Wednesday, February 3, 2016

The NYC Teacher Healthcare Crisis: Part 2, 'Toward the Tipping Point'

This is the second of three parts about the problem with health insurance that city employees are (all) about to face. This is some fairly wonky stuff but I'm convinced that, unless there is a shift in policy, we will all be paying -a lot- for our healthcare. 

Part 1 detailed how great our great insurance is.
Part 2 is how the city has tried, and failed, to slow the increase in healthcare costs to its employees.
Part 3 will be about what we, as employees lost (and will soon lose) for that failure.

My last post, detailing how great our insurance is, ended on the somewhat gloomy note of the  Cadillac Tax, a tax of 40% of the health insurance premiums which will cost more than 10,200 for individuals and $27,500 for family coverage in 2018.

It is important that we start this discussion with that reminder. This is because avoiding the Cadillac Tax is in the best interest of every single NYC employee and of the city government. Middle class city employees don't want insurance that doesn't cover anything. But if the city, as employer, winds up paying an excise for each employee, then that's just what will happen.

The city government doesn't want this to occur either, because that would mean an enormous burden to the government budget if that were to happen. All of us -every single one of us- want to avoid having our healthcare reach this level. It would represent a political tipping point for the government, for the unions who advocate for our health coverage and for the insurance companies themselves (who would, ultimately, lose customers if the politics shifted away from coverage for all city employees). Lots of things (lots and lots of things) would change if we reached that level.

Lots and lots of things.

This is only one reason why the de Blasio administration has made lowering employee healthcare costs by $3.4 billion over four years a priority. Part of this goal is to lower costs by $700 million this year (FY2016) alone (Read the NY Observer piece on that here). They had set a goal of reducing costs by $400 last year but that seems, largely, to have failed.

As I mentioned in my previous post, 'since the Patient Protection and Affordable Care Act became the law of the land, the city has been required to note the amount they spend each year on all of our healthcare costs...This allows us ... to see how much the city has paid for our benefits'.

So we can get a sense of how much it failed just by looking over our W2 reports from work.  I took a quick look at my W2s for the two previous years and noted at how much the city paid for my free (to me) health insurance in the years 2013, 2014 and this past year 2015.

 All I can say is ... wow.

In 2013, the city paid a total of $17,036.14 on my behalf for my health insurance. That cost rose a reasonable 2.26% in 2014 to $17,422.10. Although a high cost, the increase is not bad and actually strikes me as the general cost of inflation during that period of time, so I'm good with that.

Last year, however, that cost jumped to $18,848.72 -a whooping 8.18% increase from the previous year and a more than 10% increase when measured against the year before.

That's startling enough. But, according to the observer piece  linked above, "... insurance costs [were only] projected to continue to climb by 5.2 percent a year."

In other words, costs aren't just going up. They're soaring. They are rising higher than the city expected and this includes a genuine effort on the part of the city of reducing the costs by $400 million last year.

 I'm no math expert, but I'd wager that an 8 percent increase in health costs is higher than the 5.2 percent increase that had been projected.

And I'm no policy expert, but I'm guessing that if you set a goal of reducing costs by $400 million and they instead rise by 8%, that the policy initiative has failed.

Now if my own costs keep going up at this rate, at the rate of 8% each and every year, my plan will be lucky enough to miss the threshold for the Cadillac Tax, but not by much. At an 8% the costs for my health insurance will rise to these amounts over the following years.


As you can see, I'll miss the Cadillac Tax by 2018, but only by $3,600 bucks or so. The thing, however, about the Cadillac Tax is that it remains in effect every year after. The cutoff amount rises from the initial $27.500, but no one knows how much it will increase until the government announces it the year before.

And what if the rate increases more than 8%? What if the costs soar so high that they increase by 10% per year? Or 12%? What if they jump by 15%?

Of course that sounds unrealistic, but think about this question for a moment: Precisely what is there to stop this cost from rising by 15% in a year or two?

Answer: Nothing.

And for that, I have to get into Obamacare a little bit.

Here's a less edited quote from the Observer piece:
"Nonetheless, insurance costs are projected to continue to climb by 5.2 percent a year. Mr. Linn, however, dismissed this growth as inherent to the healthcare industry... "

It's that quote right there, 'inherent to the healthcare industry' that you should pay attention . The great promise of Obamacare is that everyone would be covered because everyone would be signed up for private health insurance policies. People with no means for health insurance liked this promise because it meant they would be covered. The companies, who would offer inexpensive policies for people without the means, liked it too if not for other reasons.

