Retiree health care in New York includes the medical insurance and supplemental benefits provided to retired municipal and state employees, as well as the long-term financial liabilities associated with these promises. This page covers CBC’s work on the Retiree Health Benefits Trust, Other Postemployment Benefits (OPEB) liabilities, Medicare Advantage transitions, premium cost-sharing, and the consolidation of union-administered welfare funds.
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 avoid using the Retiree Health Benefits Trust to balance the budget, as these funds are intended to pay for future retiree health benefits.
The Charter should establish the Retiree Health Benefits Trust to ensure it is available to accumulate resources to pay for the City’s long-term liability for retiree benefits.
The Charter should require annual deposits sufficient to pay the current year cost of retiree benefits plus some additional deposit, so the City’s massive long-term liability starts to get funded.
The Charter should not allow the Retiree Health Benefits Trust to be used as a de-facto rainy day fund.
The State should enact OPEB reforms, specifically the IRMAA cost elimination, to provide recurring savings.
The budget should include prior proposals to freeze Medicare Part B premiums and create a tiered cost-sharing system for future retirees, which would significantly reduce annual costs and the growing unfunded OPEB liability.
Key Data
In February 2026, CBC reported that the preliminary budget proposed pulling $1.2 billion from the Rainy Day Fund and the Retiree Health Benefits Trust (RHBT) to balance the budget, depleting funds meant for recessions and future retiree benefits.
In March 2024, CBC reported that New York State's unfunded retiree health care (OPEB) liability totaled $67 billion, and proposed eliminating Medicare Part B IRMAA reimbursements for high-income retirees to save $24 million in the first year.
In January 2023, CBC noted that enrolling NYC retirees in a Medicare Advantage Plus plan would reduce the City's annual costs by around $600 million because the federal government pays the premium.
In October 2021, CBC reported that NYC's retiree health benefits would cost $3.1 billion that year, with costs growing at an average annual rate of 5.5% since fiscal year 2014, contributing to a total long-term OPEB liability of $122 billion.
In September 2021, CBC estimated that the MTA could save $263 million annually by implementing premium cost-sharing parity for retirees, aligning their contributions with retired New York State employees.
New York City's plan to withdraw funds from the Retiree Health Benefits Trust to balance the budget threatens the long-term security of future retiree health benefits. Relying on these one-shot resources creates a fiscal cliff that undermines the city's ability to meet its future obligations.
Recommendations related to Retiree Health Care
The City should avoid using the Retiree Health Benefits Trust to balance the budget, as these funds are intended to pay for future retiree health benefits.
Key Data
$1.2 Billion
— The amount being pulled from the Rainy Day Fund and the Retiree Health Benefits Trust to balance the City budget.
Mayoral candidates were surveyed on their willingness to implement cost sharing or benefit reductions to manage the City's retiree health care expenses. The responses reflect varying approaches to addressing the fiscal challenges associated with providing health benefits to retired municipal employees.
The 5-year financial summary includes data regarding the Retiree Health Benefits Trust Fund, which is used to finance retiree health care, showing a $1,000 million withdrawal in fiscal year 2020 and a $750 million deposit in fiscal year 2022. The document does not offer specific policy recommendations on the subject.
Key Data
$1,000 Million
— FY 2020 withdrawal from the Retiree Health Benefits Trust Fund.
$750 Million
— FY 2022 deposit into the Retiree Health Benefits Trust Fund.
The New York City Charter should be amended to formally establish the Retiree Health Benefits Trust, ensuring it is dedicated to funding long-term retiree benefit liabilities rather than serving as a secondary rainy day fund. This change would mandate annual contributions sufficient to cover current benefit costs while actively addressing the City's significant long-term financial obligations.
Recommendations related to Retiree Health Care
The Charter should establish the Retiree Health Benefits Trust to ensure it is available to accumulate resources to pay for the City’s long-term liability for retiree benefits.
The Charter should require annual deposits sufficient to pay the current year cost of retiree benefits plus some additional deposit, so the City’s massive long-term liability starts to get funded.
The Charter should not allow the Retiree Health Benefits Trust to be used as a de-facto rainy day fund.
The state's current unfunded liability for retiree health care and other postemployment benefits totals $67 billion, creating significant fiscal risk. To address this, the state should eliminate Medicare Part B premium reimbursements for high-income retirees and implement a tiered cost-sharing system for future retirees to reduce long-term costs.
Recommendations related to Retiree Health Care
The State should enact OPEB reforms, specifically the IRMAA cost elimination, to provide recurring savings.
The budget should include prior proposals to freeze Medicare Part B premiums and create a tiered cost-sharing system for future retirees, which would significantly reduce annual costs and the growing unfunded OPEB liability.
Key Data
$103,000
— Qualifying income threshold for retirees and dependents subject to the Medicare Part B premium Income-Related Monthly Adjustment Amount (IRMAA).
$24 million
— Estimated savings in the first full year of implementing the elimination of IRMAA reimbursement.
$67 billion
— Total current unfunded liability for retiree health care and other postemployment benefits (OPEB).
The Metropolitan Transportation Authority should address rising health care costs by transitioning retirees to a high-quality Medicare Advantage plan, mirroring recent changes made by New York City. This shift aims to generate millions in savings without reducing benefits for transit workers, helping to stabilize the agency's operating budget.
Recommendations related to Retiree Health Care
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.
New York City's health insurance costs are projected to rise by 8.5 percent annually through 2026, necessitating reforms to align benefits with other public and private sector standards. Implementing the Medicare Advantage agreement and pursuing broader policy changes, such as premium sharing and benefit consolidation, are essential to reduce the City's long-term financial liabilities.
Recommendations related to Retiree Health Care
The agreement between the City and Municipal Labor Committee should be implemented to restrain cost growth and reduce the City’s other postemployment benefit (OPEB) liability.
Introduction 874 is a workable solution that allows the City-MLC agreement to move forward.
The law in whole should be repealed since this level of benefit specificity should not be codified.
The City and MLC should undertake a comprehensive review of health and welfare benefits to agree on a set of policy changes that preserves employee health and welfare while reducing the City’s costs.
Policy changes should include premium sharing for employees and pre-Medicare retirees, elimination of some or all of the Medicare Part B reimbursement, and consolidation of union welfare fund benefits.
Key Data
8.5 percent
— Projected annual increase in health insurance costs between fiscal years 2023 and 2026.
$200
— Monthly premium for retirees who choose to remain in their current Medigap program.
$600 million
— Estimated annual reduction in City costs if the Medicare Advantage plan is implemented.
New York State lawmakers passed a bill that would prevent reductions in skilled nursing service benefits for retirees enrolled in Medicare, despite the legislation lacking any fiscal estimate. This proposal is among several benefit sweeteners passed outside the regular budget process that face calls for a gubernatorial veto due to their potential to increase public costs without offsetting savings.
Recommendations related to Retiree Health Care
The Governor should veto S8192/A9215, which would require that skilled nursing service benefits are not reduced when retirees are enrolled in Medicare.
New York City's retiree health benefits are exceptionally generous, accounting for one-third of the city's health insurance spending and creating a $122 billion long-term liability. To address these unsustainable costs, the city should implement modest cost-sharing reforms and consolidate the more than 100 separate union-managed welfare funds to achieve administrative efficiencies.
Recommendations related to Retiree Health Care
The City should bring health and welfare benefit costs to sustainable levels, which requires negotiating changes with municipal labor unions.
Reforms such as modest retiree health benefit cost sharing would substantially reduce the City’s annual cost and long-term liability.
Consolidating these more than 100 separate welfare funds could provide comparable or better benefits at lower costs, due to administrative economies of scale and group purchasing power.
Key Data
$7.2 billion
— The City’s 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.
100
— The number of separate welfare funds managed by various unions that provide benefits to employees and retirees.
New York City's retiree health and welfare benefits cost $3.1 billion annually and represent a $122 billion long-term liability, with costs growing at an average of 5.5 percent annually. While a new agreement to shift to Medicare Advantage plans could save $600 million annually, these funds are currently directed into an off-budget stabilization fund rather than reducing the City's operating budget.
Recommendations related to Retiree Health Care
The City should reduce the cost of retiree health benefits by 50 percent.
The City should implement premium sharing for Medicare and pre-Medicare eligible retirees.
The City should pursue the elimination or reduction of Part B premium reimbursement.
The City should ensure that savings from retiree health benefit changes 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 pave the way for employee premium contributions for health insurance coverage.
Key Data
$3.1 billion
— Total annual cost of retiree health and welfare benefits.
$122 billion
— The City’s current liability for retiree health benefits, also known as other postemployment benefits (OPEB).
5.5 percent
— Average annual growth rate of retiree health insurance costs from fiscal year 2014 to fiscal year 2022.
$600 million
— Annual reduction in the City's cost of retiree health insurance under the new Medicare Advantage Plus plan.
$504 million
— Annual cost for union-administered welfare fund contributions for retirees.
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-cutting measures, including reforms to employee and retiree health care benefits. Aligning retiree premium cost sharing with other New York State employees could generate $263 million in annual savings as part of a broader effort to reduce recurring expenditures.
Recommendations related to Retiree Health Care
The MTA should implement reducing employee and retiree health care spending to help address its structural deficit.
The MTA should achieve health savings by aligning premium sharing to other New York State employees.
The MTA should pursue Retirees: Premium Cost Sharing Parity to generate savings.
Key Data
$663 million
— Potential annual savings from reducing employee and retiree health care spending.
$263 million
— Annual savings from implementing retiree premium cost sharing parity.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
MTA retirees currently do not contribute to their health care premiums, representing a significant potential area for fiscal reform. By applying the cost-sharing agreement used for retired New York State employees to its own retirees, the agency could achieve $263 million in annual savings by 2024.
Recommendations related to Retiree Health Care
The MTA should apply the State’s current cost-sharing agreement for retired New York State employees to its own retired workforce to require premium contributions.
Key Data
$263 million
— Annual savings by 2024 if retired MTA employees contributed to their health care premiums at the rate of retired State workers.
$44,312
— Salary threshold in 2019 for State workers who retired from salary grade 10 titles.
16%
— Premium contribution rate for individual coverage for State workers who retired from salary grade 10 titles.
31%
— Premium contribution rate for family coverage for State workers who retired from salary grade 10 titles.
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…
The City's fiscal plan for 2022 includes a positive step by reversing the decision to utilize funds from the Retiree Health Benefits Trust to balance the budget. This move preserves the trust's assets rather than depleting them to cover current operational expenses.
Key Data
$1.6 billion
— The amount the City reversed its plan to use from the Retiree Health Benefits Trust to balance the budget.
New York City should require employees and retirees to contribute to their health insurance premiums to reduce recurring labor costs, as most currently make no contribution. Additionally, the City must replenish the $2.6 billion Retiree Health Benefits Trust Fund that was utilized during the pandemic to ensure long-term fiscal stability.
Recommendations related to Retiree Health Care
The City should phase in employee and retiree contributions to health insurance premiums over three years, with lower-paid employees paying a smaller share than those more highly compensated.
The City should replenish the $2.6 billion of the Retiree Health Benefits Trust used in fiscal years 2020 and 2021 by fiscal year 2025.
Retirees should 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
— Recurring health insurance premium savings for the City from implementing modest premium contributions.
$2.6 billion
— Amount of the Retiree Health Benefits Trust used in fiscal years 2020 and 2021 that needs to be replenished.
$4.6 billion
— The pre-pandemic balance of the Retiree Health Benefits Trust that the City aims to return to by fiscal year 2025.
The Metropolitan Transportation Authority faces a severe fiscal crisis with significant budget gaps, necessitating a focus on operational efficiencies to mitigate drastic service cuts and layoffs. One such efficiency measure involves equalizing employee and retiree health benefit contributions to match those of State employees, which could generate $200 million in annual savings.
Recommendations related to Retiree Health Care
The MTA should focus on equalizing employee and retiree health benefit contributions to those of State employees to generate savings.
Key Data
$200 million
— Annual savings from equalizing employee and retiree health benefit contributions to those of State employees.
