drawn from the retiree health benefits trust in the current fiscal year.
$2.5 billion
— Amount placed in the trust fund created to begin funding costs associated with future health benefits for retirees.
New York City and State provide retiree health insurance benefits that are significantly more generous than those offered by large private employers, including full premium coverage and reimbursement for Medicare Part B premiums. To reduce costs and align with private sector practices, the state and city should require retirees to contribute 50 percent of their health insurance premiums and eliminate Medicare Part B reimbursements.
Recommendations related to Employee Health Benefits
The City and State should require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
The City and State should stop reimbursing retirees for Medicare Part B premiums, as this practice is out-of-line with benefits provided by other large employers.
Key Data
$1,450
— Annual out-of-pocket cost for a typical single City retiree under age 65 if required to pay 50% of health insurance premiums.
$800
— Annual out-of-pocket cost for a typical single City retiree over age 65 if required to pay 50% of health insurance premiums.
$325 million
— Estimated savings for the City in fiscal year 2004 if a 50% retiree health insurance premium contribution policy had been in effect.
$275 million
— Estimated savings for the State in fiscal year 2004 if a 50% retiree health insurance premium contribution policy had been in effect.
$67
— Monthly cost retirees would have paid in 2004 if the City and State stopped reimbursing for Medicare Part B premiums.
$131 million
— Estimated savings for the City in 2004 if it stopped reimbursing retirees for Medicare Part B premiums.
New York State faces rising labor costs, with health insurance premiums projected to grow by 40% and an unfunded liability for retiree health care reaching $56.3 Billion. To address these fiscal challenges, the state should increase employee and retiree premium contributions, eliminate the practice of using sick days to offset future premiums, and end reimbursements for Medicare Part B costs.
Recommendations related to Employee Health Benefits
For single policies, the individual's share of the health insurance premium should increase from 10% to 20%.
For families, the premium sharing should increase from 25% to 30%.
For retirees, the premium sharing should be increased to 50% for both single and family policy holders.
The practice of allowing retirees to buy down the future costs of health care premiums by applying unused sick days should be discontinued.
The highly unusual reimbursement for the cost of Medicare Part B premiums should be ended.
Key Data
40%
— Expected growth in health insurance costs over the financial plan period.
$56.3 Billion
— Estimated unfunded liability of providing retiree health care for State employees.
$138.8 Million
— Total expenses for Medicare Part B in fiscal year 2009-10.
$5,778
— Annual cost of single employee health coverage in New York.
$13,589
— Annual cost of family health coverage in New York.
State employee benefits are becoming increasingly unsustainable, with costs projected to add 60% on top of salaries by 2014 and pension expenses expected to rise by 132%. Current policies allow employees to retire after only 10 years and receive lifetime health care coverage for themselves and their families at a fraction of the premium cost.
Recommendations related to Employee Health Benefits
Entitlements must end for those who do not need them to close the budget gap without raising New York’s already high taxes.
Key Data
10 years
— State employees can retire after only 10 years and receive lifetime health care.
10%
— Employees pay just 10% of the premium for their own health care.
25%
— Employees pay just 25% of the premium for family health care.
60%
— By 2014, state employee benefits will add 60% on top of salaries.
132%
— Pension costs are expected to increase 132% over three years.
The city's current policy of requiring no contributions from employees, retirees, and their dependents toward comprehensive health insurance results in an annual taxpayer bill exceeding $3.4 billion. Adopting private-sector cost-sharing practices, such as requiring 10% contributions from workers, 25% from dependents, and 50% from retirees, could generate significant savings to help avoid layoffs.
Recommendations related to Employee Health Benefits
The city should share costs for health insurance premiums by adopting practices common in the private sector, such as 10% sharing for workers, 25% sharing for workers' dependents, and 50% sharing for retirees.
Key Data
$3.4 billion
— Annual health insurance bill for taxpayers due to the lack of employee, retiree, and dependent contributions.
10%
— Proposed cost-sharing percentage for workers' health insurance premiums.
25%
— Proposed cost-sharing percentage for workers' dependents' health insurance premiums.
50%
— Proposed cost-sharing percentage for retirees' health insurance premiums.