Healthcare companies love Obamacare because the law mandates that everyone must be signed up.

The idea behind universal mandated coverage was that it would work both ways. The insurance companies would get access to millions of people they previously couldn't. And the customers would benefit from among the insurance companies for all of these new customers. Companies would lower the cost of policies in order to remain competitive.

What Obamacare missed was the grand combination of health insurance companies. This NY Times article from October points to just one of many pieces of evidence highlighting the fact that Healthcare companies in general are merging.

"Low interest rates and cheap capital are fueling merger activity across many industries, but health care is especially devoted to the mantra that bigger is always better. And there are both the short-term goal of increasing revenue and the longer-term need to restructure in response to changes in the health care landscape under the Affordable Care Act. Unlike other areas... health care has been fragmented, with many smaller players... 
...All of the parties are under intense pressure to reduce costs, and consolidation is seen as necessary to do so..."
This is a fancy way of saying that the Healthcare companies are getting bigger and are reducing our choice. I mentioned in my first post that city employees can choose from among 20 or so health plans. Actually, that's not exactly true. More than half of those choices are now owned by just three companies! Six choices lead you to an Emblem company, three lead you to an AnthemInc company and three lead you to a choice owned by Empire. (The other choices are small companies which will, I fear, be eventually eaten up. I'm sure someone will remember Greenpoint Bank, which was gobbled up during the 2000s by CapitlaOne. The same thing that happened to small banks then will happen here now).

With fewer companies, the simple law of supply and demand will kick in. When the government handed customers over to (what is now a few) insurance companies, those companies were free to -collectively- increase the cost. Maybe this is because everyone is sick. Maybe it's because the companies are greedy. Maybe it's both. Who knows.  But the price goes up with less competition and there is less competition.

I'm not economist, but I'm pretty sure that when demand increases, because the government forced everyone to buy private insurance, the price will increase as well.

And that's the fatal flaw of Obamacare. They (the health insurance companies of every ilk) have got us and they know they've got us. If I leave GHI and go to Vytra hoping for a lower price, I'm still using an Emblem Company who will, eventually, raise that cost as well).

So who is to say that the cost of my healthcare won't go up by more than 8% next year? Answer: The insurance companies.

Now I'm no hustler, but I'd wager to say that our rates will be averaging increases at or above 8% for the next few years. In fact, my guess is that they'll come as close to that Cadillac Tax amount they can get without going over it.

These increases will be despite the crisis of rates for city employees going up more than the projected 5.2% amount and despite the city's attempts to stop it.

But the city is pulling out more than a few creative stops. The Wall Street Journal Piece I linked to last night is behind a pay wall, but it details some specific steps the city has taken. There has been (another) audit of defendants designed to put people off the roles. And then there's this:

"And it found $153 million by reaching an agreement with the Municipal Labor Committee to lower the sum the city pays into the Health Insurance Stabilization Fund. The fund was set up to ease health-care costs for employees and is jointly controlled by City Hall and the unions"
Lots to talk about with the city's Health Insurance Stabilization Fund. But most of it is going to have to be for my next post. For now, I'd  just like you to re-read the last part of this quote:

"The fund was set up to ease health-care costs for employees and is jointly controlled by City Hall and the unions"

Now I'm no expert, but I'd wager that if you stop paying into a fund that exists to help you lower healthcare costs, that can't be very good.

And what else isn't good is what that fund has been used for in recent years. But, like I said, that's for another post.

So, despite kicking off dependents in an audit, and despite not paying into the very rainy day fund that is designed to help out, the city (while claiming a reduction is overall healthcare costs) is paying, on my behalf, an extra 8% for my health insurance (with similar numbers for at least two teacher friends I've spoken with).

This problem isn't going away.

'The city’s health-care costs are projected to increase to $5.6 billion in fiscal 2016, $6 billion in fiscal 2017 and $6.4 billion in fiscal 2018, city officials said.'

My guess is the price will soar past that $6.4 billion mark.

My last post won't be for a few days. I'll talk a bit more about the Stabilization Fund (including how the unions (ours included) have allowed the city to use it in the past) and I'll try to detail some things you and I may be losing if and when we reach the tipping point.