New York City could achieve significant fiscal savings by requiring city workers and retirees to contribute to their health insurance premiums, as they currently pay zero. Reinvigorating the labor-management committee established in 2014 to reduce health insurance spending offers a viable alternative to borrowing or layoffs.
Recommendations related to Retiree Health Care
The city should require city workers and retirees to contribute to their health insurance premiums, as they currently pay zero.
The administration should reinvigorate the labor-management committee established in 2014 to reduce health insurance spending.
Key Data
zero
— The amount city workers and retirees currently pay for health insurance premiums.
hundreds of millions of dollars
— The potential savings from requiring city workers and retirees to contribute to their health insurance premiums.
New York City provides pre-Medicare retiree health insurance benefits with no premium cost to employees after 10 years of service, a benefit that cost $2.2 billion in fiscal year 2020. To achieve necessary labor savings, the City should implement premium-sharing for retirees, scale contributions based on years of service, and eliminate Medicare Part B premium reimbursements for high-income retirees.
Recommendations related to Retiree Health Care
A contribution of 16 percent of the premium for pre-Medicare retirees in fiscal year 2021 would save about $224 million.
Retirees could be asked to contribute 50 percent of the premium for pre-Medicare health insurance.
Contribution rates could be scaled based on years of service; for example, retirees with 10 years of service could be asked to contribute 75 percent, while those with 20 years would contribute 50 percent and those with 30 years would contribute 25 percent.
Elimination of Medicare Part B premium reimbursement and the income-related monthly adjustment amount (IRMAA) would save the City about $400 million a year.
The City could require pre-Medicare retirees who are eligible for insurance through an employer (either their own or their spouses’) to enroll in that plan.
Key Data
$2.2 billion
— Annual cost of pre-Medicare retiree health insurance benefits in fiscal year 2020.
$224 million
— Potential savings from a 16 percent premium contribution for pre-Medicare retirees in fiscal year 2021.
$700 million
— Potential savings if retirees contribute 50 percent of the premium for pre-Medicare health insurance.
$400 million
— Annual savings from eliminating Medicare Part B premium reimbursement and the income-related monthly adjustment amount.
$2,370
— Estimated cost per person to the City for supplemental Medicare policies in fiscal year 2021.
$1,735 to $5,899
— Annual retiree costs for Medicare Part B premiums.
New York City provides pre-Medicare retiree health insurance benefits with no premium cost to employees after 10 years of service, a benefit that costs the city billions annually and is increasingly rare in the private sector. To achieve necessary fiscal savings, the city should implement premium-sharing requirements for retirees and scale contributions based on years of service to align with other public and private employers.
Recommendations related to Retiree Health Care
A contribution of 16 percent of the premium for pre-Medicare retirees in fiscal year 2021 would save about $224 million.
The City should require retirees to contribute 50 percent of the premium for pre-Medicare health insurance.
Contribution rates for retiree health insurance could be scaled based on years of service; for example, retirees with 10 years of service could be asked to contribute 75 percent, while those with 20 years would contribute 50 percent and those with 30 years would contribute 25 percent.
Elimination of Medicare Part B premium reimbursement and the income-related monthly adjustment amount (IRMAA) would save the City about $400 million a year.
If a 50 percent premium contribution was also required for Medicare Supplemental health plan policies, the City would save about $250 million.
The City could require pre-Medicare retirees who are eligible for insurance through an employer (either their own or their spouses’) to enroll in that plan.
The years of service required to be eligible for health insurance could be increased for current employees.
Key Data
$2.2 billion
— The annual cost of pre-Medicare retiree health insurance benefits in fiscal year 2020.
$224 million
— Savings from a 16 percent premium contribution for pre-Medicare retirees in fiscal year 2021.
$700 million
— Savings from a 50 percent premium contribution for pre-Medicare health insurance.
$400 million
— Annual savings from eliminating Medicare Part B premium reimbursement and the income-related monthly adjustment amount.
$250 million
— Savings from requiring a 50 percent premium contribution for Medicare Supplemental health plan policies.
$2,370
— Estimated cost per person to the City for supplemental Medicare policies in fiscal year 2021.
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 should implement a health insurance premium-sharing arrangement for employees and retirees to generate significant recurring savings while maintaining attractive benefits. By requiring retirees to contribute a portion of their premiums for pre-Medicare and Medicare-related coverage, the city could reduce annual costs by approximately $350 million once fully implemented.
Recommendations related to Retiree Health Care
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 percent of the premium for pre-Medicare insurance and 25 percent of the premium for Medicare Part B and Supplemental Medicare coverage, the City would reduce annual costs by about $350 million when fully implemented.
Approaches to premium cost-sharing that graduate costs based on salaries, years of service, and type of insurance can be used to minimize the impact on lower wage workers.
Key Data
$350 million
— Estimated annual cost reduction from implementing retiree health benefit premium sharing when fully implemented.
$2,500
— Estimated annual cost for pre-Medicare retirees under the proposed premium-sharing arrangement.
$800
— Estimated annual cost for Medicare beneficiaries under the proposed premium-sharing arrangement.
$367 million
— Projected savings from retiree health benefit premium sharing in fiscal year 2024.
New York State's liability for retiree health insurance benefits, known as other postemployment benefits (OPEB), reached $65.1 billion in fiscal year 2019, amounting to approximately $3,345 per resident. To address this, the state is advised to implement tiered benefits for future employees, eliminate Medicare Part B surcharge reimbursements for high-income retirees, and cap premium-sharing, which would collectively reduce liabilities by $8 billion.
Recommendations related to Retiree Health Care
The State should prospectively implement a tiered retiree health benefit based on years of service for future employees to reduce OPEB liability.
The State should eliminate the reimbursement of the Medicare Part B surcharge for high-income retirees to reduce OPEB liability.
The State should cap Medicare Part B premium-sharing to reduce OPEB liability.
Key Data
$65.1 billion
— New York State's other postemployment benefits (OPEB) liability in fiscal year 2019.
$3,345
— Cost to provide health insurance benefits to State retirees per resident in fiscal year 2019.
$8 billion
— Reduction in OPEB liability from implementing proposed retiree health benefit reforms.
$48 million
— Annual reduction in budget costs by fiscal year 2023 from implementing retiree health benefit reforms.
New York State faces a significant fiscal imbalance, with a projected four-year budget gap of $28.8 billion driven by accelerating spending in areas like Medicaid and education aid. To address this, the state should prioritize spending restraint, including implementing reforms to retiree health benefits to lower long-term liabilities.
Recommendations related to Retiree Health Care
New York State should consider reforms to retiree health benefits that were proposed repeatedly in recent Executive Budgets to significantly reduce post-employment benefit costs and future liabilities.
New York City has grown its Retiree Health Benefit Trust to a record $4.7 billion, though annual deposits have slowed since fiscal years 2015 to 2017. The city is encouraged to continue increasing the fund's balance as an appropriate use of resources to help manage future obligations.
Recommendations related to Retiree Health Care
Increase budgetary reserves or make deposits to the Retiree Health Benefit Trust (RHBT) using additional resources generated by savings or higher than forecast revenues.
The City should continue to increase the Retiree Health Benefit Trust (RHBT) fund’s balance; further deposits would be an appropriate use of City resources.
Key Data
$4.7 billion
— The Retiree Health Benefit Trust (RHBT) has grown to a record balance of $4.7 billion.
The state legislature has passed 18 bills that would expand pension and disability benefits for public employees, which would cost at least $71 million in the first year. These measures threaten to undermine previous fiscal reforms regarding employee and retiree benefits and should be vetoed to prevent unnecessary cost increases.
Recommendations related to Retiree Health Care
The Governor should veto all 18 bills passed by the Legislature to enhance pension or disability benefits.
The Governor should veto A7620-A/S5903-A, which would cost $5.6 million annually to allow New York City police officers to receive retirement credit for time spent as cadets.
The Governor should continue the tradition of vetoing unwarranted expansions of employee and retiree benefits to maintain fiscal prudence.
Key Data
$71 million
— Projected first-year cost of the 18 bills passed by the Legislature to enhance pension or disability benefits.
$5.6 million
— Annual cost to allow New York City police officers to receive retirement credit for time spent as cadets under A7620-A/S5903-A.
$41 million
— First-year cost of A4431/S5207, which would establish 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.
$2.1 million
— First-year cost to Nassau County for A5324/S5133, which would grant enhanced disability benefits to ambulance medical technicians.
$1.5 million
— First-year cost to Nassau County for A5021/S3946, which would allow sheriffs and correction officers to be eligible for performance of duty disability benefits.
The scorecard tracks 189 legislative bills, including several proposals aimed at protecting or enhancing health insurance benefits for public retirees, such as prohibiting the reduction of coverage or mandating reimbursement for Medicare premiums. While these bills seek to secure benefits for retirees, the fiscal impact of most of these measures is currently undetermined.
The City Charter should be amended to properly structure the Retiree Health Benefits Trust to prevent it from being used as a de facto rainy day fund. This change would require annual deposits based on the cost of benefits and limit disbursements to pay-as-you-go amounts to ensure resources are available for future obligations.
Recommendations related to Retiree Health Care
The Charter should be amended to properly structure the Retiree Health Benefits Trust (RHBT), which is currently considered a de facto Rainy Day Fund.
The City should establish the Retiree Health Benefits Trust (RHBT) in the Charter by requiring annual deposits of at least the current year cost (or PAYGO) of the relevant retiree health benefits plus some percentage, or the normal cost of those benefits.
The City should limit Retiree Health Benefits Trust (RHBT) disbursements to PAYGO to ensure the trust is able to accrue resources for current obligations to be paid in the future.
The 2019 Benefit Sweetener Scorecard tracks 189 legislative bills, including several proposals that would impact health insurance benefits for public retirees. These measures include efforts to prohibit the reduction of retiree health benefits, mandate state reimbursement for Medicare premiums, and require notification of changes to health insurance plans.
The 2019 legislative session included numerous bills aimed at prohibiting state and local governments from reducing or modifying health insurance benefits for public employee retirees and their dependents. These legislative proposals seek to lock in existing coverage levels, though the fiscal impact of these measures remains largely undetermined.
The Metropolitan Transportation Authority faces a significant fiscal shortfall, necessitating labor cost reforms that include adjusting retiree health benefits. Aligning retiree health care contributions with those of other state retirees could generate substantial annual savings for the authority.
Recommendations related to Retiree Health Care
The MTA should utilize collective bargaining agreements to alter retiree medical benefits, including premium payments for Medicare supplemental plans.
The MTA should apply retiree health care contribution shares similar to other State retirees—between 12 percent and 16 percent for individual coverage and 27 percent and 31 percent for dependent coverage—to generate significant annual savings.
Key Data
$136 million to $165 million
— Estimated annual savings for the MTA in 2019 by applying state retiree health care contribution shares to MTA retirees.
12 percent and 16 percent
— The range of individual coverage premiums contributed by other State retirees.
27 percent and 31 percent
— The range of dependent coverage premiums contributed by other State retirees.
$614 million
— The amount the MTA spent in 2018 on other postemployment benefits (OPEB), which primarily covers premiums on retiree health insurance.
New York City's health insurance savings agreements have relied heavily on conservative budget projections and accounting decisions rather than structural reforms, failing to address significant long-term challenges. Specifically, the current approach neglects to reform the fragmented provision of benefits and the costly, non-contributory health insurance provided to retirees.
Recommendations related to Retiree Health Care
The City should address the costly provision of health insurance to retirees by requiring contributions to the cost of care.
Key Data
$8.1 billion
— Estimated annual health expenditures in 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 secured from EmblemHealth.
80 percent
— Estimated portion of the target savings already achieved by the City and the Municipal Labor Committee.
Governor Cuomo vetoed a series of legislative proposals that would have expanded employee and retiree benefits, including a measure affecting retiree health insurance contributions for former community college employees. These vetoes prevented various immediate and long-term fiscal costs that would have otherwise burdened state and local government budgets.
Recommendations related to Retiree Health Care
The Governor should veto legislation that increases costs for employee and retiree benefits.
Key Data
$13.20 Million
— One-time past service cost for the enhanced in-service death benefit for State correction officers.