The city's decision to divert funds from the Retiree Health Benefits Trust to balance operating budgets undermines long-term fiscal stability for future retiree obligations. Instead of treating this fund as a rainy day reserve, the city should establish a policy that ties withdrawals directly to the growth of current-year liabilities for retiree health insurance premiums.
Recommendations related to Employee Health Benefits
The city should adopt a policy for the future use of the Retiree Health Benefits Trust that links withdrawals to growth in the current year liability for retiree health insurance premiums.
The city should reconsider the decision to reject the advice to stop using the Retiree Health Benefits Trust as a de facto rainy day fund.
Key Data
$357 million
— Projected annual savings from proposed changes to the employee and retiree health insurance program.
$2.5 billion
— Total funds deposited into the newly created Retiree Health Benefits Trust during the fiscal years 2006 and 2007.
$1,149 million
— Amount scheduled to be diverted from the Retiree Health Benefits Trust to balance operating budgets between fiscal years 2010 and 2012.
New York City taxpayers currently pay $3.7 billion annually for the health insurance of municipal employees and retirees, a cost that could be reduced by $1.4 billion if the city adopted private-sector contribution standards. The city is highly unusual in paying the full premium for comprehensive health policies, whereas the vast majority of private firms require employee contributions.
Recommendations related to Employee Health Benefits
The city should require its current workers to make contributions toward health-insurance premiums equal to the amounts paid by employees of local private-sector firms.
The city should require retirees to make contributions toward health-insurance premiums equal to the amounts paid by employees of local private-sector firms.
Key Data
$2.5 billion
— Payments for the health insurance of current employees.
$1.2 billion
— Payments for the health insurance of retirees.
$628 million
— Annual savings to taxpayers if current workers were required to make contributions toward health-insurance premiums.
$741 million
— Annual savings to taxpayers if retirees were required to make contributions toward health-insurance premiums.
$1.4 billion
— Combined annual savings for health-insurance premiums if both current workers and retirees contributed.
8 percent
— Percentage of private firms surveyed that do not require payments toward premiums from their workers.
New York City could save nearly $1.4 billion annually by aligning its employee health insurance benefits with those of private sector firms, where employees typically contribute to premium costs. By requiring current workers and retirees to share in these costs, the city would reduce its $10.4 billion annual expenditure on pension and health benefits while remaining competitive in the labor market.
Recommendations related to Employee Health Benefits
The City of New York should align its health insurance benefits with those of local private sector firms to achieve significant annual savings.
The City should require current workers to contribute toward health insurance premiums to reduce taxpayer costs.
The City should require retirees to contribute toward health insurance premiums to align with private sector practices.
The City should convert to defined contribution plans for future hires to remain competitive with the private sector regarding pension benefits.
Key Data
$1.4 billion
— Annual savings for the City of New York by aligning its health insurance benefits with those of local private sector firms.
$628 million
— Annual savings to taxpayers if the City required current workers to contribute toward health insurance premiums.
$741 million
— Annual savings to taxpayers if the City required retirees to contribute toward health insurance premiums.
$10.4 billion
— Total amount New York City taxpayers will pay for pension and health insurance benefits in the current fiscal year.
$2.5 billion
— Cost for the health insurance of current employees.
$1.2 billion
— Cost for the health insurance of retirees.
The state's recent budget actions included a concession to teachers' unions that permanently prohibits the reduction of retiree health insurance benefits without collective bargaining, thereby restricting local school districts' ability to control costs. Future administrations must resist similar demands from other employee groups to prevent further erosion of management's authority over benefit expenses.
Recommendations related to Employee Health Benefits
The Governor and future Governors must stand firm against other employee groups demanding the same health insurance benefit protections granted to retired teachers.
The state should avoid making the prohibition on diminishing retiree health insurance benefits permanent, as it restricts local school district management's ability to contain costs.
The city must reform its generous fringe benefits, including requiring employee contributions to health insurance premiums, to maintain fiscal stability. Municipal compensation costs, which include pension and fringe benefits, rose by 80 percent between 2000 and 2009, necessitating an alignment of these benefits with other public and private-sector standards.
Recommendations related to Employee Health Benefits
Fringe benefits, which are exceedingly generous, must be reformed to be more in line with those of other public and private-sector entities.
Every employee should contribute to his or her health insurance premiums.