Monday, February 1, 2016

The NYC Teacher Healthcare Crisis: Part 1, 'Great Insurance!'

This is the first of three parts about the problem with health insurance that city employees are (all) about to face. This is some fairly wonky stuff but I'm convinced that, unless there is a shift in policy, we will all be paying -a lot- for our healthcare. 

Part 1 is about how great our great insurance is.
Part 2 about how the city has tried, and failed, to slow the increase in healthcare costs to its employees.
Part 3 is about what we, as employees lost (and will soon lose) for that failure.

Teachers in New York City enjoy some of the very best healthcare in the State of New York. Teachers here (and most other New York City employees) can choose from more than twenty (when you take the prescription riders into account) different options of health coverage (see here). Some of these choices require deductions to be made from our salary but these deductions are small when compared with teachers from other districts throughout the state.  And the deductions are just plan tiny when compared with any employee working in the private sector.

We have it good. We have it very very good.

Most (if not all) of the teachers who I know have chosen GHI for their healthcare insurance. One of our GHI options is a Comprehensive Benefits Plan or CBP. This plans allows us to see a doctor whenever we need with no deductible, no significant cap on the amount of coverage and a copay of only $15 per visit.

Stubbed toe? $15.
Cold? $15.
Flu? $15.
Cut yourself shaving and require stitches? $15.

If we'd like to see a specialist, need a test performed or go to the emergency room, the copay is only $20.

Broke you finger skiing? $20.
Broke your femur ice skating? $20.
Need an x-ray of that femur? $20.
Embarrassed that you fell while ice skating and broke your femur? Need to see a therapist or other mental health professional? $20

Because GHI is the largest health insurance provider in the city, doctors and other medical professionals line up to become a provider with the GHI network and, at the end of the day, settle for whatever GHI gives them. As a result, the patient (that's us) has access to some damn fine doctors who will serve whatever medical need we may have in the future.

 (here's hoping we never have one).

And the amount that is deducted from our check for this magnificent service? The amount that we must contribute? Our responsibility toward the premiums on this insurance? $0.


That's correct. Teachers in New York can pay absolutely nothing from their check and receive some of the very best healthcare there is. And, those of us who are vested can receive that same level insurance for the rest of our lives at no cost.

No one else has that.  No one.

I've been through teacher contracts from other districts on Long Island in the past and I have a good sense of how their healthcare stacks up to ours. Some district teachers pay nothing from their checks and receive a poor plan. Some pay something and receive an OK plan. Some districts even pay a significant amount each check for a terrible plan. Some pay for a plan similar to ours! But they pay for that plan. We don't. And many of them pay when they retire. We don't.

Say what you want about teacher pay in the city vs teacher pay in other districts. When you factor in healthcare and our TDA (which is for another discussion), the facts make themselves clear: No one has it better than NYC teachers. No one.

But someone has to pay for all that health insurance. And that someone is our employer, the City of New York.

Since 2010, since the Patient Protection and Affordable Care Act became the law of the land, the city has been required to note the amount they spend each year on all of our healthcare costs. (This includes GHI, as well hospitalization and, I'm sure, other coverage). For the past six years, this amount has been counted as deferred wages on our W2 form. This allows us, and Obama, to see how much the city has paid for our benefits.

Now this amount has outraged some people and media outlets capitalize on that outrage (see here for example or here ($) for another) but it is a fact that, if you select the top rate GHI-CBP as your health insurance, the city pays the cost of the premium and we pay nothing.

Nothing, that is, unless the cost of your plan goes up over $10,200 for individual coverage and $27,500 for family coverage. If that happens, if the amount increases over those prices (and if city actuaries count our aggregate insurance as one), then we pay a tax of 40% of that amount (here). This is the famous Cadillac Tax and it goes into effect for those plans in two years -2018.

Nothing, that is, unless the mayor exclusively decides that we must now coin up and contribute from our paychecks. The unions quietly gave him this power almost three years ago.

Nothing, that is, unless both of these things happen. And this, too, is entirely possible.

I'll end this first part by suggesting that we may be at the peak of healthcare benefits we receive as city employees. We may soon wind up be paying more (a lot more) for service that is not nearly as good.

(I'll make these available as I put them up online)
Read about how the city has tried, and failed, to slow the increase of healthcare costs to its employees in part 2
Read  about what we, as employees lost (and may soon lose) for that failure.