$2.42 Million
— Increased annual contributions and immediate past service cost 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 costs and one-time retroactive cost for allowing Tier 6 uniformed court officers to retire without early age reduction.
New York City's long-term liabilities for bonded debt, pensions, and other postemployment benefits reached a record $257.3 billion in fiscal year 2018, an increase of $4.7 billion from the previous year. Specifically, the liability for retiree health and other nonpension benefits grew by $10.1 billion to reach a total of $99 billion.
Key Data
$99 billion
— Total OPEB liability for retiree health and other nonpension benefits.
$10.1 billion
— Increase in OPEB liability for retiree health and other nonpension benefits.
$257.3 billion
— Record total long-term liabilities for bonded debt, pensions, and OPEB in fiscal year 2018.
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 a strategy to prefund these costs and reduce benefits, such as introducing premium sharing and eliminating Medicare Part B reimbursements, rather than treating the trust fund as a rainy day reserve.
Recommendations related to Retiree Health Care
The city should establish a goal of cutting retiree health benefit costs by 50 percent to address the substantial unfunded liability.
Policymakers should implement premium sharing for retiree health insurance, eliminate reimbursement of Medicare Part B, and reduce contributions to welfare funds.
The city must develop a policy for deposits and withdrawals to the Retiree Health Benefits Trust Fund to ensure it is prefunded rather than treated as a rainy day fund.
Deposits to the Retiree Health Benefits Trust Fund should equal or exceed the current year pay-as-you-go cost plus the annual service cost.
Withdrawals from the Retiree Health Benefits Trust Fund should be limited to paying annual costs to prevent the fund from being used as a general budget reserve.
Key Data
$88.4 billion
— Unfunded liability for other postemployment benefits (OPEB) at the end of fiscal year 2017.
$93.1 billion
— Total OPEB liability for the City in fiscal year 2017.
5 percent
— Portion of the total OPEB liability that has been funded.
$2.3 billion
— Amount paid from the City’s annual budget for retiree health bills in fiscal year 2017.
$6.9 billion
— Amount the actuary determined was needed in fiscal year 2017 to meet commitments to both current and future retirees.
$126,000
— Unfunded OPEB liability per member in New York City in 2016.
The City's fiscal year 2019 budget includes a $100 million deposit into the Retiree Health Benefit Trust, which remains significantly underfunded relative to the $93 billion liability for retiree health insurance. To address this, the City should prioritize securing substantial health care savings during labor negotiations and develop a policy to increase the trust's size to better manage long-term liabilities.
Recommendations related to Retiree Health Care
The City should develop a policy to increase the size of the Retiree Health Benefit Trust to fund its long-term liability for retiree health insurance.
In negotiating new collective bargaining agreements, the City should ensure that substantial health care savings are secured.
The City should focus on retiree health insurance benefits to help reduce its other postemployment benefits (OPEB) liability.
Key Data
$93 billion
— The City's total liability for providing health insurance to its retirees.
$100 million
— The deposit made into the Retiree Health Benefit Trust in the fiscal year 2019 budget.
$4.35 billion
— The total balance of the Retiree Health Benefit Trust after the most recent deposit.
5 percent
— The portion of the long-term retiree health liability currently covered by the Retiree Health Benefit Trust balance.
The provided document is a scorecard of legislative bills vetoed in 2018 that would have expanded pension and disability benefits for public employees, with costs ranging from minimal to $13.2 million for a single proposal. While most measures focused on pensions, one proposal sought to restore sick leave balances to lower retiree health insurance contributions.
The Long Island Rail Road (LIRR) faces significantly higher legacy costs than Metro-North, with retiree health insurance expenses totaling $60 million in 2017 compared to $33 million at Metro-North. These legacy costs, which include retiree health benefits and pension payments, are a primary driver of the unit cost differences between the two commuter railroads.
Key Data
$60 million
— LIRR retiree health insurance expense in 2017.
$33 million
— Metro-North retiree health insurance expense in 2017.
$9,487
— Average annual retiree healthcare expense per LIRR position in 2017.
$4,902
— Average annual retiree healthcare expense per Metro-North position in 2017.
The 2018 Benefit Sweetener Scorecard tracks various legislative proposals that were vetoed, including a measure that would have restored sick leave balances for former community college employees to calculate retiree health insurance contributions. These vetoed bills generally sought to expand benefits or alter retirement calculations for specific public sector employee groups.
New York State faces $87.3 billion in unfunded retiree health insurance liabilities, prompting calls to cap reimbursement levels and discontinue IRMAA payments for high-income retirees. Additionally, one-time financial settlements totaling $702 million should be directed toward the retiree benefits trust rather than being used for annual operating expenses.
Recommendations related to Retiree Health Care
The State should cap the amount retirees are reimbursed for health insurance premiums at current levels.
The State should discontinue IRMAA reimbursements for those most able to afford the costs of health insurance.
The State should make payments to the retiree benefits trust using one-time financial settlements.
Key Data
$170,000
— Income threshold for high-income retirees subject to IRMAA.
$87.3 billion
— Total retiree health insurance liabilities, or OPEB, for which the State has no reserved assets.
$702 million
— Total one-time financial settlements available to the State.
$383 million
— Portion of financial settlements currently used for annual operating expenses.
$194 million
— Portion of financial settlements currently used for MTA ongoing expenses.
$125 million
— Portion of financial settlements recommended for health care capital grants.
New York City contributes over $1 billion annually to union-administered benefit funds that provide supplemental health and annuity benefits to employees and retirees, yet these funds often suffer from excessive administrative costs and mismanagement. Consolidating these benefits under the City's health insurance program and utilizing a centralized cafeteria plan for non-health benefits could improve efficiency and generate significant taxpayer savings.
Recommendations related to Retiree Health Care
The Office of the Comptroller should give higher priority to auditing union-administered benefit funds to ensure better oversight.
The City should develop benchmarks and indicators for benefit funds that can trigger enforcement powers under Directive #12.
The Office of Labor Relations should expand the Comptroller’s oversight and enforcement authority over union-administered benefit funds.
The City should consolidate supplementary health care benefits under the City’s Health Insurance Plan to improve efficiency.
The City should provide non-health related benefits through a centralized cafeteria plan to allow for more tailored, efficient benefit delivery.
Key Data
$1.1 billion
— Projected New York City taxpayer contribution to 108 union-administered benefit funds in fiscal year 2018.
$163.8 million
— Combined administrative and benefit savings potential from consolidating the provision of supplemental benefits.
$109.3 million
— Total administrative expenses spent by the 91 benefit funds reviewed by the Comptroller in fiscal year 2014.
$6.3 billion
— Projected spending by New York City on health insurance benefits in fiscal year 2018.
$122.9 million
— City contribution to 27 annuity funds in fiscal year 2014.
$160 million
— Potential savings for the City by restructuring how supplemental benefits are provided.
The New York State Executive Budget for Fiscal Year 2019 proposes reforms to retiree health insurance aimed at achieving long-term savings. These measures include ending the reimbursement of Medicare premiums for high-income earners and capping Medicare reimbursement at current levels.
Recommendations related to Retiree Health Care
The state should end reimbursement of Medicare premiums for high income earners to provide needed long-term savings in retiree health insurance.
The state should cap Medicare reimbursement at current rates to provide needed long-term savings in retiree health insurance.
The 2017 Benefit Sweetener Scorecard tracks various legislative bills impacting public employee benefits, including several proposals aimed at protecting or modifying health insurance coverage for retirees. These bills include measures to prohibit the reduction of retiree health benefits and establish new reimbursement policies for Medicare premiums.
The Metropolitan Transportation Authority's 2018 budget faces significant deficits, leading the agency to consider using reserves, including those designated for retiree health care, to balance its books. Relying on these long-term reserves to cover short-term operating costs is discouraged, as it substitutes immediate resources for future liabilities.
Recommendations related to Retiree Health Care
The MTA board should avoid withdrawing from the MTA Retiree Welfare Benefits Trust to maintain cash surpluses, as this substitutes short-term resources for long-term liabilities.
The MTA board should avoid draining reserve funds, including those set aside for retiree health care, to cover operating deficits.
Key Data
$679 million
— Total funds held in the Bridges and Tunnels Necessary Reconstruction Fund and the MTA Retiree Welfare Benefits Trust.
$169 million
— Additional funds provided by the MTA's drawdown of the 2017 General Reserve and withdrawal from the GASB Fund Reserve, which is used to pay retiree health care benefits.
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 liability for retiree health benefits, a burden that continues to grow due to a lack of prefunding and an overly generous benefit package compared to other municipalities. To address this, the City should significantly reduce the cost of these benefits through reforms like cost-sharing and implement systematic prefunding policies to ensure long-term fiscal sustainability.
Recommendations related to Retiree Health Care
Require workers who retire before Medicare eligibility to pay 50 percent of their health insurance premium to reduce the normal cost by approximately $831 million annually.
No longer reimburse for Medicare Part B premiums to eliminate about $482 million in annual normal costs.
Lower Medicare Part B reimbursement from full reimbursement to 50 percent reimbursement to lower the normal cost by about $241 million annually.
End benefits for spouses of retirees to reduce the normal cost by approximately $1.78 billion annually.
Reduce to 50 percent the premium payments for Medicare supplemental insurance to reduce the normal cost by approximately $358 million annually.
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 and normal cost.
Provide a fixed payment to municipal employee unions and authorize them to provide retiree health benefits to shift the responsibility for benefit management.
Key Data
$95 billion
— The total OPEB liability for New York City.
$30,000
— The current OPEB debt for each household in New York City.
$4.9 billion
— The current annual normal cost for OPEB benefits.
$2.5 billion
— The current annual PAYGO cost for retiree health benefits.
$150,000
— The average OPEB liability per member.
$17,600
— The annual cost to New York City for family health insurance policies for retirees not yet eligible for Medicare.
The city has increased deposits into the Retiree Health Benefit Trust to its highest balance, yet health insurance costs remain a significant concern. Future labor negotiations should address employee and retiree health insurance contributions, as the city currently covers the full premium for most workers, unlike the state's lower contribution rates.
Recommendations related to Retiree Health Care
Regular deposits to the Retiree Health Benefit Trust (RHBT) should be considered, and efforts to grow the fund should be guided by standards for deposits and withdrawals.
Health insurance contributions from employees and retirees should be on the table during negotiations.
The next round of labor negotiations should build on the savings generated from the City’s partnership with the Municipal Labor Committee.
Key Data
$100 million
— Amount deposited into the Retiree Health Benefit Trust (RHBT) to bring it to its highest balance.
100%
— Percentage of the health insurance premium the city pays for most workers.
86%
— Percentage of health insurance premiums New York State pays for individuals.
71%
— Percentage of health insurance premiums New York State pays for families.
The Retiree Health Benefit Trust currently holds $4.0 billion in assets intended for future retiree health care costs. These funds should be strictly protected for their intended purpose rather than being utilized as a general rainy day fund, necessitating the establishment of formal guidelines for deposits and withdrawals.
Recommendations related to Retiree Health Care
The City should establish guidelines to require annual deposits and limit withdrawals from the Retiree Health Benefit Trust to special circumstances.
Key Data
$4.0 billion
— Assets currently held in the Retiree Health Benefit Trust.
The New York State FY2018 adopted budget includes the establishment of a retiree health reserve fund and enables its regular funding, marking a positive step in fiscal management. However, the broader budget fails to implement necessary education funding reforms and continues excessive spending on economic development without meaningful oversight or performance standards.
New York State currently covers excessive retiree health insurance costs, including Medicare Part B premiums and surcharges for high-income individuals, which should be reformed to align with standard employer practices. Implementing tiered premium contributions based on years of service and capping reimbursement levels would help control the rapidly growing expenses associated with retiree health care.
Recommendations related to Retiree Health Care
The State should cap the amount retirees are reimbursed for health insurance premiums at current levels.
The State should discontinue IRMAA reimbursements for high-income retirees who are most able to afford the costs of health insurance.
The State should create tiered premium contributions based on years of service to allow employees to pay a smaller share of premiums in retirement with each additional year of service.
Key Data
$170,000
— Income threshold for couples subject to IRMAA surcharges on health insurance.