Key Data
$15 billon
— The increase in the cost of compensating City employees, including pension and fringe benefits, from fiscal year 2000 to 2009.
80 percent
— The percentage increase in the cost of compensating City employees, including pension and fringe benefits, from fiscal year 2000 to 2009.
$100,000
— The amount that the average compensation of a New York City municipal worker exceeds.
New York City's current practice of paying the full cost of health insurance premiums for employees and retirees is unsustainable given rapidly rising costs. Implementing cost-sharing measures, such as requiring current teachers to contribute 10 percent for individual coverage and 20 percent for family coverage, could generate significant recurring savings for the city.
Recommendations related to Employee Health Benefits
The city should implement cost-sharing for health insurance premiums to provide recurring savings while maintaining quality care for employees and retirees.
New contract negotiations should include a requirement for current teachers to pay 10 percent of the premium for individual coverage and 20 percent for family coverage, which would save $100 million.
The city should require retirees to pay half the premium for health insurance, which would save $125 million.
The city should seek UFT support for further legislative reforms of pension benefits, including a higher minimum retirement age.
Key Data
$600 million
— Estimated cost of health insurance for current teachers in the current fiscal year.
$250 million
— Estimated cost of health insurance for retired teachers in the current fiscal year.
$100 million
— Projected savings from requiring current teachers to pay 10 percent of the premium for individual coverage and 20 percent for family coverage.
$125 million
— Projected savings from requiring retirees to pay half the premium for health insurance.
265 percent
— Increase in the City's required pension contributions between fiscal years 2003 and 2009.
New York City should implement premium sharing for employee and retiree health insurance, requiring current employees to contribute 25 percent and retirees 50 percent of their premiums to align with other employers. Additionally, the city should restrict withdrawals from the Retiree Health Insurance Trust Fund to only those linked to the growth in current year liabilities for retiree health insurance premiums.
Recommendations related to Employee Health Benefits
The City should implement a 25 percent contribution by current employees and a 50 percent contribution by retirees toward their health insurance premiums to bring the City more in line with other public and private sector employers.
Instead of using the Retiree Health Insurance Trust Fund as a de facto rainy day fund, the City should adopt a policy for its future use that links withdrawals to growth in the current year liability for retiree health insurance premiums.
Key Data
$200 million
— Annual savings from the recent agreement with the Municipal Labor Committee to lower future health insurance costs.
$1 billion
— Annual savings generated by implementing a 25 percent contribution by current employees and a 50 percent contribution by retirees toward their health insurance premiums.
$2.5 billion
— Amount currently held in the Retiree Health Insurance Trust Fund.
$1.1 billion
— Amount of the planned drawdown from the Retiree Health Insurance Trust Fund over three years to cover pension fund contributions.
New York's public employee benefit packages are significantly more generous than private sector norms, with the state uniquely paying nearly the entire cost of Medicare Part B premiums for retirees. To address fiscal challenges, the state should align healthcare contributions with other public sector standards by increasing employee premium payments and eliminating specific retiree reimbursements.
Recommendations related to Employee Health Benefits
The Legislature should improve these proposals by requiring a greater share of health insurance premiums to be paid by current and retired employees, bringing healthcare contributions in line with those of other public sector employees.
For retirees, the Legislature should require a 50 percent contribution to their premium costs and eliminate reimbursement for Medicare Part B premiums.
For current employees, the Legislature should increase contributions to family healthcare plans from 18 percent to 22 percent, for a savings of $75 million annually.
Key Data
$430 million
— Annual savings from requiring a 50 percent contribution to retiree health premium costs.
$200 million
— Annual savings from eliminating reimbursement for Medicare Part B premiums.
$75 million
— Annual savings from increasing current employee contributions to family healthcare plans from 18 percent to 22 percent.
18 percent
— Current contribution rate for family healthcare plans for state employees.
22 percent
— Proposed contribution rate for family healthcare plans for state employees.
50 percent
— Proposed contribution rate for retiree health premium costs.
New York City's employee compensation costs have grown significantly, driven in part by health insurance benefits that are more generous than those in the private sector and other government entities. To address these rising costs, the city is urged to aggressively pursue health-insurance reforms and implement restructuring savings.
Recommendations related to Employee Health Benefits
The mayor should aggressively pursue health-insurance reforms.
