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City Finally Details Plan to Save $3.4B in Healthcare Costs

By Jeff Mays | April 2, 2015 1:27pm
 Commissioner of Labor Relations Robert Linn is interviewed by reporters after spelling out details of a plan to save $3.4 billion in healthcare costs over the next three years.
Commissioner of Labor Relations Robert Linn is interviewed by reporters after spelling out details of a plan to save $3.4 billion in healthcare costs over the next three years.
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William Alatriste/NYC Council

NEW YORK CITY — Mayor Bill de Blasio's commissioner of labor relations spelled out details of a plan to save $3.4 billion in healthcare costs over the next three years at a City Council hearing Wednesday.

Robert Linn, commissioner of the Office of Labor Relations, testified before the council that the city reached its fiscal year 2015 goal of $400 million in health care savings.

The savings came about by doing things such as verifying that all the dependents that city employees listed on their plan were actually available for coverage, which saved $108 million.

Another $153 million in savings came from reaching an agreement with city unions on how to fund mental health care.

Negotiating the premium structure on the city's two health plansBlueCross BlueShield and EmblemHealth — and its senior care plan saved a total of $117 million. 

"There have been many who thought we would never find the savings or this was smoke and mirrors. We have proven them to be absolutely wrong," said Linn.

And the savings identified this year will only grow in future years, he said.

While changes to the way complex cases are managed, including the addition of case managers and preventative programs, will save $15 million this fiscal year, it is expected to save $50 million next fiscal year. 

The city has already identified $624 million of the $700 million in healthcare costs expected to be saved in next year's budget.

While the administration had previously announced the savings goal, City Council Speaker Melissa Mark-Viverito blasted the administration for not detailing the plan sooner. She said only two documents had been made public until Wednesday.

"How will we know if we have actually achieved any savings over time? What is the baseline against which the claimed savings will be measured?" asked Mark-Viverito.

But Linn said few details of the plan were released purposely so as not to jeopardize ongoing negotiations with unions over the savings.

"The process we have been going through is not to hide from anybody or show a lack of transparency but to reach collaborative, good agreements with the workers," said Linn before releasing details of the plan reached with the Municipal Labor Committee, an umbrella group representing the city's unions.

The Bloomberg administrations' efforts to reduce healthcare costs often landed the city and unions in court and in front of arbitrators, Linn said, adding that the city now wanted to try a more cooperative approach.

There were no municipal unions under contract when de Blasio entered office in January 2014. The city made health care savings a part of contract negotiations.

Seventy-six percent of city unions are now under contract and the savings are guaranteed under an arbitration process that would see city workers contribute more to healthcare premiums if the savings goals are not met.

Linn said union officials have good reason to cooperate. If the savings exceed $3.4 billion, the first $365 million in additional savings will be given to city employees as lump sum bonuses.

Any saving over that will be split equally with the unions.

"When you have someone across the table who is willing to sit down and listen to your suggestions then you can accomplish something," said Harry Nespoli, chairman of the Municipal Labor Committee. 

City health insurance costs have doubled to $5.3 billion from $2.6 billion in 2005 and make up almost 7 percent of the 2015 budget, according to the Citizens Budget Commission.

The city projected a 9 percent increase in premium costs but will see only a 2.9 percent increase for fiscal year 2016 due to a "national slowdown in healthcare costs," said Maria Doulis, director of city studies for the CBC.

More savings need to come from city initiatives such as reducing emergency room costs and improving the management of expensive chronic diseases instead of unexpectedly lower premium costs, according to Doulis.

Linn says it makes sense to use the 9 percent rate as a target because of the volatility of healthcare costs.

The city, with the unions, is already examining many of the ways Doulis suggested to reduce healthcare costs further, Linn added.

"All of those are things we are looking and all of those are things we think we'll find together," said Linn.