50 percent
— Maximum share of single coverage premiums for retirees with 10 years of service.
10 percent
— Minimum share of single coverage premiums for retirees with more than 30 years of service.
The Fiscal Year 2018 Executive Budget introduces reforms to retiree health insurance, specifically targeting long-term savings through adjustments to premium structures and Medicare reimbursements. These changes include the implementation of tiered premium shares based on years of service and limits on the reimbursement of Medicare premiums.
Recommendations related to Retiree Health Care
The Executive Budget should implement tiered premium shares based on years of service to provide needed long-term savings.
The Executive Budget should implement limited reimbursement of Medicare premiums to provide needed long-term savings.
The Metropolitan Transportation Authority faces significant long-term fiscal risks due to its reliance on cash reserves to fund capital projects and its failure to adequately address nearly $14 billion in unfunded retiree health insurance liabilities. To ensure future financial stability, the agency must adjust its projections to account for these risks and secure new revenue sources to properly fund its obligations.
Recommendations related to Retiree Health Care
The MTA leadership should set aside additional resources for the agency’s OPEB trust fund to address its significant unfunded retiree health care liabilities.
Key Data
$14 billion
— The total amount of the MTA’s OPEB liability as of March 31, 2016.
2%
— The portion of the total outstanding OPEB liability covered by the MTA’s assets, which is less than this amount.
$608 million
— The amount listed in the 2017 financial plan for the current cost of retiree health insurance.
New York City's legacy costs, including debt service, pensions, and retiree health benefits, are projected to grow to over $20 billion by fiscal year 2020, outpacing other budget expenditures. To address this, the city should implement reforms to retiree health benefits, such as requiring premium contributions and eliminating Medicare Part B reimbursements, which could save up to $1.6 billion.
Recommendations related to Retiree Health Care
Retirees should share in the cost of health premiums to align with other state and local governments.
Reform of union welfare funds is needed to address inefficiencies and lack of accountability.
Consolidating supplementary health care benefits under the City’s health plan would be more efficient than the current union-administered system.
Medicare Part B premium reimbursements should be eliminated, as this benefit is uncommon among public and private employers.
Key Data
$17.4 billion
— The current annual cost of legacy expenses, including debt service, pensions, and retiree health benefits.
$20.9 billion
— The projected annual cost of legacy expenses by fiscal year 2020.
$1.6 billion
— The total potential savings by fiscal year 2020 if proposed retiree health benefit reforms are implemented.
10 years
— The minimum length of service required for retirees to become eligible for health benefits.
20 percent
— The percentage of the city budget currently consumed by legacy costs.
11 percent
— The projected growth rate of non-legacy spending by fiscal year 2020.
New York City's legacy costs, which include debt service, pensions, and retiree health benefits, are projected to grow to over $20 billion by fiscal year 2020. To address the rising burden of retiree health benefits, which are expected to cost $2.9 billion by 2020, reforms such as requiring premium contributions from retirees, consolidating union welfare funds, and eliminating Medicare Part B reimbursements could save up to $1.6 billion.
Recommendations related to Retiree Health Care
City-MLC negotiations should focus on reducing health care costs further and bringing retiree health costs in line with those of other state and local governments.
Retirees should share the cost of health premiums.
Reform of union welfare funds is needed, as consolidating supplementary health care benefits under the city’s health plan would be more efficient.
Medicare Part B premium reimbursements should be eliminated.
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 by fiscal year 2020 compared to fiscal year 2016.
$3.4 billion
— Total savings expected from the City and Municipal Labor Committee partnership to reduce health care costs.
$2.1 billion
— Savings announced to date from the City and Municipal Labor Committee partnership.
$1.6 billion
— Potential savings by fiscal year 2020 from implementing recommended reforms to retiree health benefits.
New York City's current policy of fully funding health insurance premiums for employees and retirees, who qualify after just 10 years of service, contributes to a $70 billion liability for post-employment benefits. This practice, which requires no premium contributions from beneficiaries, leaves the city out of step with the private and public sectors as health insurance costs continue to rise rapidly.
Recommendations related to Retiree Health Care
The city government should require employees and retirees to contribute to their health insurance premiums to align with the private sector and the majority of the public sector.
The city should reform the current policy of providing fully funded health insurance to retirees who qualify after only 10 years of service.
Key Data
$70 billion
— The city's total liability for retiree health insurance costs and other post-employment benefits, excluding pensions.
10 years
— The length of service required for city employees to qualify for health insurance benefits as a retiree.
$5,700
— The projected increase in health insurance premiums per employee.
New York City faces a $70 billion liability for retiree health benefits, which are largely unfunded and currently rely on a pay-as-you-go approach. To secure these future obligations, the city must establish explicit guidelines for the Retiree Health Benefit Trust that mandate consistent annual deposits and restrict withdrawals to exceptional circumstances.
Recommendations related to Retiree Health Care
The city should establish explicit guidelines requiring annual deposits into the Retiree Health Benefit Trust.
The city should limit withdrawals from the trust only to special circumstances, such as unexpected spikes in retiree health insurance premiums.
Deposits should be calculated based on a share of the annual cost of retiree health benefits to ensure the fund grows steadily.
The Mayor and City Council should adopt explicit guidelines for the fund as part of the imminent budget agreement.
Building the resources necessary to tackle the OPEB liability will require consistent contributions and a commitment to protect these gains.
Key Data
$70 billion
— The City of New York's total liability for retiree health insurance costs and other post-employment benefits.
$2.5 billion
— The initial amount deposited into the Retiree Health Benefits Trust in fiscal years 2006 and 2007.
$2.2 billion
— The amount the City depleted from the Retiree Health Benefits Trust over the course of four years starting in 2010.
$3.7 billion
— The projected balance of the Retiree Health Benefits Trust, representing the highest level ever.
4 percent
— The portion of the outstanding liability currently covered by the Retiree Health Benefits Trust.
$100 million
— The approximate deposit required in fiscal year 2017 if a 5 percent contribution rate were implemented.
Six legislative bills would restrict the ability of state and local governments to modify retiree health insurance benefits. These proposals, which include freezing premium shares and prohibiting the reduction of post-employment benefits, should be rejected to avoid imposing expensive, inflexible mandates on taxpayers.
Recommendations related to Retiree Health Care
The Legislature should reject the six bills that would limit changes to retiree health insurance, as these would prohibit future adjustments to benefits.
The Legislature should reject the bill (A2887) that would prohibit any employer from diminishing a benefit awarded to a retiree.
The Legislature should reject the four separate bills that would prohibit state and local government entities from diminishing post-employment health benefits.
The Legislature should reject the bill (A5308/S3202) that would freeze state retiree premium shares to the dollar amount paid at the time of retirement.
New York State's retiree health insurance benefits are significantly more generous than private and public sector norms, costing taxpayers $1.3 billion in fiscal year 2016 with projections to reach $1.7 billion by 2020. Adopting the Governor's proposed reforms, including freezing Medicare Part B reimbursements and adjusting premium subsidies based on years of service, would reduce long-term unfunded liabilities by approximately $17.5 billion.
Recommendations related to Retiree Health Care
The Legislature should adopt the Governor’s Executive Budget proposal to reduce growing costs associated with retiree health insurance.
The State should end reimbursement for the Income Related Monthly Adjustment Amount (IRMAA) to align with federal policy and stop subsidizing higher-income retirees.
The State should freeze reimbursement for the regular Medicare Part B premium at the 2015 rate of $105 monthly to limit future cost growth.
The State should moderately reduce the premium subsidy for retirees with less than 30 years of service to better align benefits with service duration.
Key Data
$1.3 Billion
— Cost to taxpayers for retiree health benefits in fiscal year 2016.
$1.7 Billion
— Projected cost of retiree health benefits by fiscal year 2020.
$6 Million
— Annual savings from ending reimbursement for the IRMAA.
$1 Million
— Savings in fiscal year 2017 from freezing Medicare Part B reimbursement.
$25 Million
— Estimated savings in fiscal year 2020 from reducing premium subsidies for retirees with less than 30 years of service.
$17.5 Billion
— Amount by which the State’s long-term unfunded liability for future retiree health benefits could be reduced.
New York State's retiree health care costs are projected to rise to $1.6 billion by 2020, prompting a proposal to implement a tiered premium contribution system based on years of service. This plan aims to reduce state expenditures by capping Medicare Part B reimbursements at $105 per month and eliminating IRMAA payments for high-income retirees.
Recommendations related to Retiree Health Care
The State should decrease reimbursements for retiree Medicare Part B premiums to curtail rising retiree health care costs.
The State should create a tiered system for retiree health insurance based on years of service to allow employees to pay a smaller share of premiums in retirement with each additional year of service.
The State should cap the amount retirees are reimbursed for Medicare Part B premiums at $105 per month to reduce the burden of paying for standard premiums.
The State should discontinue IRMAA reimbursements for high-income retirees to ensure the State is not paying for costs for those most able to afford healthcare.
Key Data
$1.3 billion to $1.6 billion
— Forecasted growth of retiree health care costs in fiscal years 2016 to 2020.
$10 million
— Savings to the State in fiscal year 2017 from the proposed retiree health insurance changes.
$40 million
— Savings to the State in fiscal year 2020 from the proposed retiree health insurance changes.
$122 per month
— Current standard Medicare Part B premium paid by New York State for retirees.
$105 per month
— Proposed cap on the amount retirees are reimbursed for Medicare Part B premiums.
$170,000 per year
— Income threshold for couples subject to IRMAA levies.
The New York State Executive Budget for fiscal year 2016-2017 proposes reducing state payments for retiree health care costs as part of a strategy to control personnel expenses, which would keep the number of state employees essentially flat. While the budget includes $2.3 billion in one-time legal settlement funds and over $1 billion in new economic development capital grants, it lacks specific details on the long-term management of retiree health care obligations.
Legislative proposals that would restrict the ability of public employers to adjust retiree health benefits to achieve cost savings should be rejected to maintain administrative flexibility. These measures, which include prohibiting reductions in health benefits and limiting the authority to set contribution rates, threaten to undermine efforts to control rising retiree health insurance expenses.
Recommendations related to Retiree Health Care
Legislators should reject the five bills that prohibit public employers from reducing health benefits provided to retirees and their dependents, as these proposals restrict the managerial discretion needed to achieve cost savings.
The state should reject the bill that establishes health insurance rates for the largest State health insurance plan and eliminates the authority of the President of the Civil Service Commission to establish contribution rates for retirees.
Legislators must ensure that bills which reduce administrative flexibility for controlling rapidly increasing retiree health insurance costs do not advance to the Governor’s desk.
Key Data
5
— Number of bills introduced that prohibit public employers from reducing health benefits provided to retirees and their dependents.
The fiscal year 2016 executive budget includes an increase of $280 million for the Retiree Health Benefit Trust as part of a broader allocation of unanticipated tax revenues. This funding is among several reserve increases intended to address potential adverse economic developments.
Key Data
$280 million
— Increase in the Retiree Health Benefit Trust included in the fiscal year 2016 executive budget.
New York City's health insurance costs have doubled since 2005, leading to a $3.4 billion savings agreement with the Municipal Labor Committee that relies on projected rather than actual savings. Instead of implementing structural changes like premium-sharing for employees and retirees, the city is currently claiming savings based on lower-than-expected premium increases, which are largely due to national trends rather than specific policy actions.
Recommendations related to Retiree Health Care
The City should implement initiatives that "bend the cost curve" and achieve recurring savings for City taxpayers.
The City should establish premium-sharing with employees and retirees to help reduce health care costs.
The City should reduce per enrollee utilization of services to achieve recurring savings.
The City should better manage chronic conditions to improve health outcomes and save money.
The City should lower provider payments through lower fees for service, higher deductibles, or higher copayments.
The City should ensure that savings are counted clearly and honestly, excluding temporary premium rate freezes or low premium increases.
The City should reduce emergency room utilization as a basis for meeting 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
— Portion of the 2015 budget comprised by health insurance costs.
$3.4 billion
— Total savings target between fiscal year 2015 and 2018.