The city should identify and implement savings from health-insurance restructuring.
Key Data
$8,000
— Average annual cost per full-time city employee for health insurance.
$200 million
— Projected savings from health-insurance restructuring included in the mayor's plan for the next fiscal year.
Between fiscal years 2000 and 2008, the average cost of health insurance per full-time New York City employee doubled, rising from $4,030 to $8,030. This increase contributed to a broader trend where fringe benefits grew to represent 35 percent of total average compensation costs by 2008.
Key Data
$4,030
— The average cost of health insurance per full-time employee in fiscal year 2000.
$8,030
— The average cost of health insurance per full-time employee in fiscal year 2008.
99%
— The total percentage increase in health insurance costs per full-time employee between fiscal years 2000 and 2008.
$4,000
— The total dollar increase in health insurance costs per full-time employee between fiscal years 2000 and 2008.
New York State should reduce its budget by cutting ineffective programs, including scaling back generous health insurance and retirement packages for state government workers that are no longer justified. By creating a new pension tier for future employees, the state could eventually save $216 million annually.
Recommendations related to Employee Health Benefits
The state should scale back health-insurance and retirement packages for state-government workers, as they are no longer justified given that many government workers are now paid more than their private-sector counterparts.
Key Data
$216 million
— Annual savings from the creation of a new pension tier for future state employees.
New York state should restructure its employee health insurance and pension benefits to align with other public-sector employers, including requiring higher contributions from current workers and retirees. These changes, along with other fiscal adjustments, are necessary to avoid tax increases while addressing significant budget gaps.
Recommendations related to Employee Health Benefits
The state should restructure its health insurance to bring it in line with other public-sector employers.
An additional 4 percent contribution toward family plan premiums from current workers should be required.
For retirees, New York should insist on a larger contribution toward premiums and eliminate repayment for Medicare Part B premiums.
Key Data
$1.1 billion
— Annual savings that can be generated from fringe benefits for state employees.
4 percent
— Additional contribution toward family plan premiums that should be required from current workers.
6
— Number of states that pay any part of their employees' Medicare premiums, compared to New York which pays the full cost.
New York State spends approximately $2.6 billion annually on health insurance for over one million employees, retirees, and their dependents, with costs projected to rise significantly. To achieve budgetary savings, the state could align its benefits more closely with private and other public sector employers by increasing employee contributions toward premiums and eliminating reimbursements for Medicare Part B.
Recommendations related to Employee Health Benefits
If the State were to bring its practices more in line with other public sector employers, it would require an additional 4 percent contribution toward family plan premiums for post-1983 hires.
For retirees, New York could require a 50 percent contribution toward premiums to align with other public sector employers.
The State could eliminate payment for Medicare Part B premium contributions to achieve significant savings.
Key Data
$2.6 billion
— Annual State spending to provide health insurance to over 1 million employees, retirees, and their dependents.
$12,675
— Total annual premium cost for family health insurance coverage in 2007.
$75 million
— Estimated annual savings from requiring an additional 4 percent contribution toward family plan premiums for post-1983 hires.
$432 million
— Estimated annual savings from requiring retirees to contribute 50 percent toward health insurance premiums.
$207 million
— Estimated annual savings from eliminating State payment for Medicare Part B premium contributions.
New York City's health insurance costs are significantly higher than those of other large employers, as the city currently pays 100 percent of premiums for both current employees and retirees. To address this, the city should require employees to contribute 10 percent for individual and 20 percent for family policies, while requiring retirees to pay 50 percent of premiums and ending the city-funded Medicare Part B subsidy, which would yield $1,197 million in savings by fiscal year 2009.
Recommendations related to Employee Health Benefits
The City should more closely align its health insurance practices with those of other employers.
The City should share the cost of health insurance premiums with workers by requiring 10 percent for individual policies and 20 percent for family policies.
Retirees should be required to pay 50 percent of their health insurance premiums.
The City should stop paying for retiree Medicare Part B premiums.
The Mayor could make these changes via collective bargaining, and a local law could end the Medicare subsidy.
Key Data
$1,197 million
— Projected annual savings in fiscal year 2009 from implementing health insurance reforms.
18 percent
— Typical worker contribution for individual health insurance coverage among large private employers.
31 percent
— Typical worker contribution for family health insurance coverage among large private employers.
