The New York City Unions Whose Backdoor Deal Sold Out Retirees, Helped Insurance Industry

Medicare for all protest
Protesters supporting “Medicare for All” rally outside PhRMA headquarters April 29, 2019 in Washington, DC. Are NYC unions selling out retirees? Win McNamee/Getty Images

In recent years, leadership of some of the nation's largest unions have publicly opposed single-payer health care proposals, angering their rank-and-file and forcing Democratic politicians who back single-payer to take on a key constituency.

In New York City, for example, the umbrella organization for the city's public sector unions—the Municipal Labor Committee (MLC)—recently helped the health insurance industry block a statewide single-payer bill, on the grounds that their members wanted to keep the health care benefits for which they had sacrificed wage increases.

But it turns out that the MLC, which bargains for health care benefits for city unions, was also engaging in backdoor negotiations with the city, resulting in a proposal to switch nearly a quarter-million people from Medicare to privately administered Medicare Advantage plans.

The move, scheduled to go into effect on July 1, would change the annual out-of-pocket costs of those impacted from a maximum of $1,053 per year to up to $7,550. It could also force retirees to find new doctors, as many doctors don't accept Medicare Advantage plans, and could require prior authorization for procedures, which tends to lead to high claim-denial rates.

"The unions bought into austerity politics," said Bill Friedheim, the head of the retiree chapter of the Professional Staff Congress, which represents nearly 3,000 retired New York public university professors. "Instead of pushing for new sources of revenue in the richest city in the richest state in the richest country in the history of the world, the municipal unions have become parties in managing austerity."

Savings Or Cost Shifting?

In 2018, the MLC and the New York City Office of Labor Relations came to an agreement which involved cutting the costs of union health care benefits to save the city $600 million a year by fiscal year 2021 (now 2022, delayed due to the pandemic).

Switching retirees from Medicare to Medicare Advantage was one of eight proposed measures to cut costs. Tens of thousands of retirees are calling on the MLC to issue a moratorium on the switch until the organization has conducted a detailed analysis of the impacts of the move.

Under the current system, the city spends $600 million on retiree health care annually, in addition to the $2.9 billion the federal government spends per year on Medicare for the city's retirees. The city's $600-million contribution funds out-of-pocket costs for expenses not covered by Medicare, as well as reimbursements for premiums for Medicare Part B, which covers outpatient care.

Retirees fear that those cost-savings will actually amount to cost-shifting in the form of higher out-of-pocket costs and less coverage. While much is unknown about how the switch would affect the coverage that retirees receive, experts agree that for people who struggle with health issues, Medicare Advantage is more expensive and provides fewer choices.

That's because the cost savings from Medicare Advantage come from both higher copayments, essentially shifting costs from the government to individuals, as well as the fact that people receive less care either due to high claim denials or because they don't seek out the care in the first place because fewer providers accept Medicare Advantage.

As Leonard Rodberg, a retired City University of New York professor who studied health policy told The Daily Poster, "If you go to the doctor [insurers] save money, because you pay part of the cost. And if you don't go, they save even more money. If you need a treatment, they turn you down, deny care, and save even more. There's a variety of ways they save money, and they claim they save money by keeping you healthier, but nobody has ever been able to document what they do to keep you healthy."

"They want health care benefits associated with union leadership"

The MLC helped prevent a vote on the New York Health Act, a piece of single-payer legislation sponsored by a majority of lawmakers in both the state house and senate this year. New York became the second large state with a Democratic legislative supermajority to block an up-or-down vote on single payer.

In a May 5 letter to House Speaker Carl Heastie opposing the legislation, MLC chair Harry Nespoli wrote, "For over 50 years, the MLC has bargained health care matters with the City and other NYC-based employers. We are proud of the programs we have developed—which provide quality care without any contribution to premium for either actives or retirees."

Just a few weeks before that, however, the MLC had quietly come to an agreement with the city to switch retirees to new private health plans that could drastically raise annual out-of-pocket cost maximums for those on the plans.

Retirees and active members allege that the MLC opposed single-payer in part because the unions wanted their members to associate union membership with health insurance.

"For a lot of these MLC unions, the one tangible thing that they provide, in addition to wages, are health care benefits, and particularly the benefits that come out of their welfare funds," said one New York City union representative, speaking on the condition of anonymity. "They want health care benefits associated with union leadership."

The representative added, "It doesn't have to be true. If unions fought for more robust raises and benefits, they wouldn't have to be concerned that the only thing they have to show for people is health care benefits."

Rodberg, the CUNY professor, concurred. After the 2018 Supreme Court decision Janus v. AFSCME, which said that public employees can't be required to pay union dues, public sector unions have worried about proving themselves indispensable to their members. "The union negotiates with the city to provide these health benefits, so you could argue that if there were no union, there would be no health benefits," Rodberg said, adding, "They fight for the fact that they have to fight for health care."

Nespoli and the leaders of the United Federation of Teachers, AFL-CIO, and Teamsters Local 16, all of which are part of MLC, did not respond to requests for comment.

Following the 2018 cost-cutting agreement, union leaders and officials came up with eight proposals to meet the cost-cutting requirements, including switching to a statewide single-payer system or setting up a self-insurance system.

A January 2021 study by The New School found that the city could save about $1.6 billion per year if it adopted a self-insurance program, as most major cities and large companies have done. That would involve setting up a health insurance plan just for the city's employees and paying for claims directly, rather than paying premiums to a health insurance company which tends to be more expensive because insurance company profit margins are so large.

But since the negotiations between the MLC and Office of Labor Relations were held behind closed doors, retirees don't know whether this option was ever considered.

Retirees pointed to MLC personnel with ties to the health insurance companies that could end up providing the new Medicare Advantage plans as potential conflicts of interest. Gregory Floyd, President of the Teamsters Local 237 and Secretary of the MLC, is on the board of EmblemHealth.