$400 million
— Annual savings target in fiscal year 2015.
$700 million
— Annual savings target in fiscal year 2016.
The city should explore potential health insurance savings by adjusting the eligibility or status of retirees, such as transitioning them to plans on the New York State Health Exchange. Additionally, any claimed savings must stem from specific, recurring measures that improve efficiency rather than temporary freezes or accounting adjustments.
Recommendations related to Retiree Health Care
A significant source of potential savings may be possible through changing the status or eligibility of retirees, for example, by moving some or all from City plans to those available on the New York State Health Exchange with federal subsidies.
As a first step, an objective system for measuring savings should be established to ensure they are recurring and lead to reductions in per person or per family premium costs.
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 increases or decreases in covered lives should not affect the calculation of savings.
An agreement should be reached that assures there will be regular audits in the future as a matter of managerial discretion to verify reductions in the number of people covered.
Key Data
$1 billion
— The amount already agreed upon for funding taken from the Health Insurance Stabilization Fund.
$100
— The fiscal year 2014 average payment per service used in the hypothetical savings calculation.
1,000,000
— The baseline assumption of enrollees used in the hypothetical program to centralize radiation services.
3.0 percent
— The historical annual increase in payment per service.
5.0 percent
— The historical annual increase in utilization per 1,000 enrollees.
New York faces an estimated $66.5 billion in unfunded other-post-employment-benefit (OPEB) liabilities for future retiree health insurance. To address this looming fiscal challenge, the state should establish a dedicated trust fund similar to the model used by New York City.
Recommendations related to Retiree Health Care
The state should establish a retiree health insurance trust fund similar to the one maintained by New York City to help improve the looming fiscal crunch represented by unfunded liabilities.
Key Data
$66.5 billion
— New York's estimated other-post-employment-benefit (OPEB) liability for retirees' future health insurance.
The 2014 legislative scorecard tracks proposals affecting public sector benefits, including measures to prohibit the reduction of health insurance for retirees and their dependents and to extend state health insurance eligibility to retired school board members. These legislative items represent a portion of the broader benefit enhancements under consideration, though specific fiscal impacts for these health-related provisions were not provided.
The agreement between New York City and the Municipal Labor Committee regarding health insurance reforms relies on one-time savings and artificial caps rather than structural changes that would create long-term efficiency. These measures fail to address the need for meaningful, recurring savings that would benefit both taxpayers and union members.
This scorecard tracks various legislative bills concerning pension enhancements and disability benefits, including a single proposal to prohibit the diminution of health insurance benefits for retirees. The document does not provide specific fiscal data or policy recommendations regarding retiree health care.
The city should explore potential health insurance savings by adjusting the eligibility or status of retirees, such as transitioning them to New York State Health Exchange plans that offer federal subsidies. Establishing clear, objective systems for measuring savings is essential to ensure that only specific, efficiency-driven reforms are credited toward health care cost reduction goals.
Recommendations related to Retiree Health Care
A significant source of potential savings may be possible through changing the status or eligibility of retirees, for example, by moving some or all from City plans to those available on the New York State Health Exchange with federal subsidies.
As a first step, an objective system for measuring savings should be established to ensure that only recurring savings that "bend the curve" in health care costs are counted.
The City should have a reliable mechanism for recouping amounts of planned savings not actually achieved during a fiscal year.
An agreement should be reached that assures there will be regular audits in the future as a matter of managerial discretion to identify ineligible enrollees.
Additional funding taken from the Health Insurance Stabilization Fund beyond the $1 billion already agreed upon should not count as savings, as it does nothing to make the delivery of health care more efficient.
Key Data
$1 Billion
— The amount of funding from the Health Insurance Stabilization Fund already agreed upon, beyond which additional funding should not count as savings.
1,000,000
— The baseline number of enrollees used in the hypothetical illustration of savings calculations.
$100
— The fiscal year 2014 average payment per service used in the hypothetical savings calculation.
20
— The average utilization of service per 1,000 enrollees in fiscal year 2014.
A tentative labor agreement between the city and the teachers union aims to stabilize the financial plan, with costs projected at $4 billion over four years. To ensure affordability, the city should implement cost-saving measures, including requiring retirees and employees to contribute to their health insurance premiums to achieve projected savings of $3.4 billion.
Recommendations related to Retiree Health Care
The city should achieve more predictable savings 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
$4 billion
— Projected cost of the teachers' contract over the next four years.
$400 million
— Additional salary growth for employees in fiscal year 2015.
$1.5 billion
— Additional salary growth for employees in fiscal year 2018.
$3.4 billion
— Estimated new health care savings to be determined by city and labor officials.
New York City's health insurance policies for retirees are significantly more generous than those of comparable public and private employers, contributing to an $83 billion unfunded liability for post-employment benefits. Implementing premium-sharing requirements for retirees and eliminating the full reimbursement of Medicare Part B premiums would generate billions in savings and help align the city's financial obligations with national standards.
Recommendations related to Retiree Health Care
The City must take steps to more equitably share the cost of health insurance premiums with employees and retirees.
The City should require premium-sharing by retirees to bring New York City closer to the standards set by the private sector and other municipal governments.
The City should eliminate the reimbursement for Medicare Part B premiums for retirees and their spouses.
City leaders should work together to implement health insurance reforms that generate recurring savings to help bring the City’s finances into long-term structural balance.
Key Data
$83 billion
— Estimated unfunded liability for retiree health insurance and other post-employment benefits.
$1.8 billion
— Total savings in fiscal year 2014 if proposed premium-sharing and Medicare Part B reimbursement changes are adopted.
$2.2 billion
— Total savings in fiscal year 2016 if proposed premium-sharing and Medicare Part B reimbursement changes are adopted.
$280 million
— Annual savings from eliminating the reimbursement of Medicare Part B premiums entirely.
$45 million
— Annual savings from eliminating only the spousal reimbursement of Medicare Part B premiums.
$140 million
— Annual savings from halving the reimbursement of Medicare Part B premiums.
New York State should adopt the Governor's proposal to eliminate supplemental Medicare Part B premium reimbursements for higher-income retirees to help manage rising Other Post-Employment Benefits (OPEB) liabilities. This measure, which would affect fewer than 5% of state retirees, is projected to generate $1.7 million in savings for fiscal year 2014-15, growing to $7.0 million by fiscal year 2017-18.
Recommendations related to Retiree Health Care
The state budget should include the Governor’s proposal to eliminate reimbursement for the portion of the Medicare Part B premium above the minimum level for retirees with higher incomes.
Key Data
$1.7 million
— Estimated savings in fiscal year 2014-15 from eliminating supplemental Medicare Part B premium reimbursement for higher-income retirees.
$7.0 million
— Estimated savings in fiscal year 2017-18 from eliminating supplemental Medicare Part B premium reimbursement for higher-income retirees.
$41.4 billion
— Reported Other Post-Employment Benefits (OPEB) liabilities for New York State in 2008.
$59.7 billion
— Reported Other Post-Employment Benefits (OPEB) liabilities for New York State in 2010.
$54.3 billion
— Reported Other Post-Employment Benefits (OPEB) liabilities for New York State in 2012.
5%
— Percentage of the 145,000 State retirees and dependents with Medicare coverage affected by the proposed reimbursement change.
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 City's spending on retiree health benefits is projected to reach $2.4 billion by fiscal year 2015, doubling the $1.2 billion expenditure from fiscal year 2005. These benefits, which include comprehensive insurance with no premium cost sharing and Medicare Part B reimbursements, are a significant component of the city's rapidly growing legacy costs.
Key Data
$2.4 billion
— The annual cost of retiree health benefits by fiscal year 2015.
$1.2 billion
— The amount spent on retiree health benefits in fiscal year 2005.
New York City's health insurance costs are projected to rise to nearly $7 billion by 2016, consuming 80 percent of the city's projected budget deficit. To address this, the city should implement premium-sharing for employees and retirees, including requiring contributions of up to 50 percent from retirees and eliminating Medicare Part B reimbursements.
Recommendations related to Retiree Health Care
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 for their health insurance premiums.
The city should require contributions of up to 50 percent from retirees for 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 requiring no employee contribution.
$1.7 billion
— Estimated annual savings achievable through premium-sharing and eliminating Medicare Part B reimbursement.
New York is one of only five states that currently reimburse most or all Medicare Part B premiums for high-income retirees, a practice that should be eliminated to reduce state liabilities. Ending this reimbursement would lower the cost of providing health insurance for retirees and decrease the state's accrued Other Post-Employment Benefits liability.
Recommendations related to Retiree Health Care
The State should eliminate reimbursement for the additional Medicare Part B premium for high-income participants to bring down the cost of providing health insurance for retirees and reduce the State’s accrued Other Post-Employment Benefits liability.
Key Data
5
— Number of states, including New York, that reimburse most or all Medicare Part B premiums for retirees.
New York City's health insurance costs for public employees and retirees are projected to reach $7 billion by 2016, contributing significantly to the city's budget deficit. To address this, implementing premium-sharing for retirees and phasing out Medicare Part B reimbursements could generate over $2 billion in annual savings.
Recommendations related to Retiree Health Care
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
$1.8 billion
— The total savings in fiscal year 2014 if premium-sharing reforms are implemented.
$2.2 billion
— The total savings in fiscal year 2016 if premium-sharing reforms are implemented.
50%
— The share of the premium that retirees should pay for health coverage.
40%
— The projected growth of health insurance costs for public employees and retirees by 2016.
$7 billion
— The projected annual cost of health insurance for public employees and retirees by 2016.
$1.5 billion
— The portion of the projected 2016 budget deficit attributed to the growth in health insurance costs.
New York City's current health insurance policies for employees and retirees are exceptionally generous compared to other public and private employers, as the city pays the full premium cost and reimburses Medicare Part B premiums. Implementing premium-sharing requirements for employees and retirees, along with eliminating Medicare Part B reimbursements, would generate significant recurring savings to help balance the city's long-term finances.
Recommendations related to Retiree Health Care
The City should implement premium-sharing by employees to align with norms in the private sector and other state and local governments.
The City should require premium-sharing by retirees, as they currently contribute less toward health insurance premiums than they did as employees.
The City should eliminate Medicare Part B reimbursement, as this practice is rare among other state and local governments.
Key Data
$1.8 billion
— Total savings in fiscal year 2014 if the proposed health insurance premium-sharing and Medicare reimbursement changes are adopted.
$2.2 billion
— Total savings in fiscal year 2016 if the proposed health insurance premium-sharing and Medicare reimbursement changes are adopted.
$1.4 billion
— Cost to the City for retiree health insurance premiums in fiscal year 2013.
$83 billion
— Estimated unfunded liability for retiree health insurance and other post-employment benefits.
$45 million
— Potential savings from eliminating spousal Medicare Part B reimbursement.
$280 million
— Potential savings from eliminating Medicare Part B reimbursement entirely.
New York City's fiscal challenges are driven by large expenditure items like health insurance, which costs $5.2 billion annually and cannot be unilaterally reduced by the Mayor. To help balance the fiscal year 2013 budget, the City withdrew $1 billion from the Retiree Health Insurance Trust, an account intended to manage long-term liabilities.
Key Data
$1 billion
— Amount withdrawn from the Retiree Health Insurance Trust to help balance the fiscal year 2013 budget.
$5.2 billion
— Annual cost of health insurance, which is a major expenditure item that cannot be reduced by the Mayor unilaterally.
New York school districts spend significantly more on fringe benefits than the national average, with $4.7 billion spent on health insurance for employees and retirees in 2009. Reallocating responsibility for these premium costs to match state employee arrangements could generate over $500 million in annual savings for school districts.
Recommendations related to Retiree Health Care
School districts should change their health insurance premium sharing arrangements to match those of the State of New York for its employees to reduce fringe benefit costs.
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.
Key Data
$4.7 billion
— The amount school districts in New York State, including New York City, spent on health insurance for employees and retirees in 2009.
$500 million
— The annual savings that would be exceeded if New York City and school districts across the State changed their health insurance premium sharing arrangements to match those of the State of New York for its employees.
$310 million
— The portion of the annual savings for the New York City Department of Education if health insurance premium sharing arrangements were changed.