38 percent
— Percentage of large private employers that offer health insurance benefits to retirees.
9 percent
— Percentage of large private employers that pay any share of Medicare Part B premiums for retirees.
60 percent
— Average share of Medicare Part B premiums paid by private employers among those that do provide coverage.
New York City and State provide retiree health insurance benefits that are significantly more generous than those offered by other large public and private employers, creating a growing fiscal burden. To reduce costs and align with broader industry practices, the government should require retirees to contribute 50 percent toward their health insurance premiums and cease the reimbursement of Medicare Part B premiums.
Recommendations related to Employee Health Benefits
The City and State should require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
The City and State should stop reimbursing retirees for Medicare Part B premiums, as this practice is out-of-line with benefits provided by other large employers.
Key Data
$1,450
— Estimated annual out-of-pocket cost for a single City retiree under age 65 under the proposed 50 percent premium contribution policy.
$800
— Estimated annual out-of-pocket cost for a single City retiree over age 65 under the proposed 50 percent premium contribution policy.
$325 million
— Estimated savings for the City in fiscal year 2004 if the 50 percent retiree health insurance premium contribution policy had been in effect.
$275 million
— Estimated savings for the State in fiscal year 2004 if the 50 percent retiree health insurance premium contribution policy had been in effect.
$131 million
— Estimated savings for the City in 2004 if the practice of reimbursing retirees for Medicare Part B premiums was stopped.
$88 million
— Estimated savings for the State in 2004 if the practice of reimbursing retirees for Medicare Part B premiums was stopped.
New York's fragmented health insurance subsidy programs are inefficient and difficult to navigate, causing many eligible residents to miss out on coverage while generating high administrative costs. The state should implement an integrated eligibility system, independent of public assistance, to streamline enrollment and improve access for the uninsured.
Recommendations related to Employee Health Benefits
The Governor should give the Health Commissioner primary responsibility and authority for redesigning the health insurance subsidy system and its supporting information systems.
The State should integrate eligibility determination for major health insurance programs into a new system created independent of the current public assistance eligibility bureaucracy.
The State should maintain a statewide master eligibility file for all health insurance programs to allow enrollees to move easily between programs when their status changes.
The State should rely on community-based organizations following the model of "facilitated enrollment" to handle client interviews and documentation review.
The State should integrate Food Stamp eligibility determination with health insurance subsidy eligibility determination to improve efficiency and reach.
The State should test using school lunch program administrators as facilitated enrollers for health insurance programs.
The State should coordinate Earned Income Tax Credit benefit determination with health insurance subsidy eligibility determination.
Key Data
$21 Billion
— Annual cost of the Medicaid program in New York State.
$68 Million
— Cost of 'Medicaid-only' eligibility offices in New York City in fiscal year 2000.
$117
— Administrative cost per recipient for 'Medicaid-only' eligibility offices in New York City in fiscal year 2000.
$464 Million
— Annual Child Health Plus (CHP) appropriation in federal fiscal year 1999.
$148 Million
— Benefits provided by the EPIC program in 1999.
$929
— Administrative cost per case for public assistance in New York City in fiscal year 2000.
The municipal health insurance program has become increasingly expensive, with costs rising from $1.16 billion in 1995 to $1.65 billion in 2000, largely due to escalating premiums and a growing number of covered individuals. To address these rising costs, the city should implement premium cost-sharing for employees and retirees, while also fostering price competition among insurance providers to generate significant annual savings.
Recommendations related to Employee Health Benefits
The City should require cost-sharing of 10 percent toward individual coverage and 20 percent for family coverage for employees.
The City should drop reimbursement of Medicare Part B premiums for retirees.
The City should require a 50 percent contribution from retirees toward premiums for non-Medicare benefits.
The City should ask the multiple plans seeking to insure municipal workers and their families to compete by offering lower prices.
Key Data
$500 million
— Annual direct savings from implementing premium cost-sharing for municipal employees and retirees.
$129 million
— Projected savings in fiscal year 2002 from implementing price competition among health insurance plans.
$247 million
— Projected savings in fiscal year 2004 from implementing price competition among health insurance plans.
$1,156 million
— City cost for its health insurance program in 1995.
$1,653 million
— City cost for its health insurance program in 2000.
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