$220 million
— The minimum annual savings for school districts in the rest of the state if health insurance premium sharing arrangements were changed.
Borrowing to cover separation costs like accrued sick leave creates significant fiscal risks, as these liabilities are often unfunded. These issues are minor compared to the massive, largely unfunded liabilities for retiree health insurance—such as New York City's $83.9 Billion OPEB liability—necessitating that state and local governments establish standards for funding these future obligations.
Recommendations related to Retiree Health Care
The Legislature should allow borrowing for those who need it now only on the condition of future requirements to build adequate reserves and should prevent future borrowing needs by establishing standards for funding more adequately future separation costs and OPEB liabilities among all localities and the State itself.
Leaders of state and local entities should be doing more to reduce and meet their large future obligations for retiree health insurance.
Key Data
$83.9 Billion
— New York City's accrued liability for retiree health insurance (OPEB) at the end of the 2011 fiscal year.
$10.6 Billion
— New York State's accrued liability for retiree health insurance (OPEB) at the end of the 2011 fiscal year.
$3.9 Billion
— New York City's accrued liability for vacation and sick leave at the end of the 2011 fiscal year.
$1.2 Billion
— New York State's accrued liability for vacation and sick leave at the end of the 2011 fiscal year.
New York City provides an overly generous subsidy by reimbursing retirees and their spouses for the full out-of-pocket cost of Medicare Part B premiums, a benefit that is rare in both the public and private sectors. Phasing out this reimbursement could save hundreds of millions of dollars annually, allowing those funds to be redirected toward essential services like child care and after-school programs.
Recommendations related to Retiree Health Care
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 $140 million in fiscal year 2013 and $310 million in 2014.
The City should redirect budget resources toward the needs of our city’s children and away from areas of overspending on retiree health benefits.
Key Data
$280 million
— Cost of providing Medicare Part B reimbursement to retirees and their spouses in fiscal year 2013.
$380 million
— Projected cost of providing Medicare Part B reimbursement to retirees and their spouses by fiscal year 2016.
$140 million
— Potential savings in fiscal year 2013 from reducing Medicare Part B reimbursement by 50 percent.
$310 million
— Potential savings in fiscal year 2014 from reducing Medicare Part B reimbursement by 50 percent.
$100
— Monthly standard premium for Medicare Part B benefits covering physician services.
New York City faces a $90 billion unfunded liability for retiree health benefits, yet the current financial plan proposes depleting the Retiree Health Benefits Trust Fund by $1 billion annually to provide temporary budget relief. To address this long-term fiscal challenge, the city should implement structural reforms, including phasing out Medicare Part B premium reimbursements for retirees and introducing premium-sharing arrangements.
Recommendations related to Retiree Health Care
The Council should move promptly on one front: phasing out the unusual practice of reimbursing retired municipal workers for their Medicare Part B premiums.
The Council should tie depletion of the RHBT fund to health insurance reforms, most importantly, phasing out the reimbursement of Medicare Part B premiums.
The Council should use its authority to phase out the reimbursement through local legislation; this step alone would save $280 million in fiscal year 2013 and grow to $380 million by fiscal year 2016.
The Council should support the Mayor in seeking premium-sharing arrangements for employees and retirees.
Premium contributions for retirees under age 65 should be phased in over the course of the financial plan.
Key Data
$90 billion
— The City's unfunded liability for retiree health benefits.
$1 billion
— The amount withdrawn from the Retiree Health Benefits Trust Fund (RHBT) in fiscal years 2013 and 2014.
$280 million
— The savings in fiscal year 2013 from phasing out the reimbursement of Medicare Part B premiums.
$380 million
— The savings in fiscal year 2016 from phasing out the reimbursement of Medicare Part B premiums.
50 percent
— The proposed contribution toward the premium cost for retirees under age 65.
Rising costs for retiree health benefits are threatening essential government services, with New York City spending $1.6 billion in fiscal year 2012 and facing $84 billion in unfunded liabilities. Proposed legislation that would restrict public officials from adjusting these benefits risks forcing local governments to choose between service cuts and unsustainable financial obligations.
Recommendations related to Retiree Health Care
Public officials should retain their discretion to alter retiree health insurance to avoid being forced to sacrifice core services.
State and local elected officials should not have their hands tied by legislation that prevents them from addressing rising retiree health-insurance costs.
Local governments and school districts should maintain the ability to make reasonable reductions in benefits to avoid cuts in crucial services like police, fire, and schools.
Key Data
$1.6 billion
— New York City cost for retiree health insurance in fiscal year 2012.
$1.3 billion
— State cost for retiree health care in fiscal year 2011-12.
$84 billion
— Unfunded liability for the city.
$56 billion
— Unfunded liability for the state.
$200 billion
— Statewide unfunded liability in 2010.
44 percent
— Increase in retiree health-insurance costs in the city budget from five years prior.
Several legislative proposals have been introduced to protect and enhance health insurance benefits for public employee retirees, including measures to prevent the reduction of employer contributions and benefits. Additionally, specific bills target MTA NYC Transit employees, aiming to reduce the vesting period for retirement health care coverage from 25 years to 10 years and increase Medicare Part B expense reimbursement from 50% to 100%.
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.
Transit workers receive comprehensive health insurance coverage that extends into retirement, with retirees currently making no contribution to the cost of their premiums. In contrast, only 10.6 percent of private firms in New York offer health insurance to retirees under 65, and 9.5 percent offer it to those over 65, highlighting the disparity in benefits.
Recommendations related to Retiree Health Care
The MTA should consider increasing the contribution toward retiree health insurance to fund wage increases.
The MTA should consider ending the partial Medicare Part B reimbursement for retirees to help fund wage increases.
The MTA should consider implementing premium-sharing for health insurance to offset costs.
Key Data
10.6 percent
— Percentage of private firms in New York that offer health insurance to retirees under 65.
9.5 percent
— Percentage of private firms in New York that offer health insurance to retirees over 65.
1.5 percent
— Percentage of gross base salary that TWU employees contribute toward retiree health insurance.
New York City's financial reporting has been complicated by the recognition of Other Post-Employment Benefits (OPEB), which include the significant costs of retiree health insurance. These liabilities, first recognized in fiscal year 2006 with an added expense of $53.3 billion, have contributed to large deficits under modern accounting standards, highlighting the need for a more transparent and meaningful approach to defining a balanced budget.
Recommendations related to Retiree Health Care
New Yorkers should be giving much more attention to the financial results disclosed under the new GAAP rules.
Municipal leaders should work toward moving from the current self-deluding standard for a balanced budget to a more meaningful one.
A time frame similar to the seven years it took to balance the budget during the fiscal crisis should be adopted for recognizing that times have changed and a new standard is needed for local financial management.
Key Data
$53.3 billion
— The added expense recognized in fiscal year 2006 when the accumulated liability for retiree health insurance was first identified.
$2.3 billion to $9.4 billion
— The range of the annual increment in retiree health insurance expenses in the years following fiscal year 2006.
$53,507 million
— The OPEB expense reported for the City of New York in fiscal year 2006.
$9,440 million
— The OPEB expense reported for the City of New York in fiscal year 2010.
$8,922 million
— The OPEB expense reported for the City of New York in fiscal year 2011.
Reforming fringe benefits, such as aligning health insurance premium sharing plans and eliminating Medicare Part B premium reimbursements, could yield significant savings for New York's public sector. These measures offer a more sustainable alternative to headcount reductions like early retirement incentives.
Recommendations related to Retiree Health Care
School districts outside New York City should align their health insurance premium sharing plan with New York State government to achieve significant savings.
The state should eliminate the practice of reimbursing Medicare Part B premiums to reduce public expenditures.
Policymakers should increase health insurance premium sharing for retirees to 50 percent to generate substantial budgetary savings.
Key Data
$220 million
— Potential savings if school districts outside New York City aligned their health insurance premium sharing plan with New York State government.
$120 million
— Potential savings from eliminating the New York State government’s practice of reimbursing Medicare Part B premiums.
$315 million
— Potential savings from increasing health insurance premium sharing for retirees to 50 percent.
New York City's fiscal health is threatened by rapidly growing costs for health insurance, pensions, and debt service, which are projected to consume an increasing share of the budget. To address these structural deficits and avoid future service cuts, the City should implement reforms such as requiring employees and retirees to contribute to their health insurance premiums and adjusting pension eligibility for future hires.
Recommendations related to Retiree Health Care
The City’s leaders must work with the Municipal Labor Committee to reform health insurance arrangements by requiring employees and retirees to pay a share of their premiums.
The City should adopt a premium-sharing arrangement similar to that of most New York State employees, which would produce $625 million in savings beginning in 2012.
The City should require retirees under age 65 to pay 50 percent of their premium to generate about $700 million in savings.
The City should eliminate the Medicare Part B reimbursement for retirees over age 65 to save an additional $250 million.
Key Data
$625 million
— Projected savings beginning in 2012 from adopting a premium-sharing arrangement for health insurance similar to that of most New York State employees.
$700 million
— Estimated savings from requiring retirees under age 65 to pay 50 percent of their health insurance premium.
$250 million
— Estimated savings from eliminating the Medicare Part B reimbursement for retirees over age 65.
$2 billion
— Cumulative savings by 2015 from implementing the proposed health insurance premium-sharing and retiree contribution reforms.
New York City could avoid municipal layoffs and service cuts by adopting the state's labor agreement model, which includes implementing employee and retiree health insurance premium contributions. Adopting the state's long-standing policy for retiree premium-sharing would generate $290 million in savings for the city in fiscal year 2012.
Recommendations related to Retiree Health Care
The City should adopt the State’s long-standing policy for retiree premium-sharing (10% for individuals and 25% for families) to save $290 million in fiscal year 2012.
The City should avoid relying on one-shots such as drawdowns from the Retiree Health Benefits Trust Fund, which provide only temporary relief from budget pressures.
Key Data
$290 million
— Savings in fiscal year 2012 if the City adopted the State’s long-standing policy for retiree premium-sharing.
10%
— Individual retiree health insurance premium contribution under the State's long-standing policy.
25%
— Family retiree health insurance premium contribution under the State's long-standing policy.
New York City could save $700 million in fiscal year 2012 by requiring retirees to contribute 50 percent toward their health insurance premiums and an additional $250 million by ending the reimbursement of Medicare Part B premiums for those over 65. These reforms would address the lack of retiree contributions to basic premiums and the rarity of public sector reimbursement for Medicare costs.
Recommendations related to Retiree Health Care
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
$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.
New York City's retiree health insurance costs are projected to reach $2.2 billion by 2015, contributing to a $70 billion unfunded liability. To avoid service cuts and layoffs, the city should reform these benefits by ending Medicare Part B reimbursements, increasing vesting requirements, and implementing premium-sharing for retirees.
Recommendations related to Retiree Health Care
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
— Existing unfunded liability created by retiree health-insurance obligations.
$250 million
— Potential savings in fiscal year 2012 from ending Medicare Part B premium reimbursement.
$700 million
— Potential savings in 2012 if retirees paid half their premiums.
$950 million
— Combined value of savings from the proposed reforms.
The 2011 scorecard identifies several legislative proposals concerning public employee benefits, specifically focusing on health insurance protections for retirees. These bills include measures to permanently set benefit levels and prohibit the unilateral reduction of health insurance contributions for retired state and local employees.
New York City faces a $70 billion unfunded liability for retiree health benefits, with annual costs projected to reach $2.2 billion by 2015. To address this fiscal challenge and preserve the retiree health insurance trust fund, the City should eliminate Medicare Part B premium reimbursements and implement premium-sharing requirements for retirees.
Recommendations related to Retiree Health Care
The City should eliminate the reimbursement for Medicare Part B premiums to generate recurring savings.
The City should protect the retiree health insurance trust fund from any further drawdowns, including those already scheduled.
The City should increase vesting requirements for retiree health insurance for the rest of the public workforce.
The City should institute premium sharing for retiree health insurance, similar to requirements in New York State.
Key Data
$70 billion
— The total unfunded accrued liability for retiree health benefits.
$1.5 billion
— The cost of retiree health insurance in the current year.
$975 million
— The combined value of savings in fiscal year 2012 from eliminating Medicare Part B reimbursements and instituting premium sharing.
$2.2 billion
— The projected cost of retiree health insurance by 2015.
$240 million
— The savings generated in the current year by eliminating Medicare Part B premium reimbursements.
$620 million
— The savings generated in the current year if retirees paid for half the cost of their premiums.
New York State and City currently spend hundreds of millions of dollars annually to reimburse retirees for Medicare Part B premiums, including for high-income individuals who can afford the costs themselves. Eliminating these reimbursements and increasing retiree health insurance premiums to 50 percent of the total cost would provide significant budget relief without impacting essential services.
Recommendations related to Retiree Health Care
New York State and City should eliminate the reimbursement for Medicare Part B premiums, a fringe benefit rarely offered by other employers.
The State and the City should increase premiums for retiree health insurance to 50 percent of the cost to relieve the burdens of rampant cost escalations.
Key Data
$96.40
— The base monthly premium for Medicare Part B in 2010.
$350
— The monthly premium for Medicare Part B for retirees with greater incomes.
$140 million
— Total costs of State Medicare Part B reimbursements in fiscal year 2010.
$213 million
— Total costs of City Medicare Part B reimbursements in fiscal year 2010.
$312 million
— Projected City Medicare Part B reimbursement costs by 2014.
50 percent
— The projected increase in City Medicare Part B reimbursement costs between 2010 and 2014.
New York taxpayers bear at least three-quarters of the cost for retiree health insurance premiums, contributing to significant financial strain on state and local governments. Unfunded liabilities for these benefits have reached $56 billion for the state and nearly $1 billion in Rochester, jeopardizing the future provision of essential public services.
Recommendations related to Retiree Health Care
New York's leaders must control the cost of public retirement benefits to ensure the ability of state and local governments to provide essential public services.
The state Legislature should cease passing legislation to 'sweeten' retirement benefits annually.
Key Data
three-quarters
— The portion of retiree health insurance premium costs that is borne by taxpayers.
$1 billion
— The unfunded liability for retiree health insurance benefits in Rochester.
$56 billion
— The unfunded liability for retiree health insurance benefits for New York State.
New York City faces rapidly rising costs for retiree health insurance, known as other postemployment benefits (OPEB), which reached $9.4 billion in fiscal year 2010. To manage these growing liabilities, the city should implement premium-sharing for retirees and establish a formal, protected funding policy for future obligations.
Recommendations related to Retiree Health Care
The City should require greater retiree contributions toward health insurance premiums.
The City should establish a program for funding the future liabilities.
The City should institute premium-sharing for retirees, with an appropriate goal of retirees paying 50 percent of their premiums.
The Mayor and the City Council should agree to a policy that determines the basis for future contributions and limits the conditions and purposes of future withdrawals from the Retiree Health Benefits Trust.
Key Data
$9.4 billion
— Expense recognized by New York City for other postemployment benefits (OPEB) in fiscal year 2010.
$2.3 billion
— OPEB expense incurred by New York City in fiscal year 2009.
$1.6 billion
— Total premium payments made by the City for retiree health insurance in fiscal year 2010.
$2.4 billion
— Projected cost of City premium payments for retiree health insurance by 2014.
$11 billion
— Actuarially determined contribution needed for the City to fully fund its 2010 OPEB obligation.
$2.5 billion
— Total amount deposited into the Retiree Health Benefits Trust (RHBT) fund over fiscal years 2006 and 2007.
Rising costs for municipal retiree health insurance and pensions are forcing significant budget cuts to youth services and community programs. To address this, union leaders should agree to cost-sharing for health insurance premiums, requiring retirees to contribute to their benefits similar to private and nonprofit sector arrangements.
Recommendations related to Retiree Health Care
Union leaders must agree to more cost-sharing for health insurance premiums, and retirees should be paying for a share of their benefits similar to arrangements in the private and nonprofit sectors.
Key Data
$1.2 Billion
— The cost of retiree health insurance to New York taxpayers last year.
Governor Paterson's proposal to lay off 898 state workers and leave 1,102 positions vacant aims to address an $8 billion budget gap, despite union opposition. Reducing the cost of health insurance and retiree benefits offers a preferable alternative to these layoffs, such as increasing employee premium sharing for family health insurance plans to save $79 million annually.
Recommendations related to Retiree Health Care
Reducing the cost of health insurance and retiree benefits is a preferable option to layoffs, as it would save money and prevent further deterioration of state services.
Key Data
$79 million
— Annual savings from increasing employee premium sharing for family health insurance plans from 25% to 30%.
New York State faces significant unfunded liabilities for retiree health insurance, with state and local obligations exceeding $200 billion. To address these escalating costs, proposals have been made to implement a sliding scale for employee contributions based on length of service.
Recommendations related to Retiree Health Care
Governor David Paterson has proposed reforming retiree health benefits to require employee contributions on a sliding scale that would determine cost-sharing in inverse proportion to length of service.
For those with a minimum of ten years of service, retirees would be responsible for 50 percent of the premium for individual coverage and 65 percent for dependent coverage.
For each additional year of service, the State’s contribution would be increased by 2 percent.
The maximum benefit of 10 percent for individuals and 25 percent for families would only be available for those with 30 years or more of service.
Key Data
$46.3 billion
— State liability for retiree health insurance and other benefits as of March 31, 2010.
$9.6 billion
— SUNY liability for retiree health insurance and other benefits as of March 31, 2010.
$200 billion
— Estimated total State and local unfunded actuarial liabilities for retiree health benefits.
$56 billion
— Future cost of New York State retiree health insurance obligations.
$96.40
— Base monthly premium for Medicare Part B.
New York City's municipal union welfare funds, which provide supplemental benefits to active and retired employees, suffer from poor management, lack of accountability, and inefficient administration. Consolidating these benefits into a citywide health insurance program and implementing a centralized cafeteria plan for other services could improve oversight and generate significant annual savings.
Recommendations related to Retiree Health Care
The City should consolidate supplementary health care benefits under the City's health insurance plan to allow for large-scale purchasing and better benefit design for municipal workers and retirees.
A new centralized 'cafeteria' plan should be developed to provide non-health-related benefits, enabling individuals to select specific benefits with a limit on the dollar value.
The City should improve accountability for any remaining union welfare fund expenditures by setting performance standards and expanding the Comptroller's authority to sanction non-compliant funds.
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 plan.
8-16%
— Percentage of current welfare fund expenditures that go toward non-health-related benefits.
48 of 70
— Number of welfare funds analyzed that were cited for issues like excessive administrative costs or signs of insolvency.
3
— Number of welfare funds that were insolvent at the end of 2007.
The 2010 scorecard tracks various legislative "sweeteners" that expand retirement and health benefits for public employees, including a bill that would prohibit the reduction of health insurance benefits for state retirees. These measures collectively increase long-term fiscal liabilities for the state and local governments by expanding pension and benefit eligibility.
The city has accrued over $65 billion in future liabilities for retiree health benefits, yet the current financial plan proposes drawing over $1 billion from the dedicated trust fund to balance the budget. To ensure long-term fiscal stability, the city should preserve these trust funds for their intended purpose and implement higher contribution requirements for retirees and employees to generate significant annual savings.
Recommendations related to Retiree Health Care
The Council should support the Mayor’s efforts to bargain with municipal labor unions for contributions to health insurance premiums.
The City should require contributions that are comparable to other public and private sector employers, specifically by requiring employee contributions of 50 percent for retirees.
The Council should reject the depletion of the retiree health insurance trust fund.
The funds in the trust should be reserved for their original purpose – to pay for retiree health benefits – not for general budget balancing.
Key Data
$2.5 billion
— Amount placed in a trust fund created to begin funding the costs associated with future health benefits for retirees.
$65 billion
— Accrued future liability associated with retiree health benefits.
$1 billion
— Amount in draw downs from the retiree health benefits trust fund called for over the life of the financial plan.
$82 million
— Amount being drawn from the retiree health benefits trust fund in the current fiscal year.
$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.
New York City and State provide retiree health insurance benefits that are significantly more generous than those offered by large private employers, including paying full premiums and reimbursing Medicare Part B costs. Reforming these benefits by requiring retirees to pay 50 percent of premiums and eliminating Medicare Part B reimbursements would generate substantial savings for taxpayers.
Recommendations related to Retiree Health Care
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 to align with practices of other large employers.
Key Data
$1.5 billion
— The combined cost to the City and State of health insurance for retirees in 2004.
$325 million
— The amount the City would have saved in fiscal year 2004 if a 50 percent retiree premium contribution policy had been in effect.
$275 million
— The amount the State would have saved in fiscal year 2004 if a 50 percent retiree premium contribution policy had been in effect.
$131 million
— The amount the City would have saved in 2004 by stopping the reimbursement of Medicare Part B premiums.
$88 million
— The amount the State would have saved in 2004 by stopping the reimbursement of Medicare Part B premiums.
$67
— The monthly cost retirees would have paid in 2004 if the reimbursement for Medicare Part B premiums was stopped.
The city's commitment to fully fund health insurance premiums for retirees and their dependents represents a $65 billion liability that requires reform. To address this, the city should cease using the Retiree Health Benefits Trust to balance operating budgets and instead require retirees to contribute a substantial share of their own insurance premiums.
Recommendations related to Retiree Health Care
The imprudent diversion of funds from the Retiree Health Benefits Trust should be eliminated from the Executive Budget.
The city should require retirees to pay a substantial share of their health insurance premiums.
Key Data
$65 billion
— Actuarial value of future premiums for health insurance for retirees and their dependents.
$2.5 billion
— Amount deposited into the Retiree Health Benefits Trust from surplus revenue over two years starting in 2006.
$1.2 billion
— Amount from the Retiree Health Benefits Trust used to balance the budget in fiscal years 2011 to 2013.
$1.1 billion
— Additional tax revenue forecasted in each fiscal year from 2011 to 2013.
New York State faces a $56.3 billion unfunded liability for retiree health care, exacerbated by generous premium sharing arrangements and reimbursements that exceed private sector norms. To address these fiscal pressures, the state should increase retiree premium contributions to 50 percent, eliminate the use of unused sick days to offset premiums, and end the reimbursement of Medicare Part B costs.
Recommendations related to Retiree Health Care
For retirees, the premium sharing should be increased to 50 percent 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
$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.
$1,152
— Annual reimbursement cost per retiree for Medicare Part B premiums.
New York State faces significant long-term financial obligations, with unfunded liabilities for retiree health insurance benefits and pensions contributing to a debt burden that ranks among the highest in the nation. The state's unfunded liability for retiree health benefits alone exceeds $50.8 billion, highlighting the substantial fiscal challenge posed by these long-term obligations.
Key Data
$50.8 billion
— New York's unfunded liability for retiree health insurance benefits (OPEB).
$48.1 billion
— New York's combined unfunded pension and OPEB liability.
$2.4 trillion
— Estimated total future pension liability of state and local pension plans in 2008.
$600 billion to $1.6 trillion
— Estimated total OPEB liability for state and local pension plans.
New York City should reconsider using the Retiree Health Benefits Trust as a general budget reserve, as $1,149 million is currently scheduled to be withdrawn from the fund between fiscal years 2010 and 2012. Instead of treating the trust as a rainy day fund, the city should link withdrawals to the actual growth in liabilities for retiree health insurance premiums.
Recommendations related to Retiree Health Care
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 instead of using it as a rainy day fund.
The City should reconsider the decision to use the Retiree Health Benefits Trust as a de facto rainy day fund to balance current operating budgets.
Key Data
$2.5 billion
— Total amount deposited into the newly created Retiree Health Benefits Trust during the fiscal years 2006 and 2007.
$1,149 million
— Amount scheduled to be withdrawn from the Retiree Health Benefits Trust to help balance operating budgets in fiscal years 2010 through 2012.
$357 million
— Potential annual savings from proposed changes to the employee and retiree health insurance program.
New York City's budget relies on a $395 million drawdown from a retiree health insurance trust fund, which is a one-shot measure that should be avoided. This reliance on temporary fixes to address the projected $4.1 billion budget gap risks obscuring the need for structural cost-cutting measures.
Recommendations related to Retiree Health Care
The city should avoid using the $395 million drawdown from a retiree health insurance trust fund as a one-shot budget measure.
Key Data
$395 million
— Drawdown from a retiree health insurance trust fund used as a one-shot budget measure.
New York City spends over $10 billion annually on municipal employee and retiree benefits, a figure that significantly exceeds private-sector standards and contributes to rising budget pressures. Aligning these benefits with private-market practices, such as requiring employee and retiree contributions toward health premiums and shifting to defined-contribution pension plans for new hires, could yield substantial annual savings.
Recommendations related to Retiree Health Care
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, which would result in annual savings of about $628 million.
The city should implement a policy requiring retirees to make contributions toward health-insurance premiums, which would generate annual savings of $741 million.
The city could become competitive with the private sector by converting to defined-contribution plans for future hires regarding pension benefits.
Key Data
$10.4 billion
— Total annual cost for pension and health-insurance benefits for current and retired municipal employees.
$1.2 billion
— Annual cost for the health insurance of retirees.
$741 million
— Potential annual savings if the city required retirees to contribute to health-insurance premiums.
2
— Number of private companies out of 52 surveyed that paid the full premium cost for retiree health insurance.
New York City's policy of paying the full premium for retiree health insurance is highly unusual compared to the private sector, where most firms require substantial contributions from retirees. Aligning these benefits with private sector standards could save taxpayers approximately $741 million annually.
Recommendations related to Retiree Health Care
The City should align its health insurance benefits with those of local private sector firms to save about $1.4 billion annually in combined costs.
The City should implement a policy requiring contributions from retirees toward health insurance premiums, mirroring the practices of local private firms.
The City should adopt policies competitive with the private sector to balance the cost of benefits to taxpayers while maintaining the ability to recruit and retain a competitive workforce.
Key Data
$741 million
— Annual savings to taxpayers if the City required retiree health insurance contributions competitive with the private sector.
$2,950
— Typical annual retiree required contribution for individual coverage among local private firms offering retiree health insurance.
$5,900
— Typical annual retiree required contribution for couples among local private firms offering retiree health insurance.
56%
— Percentage of local private firms surveyed that offer health insurance to retirees.
71%
— Percentage of the premium paid by the City for single retirees that private sector retiree contributions represent.
55%
— Percentage of the premium paid by the City for retirees with family coverage that private sector retiree contributions represent.
A legislative concession now prohibits school districts from reducing health insurance benefits for retired teachers without collective bargaining, which limits management's ability to control these costs. This permanent policy change risks setting a precedent for other public employee groups to demand similar protections, requiring future executive leadership to resist further expansions of these benefits.
Recommendations related to Retiree Health Care
The Governor and all future Governors must stand firm against other employee groups demanding the same benefits that prohibit the diminution of health insurance benefits for retirees without bargaining.
Legislation that prevents school districts from reducing retiree health insurance benefits without union approval should be vetoed to help manage rising costs. Eliminating these restrictive mandates would allow local districts to better control expenses and alleviate the burden of high local taxes.
Recommendations related to Retiree Health Care
We ask that you veto A4628, a bill that would renew the provision that prohibits school districts from reducing the health insurance benefits offered to retirees unless the changes are approved by the local teachers union.
State leaders should reconsider the automatic extension of a measure that ties the hands of school districts seeking to control skyrocketing health insurance costs.
New York should, whenever the opportunity arises, roll back costly mandates regarding retiree health benefits.
New York City's spending on retiree health care reached $1.1 billion in fiscal year 2008 and is projected to grow to $1.9 billion by fiscal year 2013. To address these rising costs, the city should require retirees to contribute to their health insurance premiums, similar to the contributions sought from current municipal employees.
Recommendations related to Retiree Health Care
The city should apply the concept of employee contributions to health premiums to retirees.
Key Data
$1.1 billion
— City spending on retiree health care in fiscal year 2008.
$1.9 billion
— Projected city spending on retiree health care in fiscal year 2013.
10 percent
— The expected annual growth rate of taxpayer costs for retiree health coverage.
New York should reduce its fiscal burden by requiring public retirees to pay a larger share of their health insurance premiums and eliminating the state's reimbursement for Medicare Part B premiums. These changes would align the state's benefits more closely with other public sector standards and generate significant annual savings.
Recommendations related to Retiree Health Care
The Legislature should require a 50 percent contribution to premium costs for retirees.
The Legislature should eliminate reimbursement for Medicare Part B premiums for retirees.
The Legislature should require a greater share of health insurance premiums to be paid by current and retired employees to bring contributions in line with other public sector employees.
Key Data
$430 million
— Annual savings from requiring retirees to pay a 50 percent contribution to their health insurance premium costs.
$200 million
— Annual savings from eliminating state reimbursement for Medicare Part B premiums for retirees.
50 percent
— Proposed contribution requirement for retirees toward their health insurance premium costs.
6
— Number of states, including New York, that pay any part of Medicare Part B premiums for retirees.
New York State currently covers the full cost of Medicare Part B premiums and a vast majority of health insurance premiums for retirees, creating a significant financial burden. Proposed reforms aim to reduce these generous benefits by implementing cost-sharing measures for workers with less than 30 years of service, bringing public sector benefits closer to private sector standards.
Recommendations related to Retiree Health Care
The state should reduce the share of health insurance premiums paid for workers retiring with less than 30 years of service and apply this cost-sharing to Medicare Part B premiums.
The state should consider enhancing cost-sharing for current workers to better align with private sector standards.
Key Data
90 percent
— The portion of retirees' individual health insurance premiums currently paid by the state.
75 percent
— The portion of retirees' family health insurance premiums currently paid by the state.
30 years
— The length of service threshold proposed for workers to avoid reduced health insurance cost-sharing.
Legislation that prevents local governments from reducing health insurance benefits for retirees forces local officials to bear costs without the flexibility to negotiate, ultimately increasing the tax burden. This mandate effectively bypasses local contract negotiations, shifting the financial responsibility for rising retiree health care expenses onto local taxpayers.
Recommendations related to Retiree Health Care
Governor David Paterson should veto the legislation (A9393A/S6457A) that prevents local officials from managing retiree health insurance costs.
Local government leaders should maintain the flexibility in negotiating with unions to better manage the escalating expenses of retiree health insurance.
Local governments should have a say in the costs associated with retiree health benefits rather than having them decreed by state officials.
Key Data
79%
— New York's local taxes are <b>79% above the national average</b> statewide.
$49.7 billion
— The estimated <b>state liability for government retiree health insurance</b> is $49.7 billion.
$57.8 billion
— The estimated <b>New York City liability for government retiree health insurance</b> is $57.8 billion.
New York City taxpayers currently contribute $900 million annually for retiree health insurance, alongside $4 billion for municipal pension funds. Without changes to these benefit structures, pension contributions are projected to exceed $5.7 billion by 2010.
Key Data
$900 million
— annual taxpayer contribution for retiree health insurance
New York City's current retiree health insurance and pension benefits are significantly more generous than those offered by private employers and other government entities, creating unsustainable long-term costs. To address this, the city should reform these benefits by requiring retirees to contribute to their health insurance premiums and eliminating the reimbursement of Medicare Part B costs.
Recommendations related to Retiree Health Care
The City should require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
The City should stop reimbursing retirees for Medicare Part B premiums to align with practices of other large employers.
The City should increase required employee contributions for pension plans, as the current 3 percent requirement is lower than most other systems.
The City should raise the minimum age requirement for retirement to align more closely with federal Social Security thresholds.
The City should base pension benefits on a standard definition of final average salary that excludes overtime and other supplements.
The City should define work-related disabilities more rigorously to prevent the current system from allowing broad access to enhanced benefits without clear evidence of a work-related cause.
The City should eliminate the variable supplements known as "Christmas bonuses" available to some retired uniformed workers.
Key Data
$927 million
— The amount the City paid for health insurance for retirees in fiscal year 2005.
$325 million
— The estimated savings the City would have realized in fiscal year 2004 if retirees were required to pay 50 percent of their health insurance premiums.
$131 million
— The estimated savings the City would have realized in 2004 if it stopped reimbursing retirees for Medicare Part B premiums.
$1,450
— The estimated annual out-of-pocket cost for a single City retiree under age 65 if they were required to pay 50 percent of their health insurance premiums.
$800
— The estimated annual out-of-pocket cost for a single City retiree over age 65 if they were required to pay 50 percent of their health insurance premiums.
$67
— The estimated monthly cost retirees would pay for Medicare Part B if the City stopped reimbursing the premiums.
New York City's current health insurance policy for employees and retirees is significantly more generous than that of other large employers, with the city covering 100% of premiums and subsidizing Medicare. To reduce costs, the city should require retirees to pay 50% of their health insurance premiums and eliminate the subsidy for Medicare Part B premiums.
Recommendations related to Retiree Health Care
The City should more closely align its health insurance practices with those of other employers by requiring retirees to pay 50 percent of their health insurance premiums.
The City should stop paying for retirees' Medicare Part B premiums to reduce costs.
The Mayor could make changes to health insurance contributions via collective bargaining to bring practices in line with other large employers.
The City should require 10 percent for individual policies and 20 percent for family policies for current employees to share the cost of health insurance premiums.
Key Data
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 large private employers that do offer such benefits.
$1,197 million
— Projected annual savings in fiscal year 2009 from implementing health insurance reforms.
New York City and State provide retirement benefits, including health insurance and pensions, that are significantly more generous than those offered by other large public and private employers. To reduce the growing fiscal burden on taxpayers, the state and city should reform these benefits by requiring higher employee contributions, raising retirement age requirements, and transitioning to defined contribution plans.
Recommendations related to Retiree Health Care
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.
The City and State should seek to place all new workers in defined contribution plans to replace the current defined benefit system.
The New York systems should increase required employee contributions and not limit them to ten years.
The New York system should raise the minimum age requirement for retirement to adopt similar age thresholds to the federal Social Security system.
The pension systems should base pension benefits on a more standard definition of final average salary that excludes overtime and other supplements subject to manipulation.
The current system should define work-related disabilities more rigorously to set more rigorous standards for uniformed workers.
The City should eliminate the variable supplements available to some retired New York City uniformed workers.
Key Data
$615 million
— Required contributions to pension funds for City workers in fiscal year 2000, which tripled to $2.3 billion by fiscal year 2004.
$4.2 billion
— Combined cost of health insurance benefits for the City and State in 2004, projected to rise 50 percent to $6.3 billion in 2008.
$1,450
— Annual out-of-pocket cost a typical single City retiree under age 65 would face under the proposed 50 percent premium contribution policy.
$325 million
— Estimated savings for the City in fiscal year 2004 had the 50 percent health insurance premium contribution policy been in effect.
$131 million
— Estimated savings for the City in 2004 if the policy of reimbursing retirees for Medicare Part B premiums was stopped.
$420 million
— Estimated amount the City paid in 2004 for health insurance for its approximately 74,000 early retirees.
The municipal health insurance program is currently more expensive than necessary because it lacks modern cost-containment strategies like premium cost-sharing and price competition among insurance plans. Implementing these measures, including requiring contributions from retirees for non-Medicare benefits and dropping reimbursement of Medicare Part B premiums, could yield substantial annual savings for the City.
Recommendations related to Retiree Health Care
The City should require cost-sharing of 10 percent toward individual coverage and 20 percent for family coverage for employees, should drop reimbursement of Medicare Part B premiums for retirees, and 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.
The City should follow the premium cost-sharing strategy now widespread among public and private employers.
Key Data
$500 million
— The direct annual savings to the City from requiring cost-sharing for employees and retirees.
$129 million
— The projected savings in fiscal year 2002 from implementing price competition among insurance plans.
$247 million
— The projected savings in fiscal year 2004 from implementing price competition among insurance plans.
50 percent
— The required contribution from retirees toward premiums for non-Medicare benefits.
10 percent
— The required cost-sharing toward individual health insurance coverage for employees.
20 percent
— The required cost-sharing toward family health insurance coverage for employees.
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