Appeals Court Judges Question NYC’s Medicare Advantage Plan

By Steve Wishnia

A panel of five state appeals-court judges appeared skeptical of the city administration’s contention that it can legally change retired employees’ health coverage from traditional Medicare to a private Medicare Advantage plan.

“This attempt to go around what people have earned is really problematic,” Justice Dianne T. Renwick told city Corporation Counsel attorney Richard Dearing at a hearing by the Appellate Division First Department Oct. 27. Retirees want plans “where they can choose their doctor,” she said.

“This attempt to go around what people have earned is really problematic,” Justice Dianne T. Renwick told city Corporation Counsel attorney Richard Dearing on Friday, Oct. 26. Above: Municipal retirees march outside City Hall two weeks ago in opposition to changing Section 12-126 of the city’s Administrative code. Photo by Joe Maniscalco

The city is appealing a March ruling by state Supreme Court Judge Lyle E. Frank in NYC Organization of Public Service Retirees v. Campion that its plan to switch up to 250,000 retired and disabled city employees to Medicare Advantage from Senior Care, a supplemental plan that covers the 20% of costs Medicare doesn’t pay, violated Section 12-126 of the city administrative code. Those who wanted to keep Senior Care would have had to pay $191 a month in premiums.

The crucial sentence

Section 12-126, enacted in 1967, states that “the city will pay the entire cost of health insurance coverage for city employees, city retirees, and their dependents, not to exceed one hundred percent of the full cost of H.I.P.-H.M.O. on a category basis.” Judge Frank interpreted that to mean that as long as the city was giving retirees the option of staying in their current program, it could not charge them the $191 premium.

The city is arguing that the code does not require the city to offer more than one premium-free plan. “The lower court misconstrued Section 12-126 in two different ways,” Dearing told the court. Judge Frank, he said, wrongly interpreted it as meaning the city had to pay for multiple plans, and that the $776-a-month cap on what the city will pay was the maximum for Medicare plans as well as those for active workers.

The city has always paid for multiple plans, responded Justice Lizbeth Gonzalez, noting that the law says “contracts” in the plural, so how can it now offer only one?

Dearing said that the plural was meant to refer to a plan that has contracts with more than one insurance company. The city’s brief also argues Medicare Advantage would provide better health coverage than what retirees currently have and would save the city money.

“They’re completely ignoring the definition of health insurance coverage,” Jacob Gardener, the lawyer who represented the New York City Organization of Public Service Retirees at the hearing, told Work-Bites. The term “program” means different plans, he says, and “the legislative intent couldn’t be clearer.”

The plaintiffs argue Medicare Advantage would provide “significantly worse” coverage than Senior Care, as many doctors and hospitals that accept Medicare would not accept a Medicare Advantage plan, patients would have to pay full price for care outside the plan’s network, and the private plans’ insistence on prior authorization for procedures would delay or deny essential care.

“The City’s planned health-care overhaul would not actually reduce those costs; it would merely shift them onto retirees and the federal government,” their brief says.

They also accuse the city and the Municipal Labor Committee, the group of 102 city employees’ unions that negotiates benefits, of sacrificing retirees in order to achieve the $600 million in health-care savings they agreed to make in 2018.

Retired city workers have received premium-free health coverage for decades, and reneging on that promise is “a bait-and-switch,” Gardener told Work-Bites, saying that the city is “saving money off the backs of senior citizens and disabled first responders. When you’ve already promised benefits and they’ve devoted their lives to working for the city, it’s just unfair.”

Dearing argued that the city was not obligated to pay more than $7.50 a month for coverage for Medicare recipients, based on the cost of a plan called HIP VIP.

Gardener disputed that, saying that a city actuary in September had said that plan cost about $190 a month.

The city had not offered retirees the HIP VIP plan for at least five years before 2021 — and possibly not since 2003, says Marianne Pizzitola, president of the New York City Organization of Public Service Retirees and the Fire Department EMS Retirees Association. According to a city Office of Labor Relations list of premiums for COBRA coverage, it cost $188.65 a month in 2021 [and the price suddenly dropped to $7.65 in 2022].

“How is it possible that the rate for a health-insurance plan dropped from almost $200 to $7.50? It defies logic,” Pizzitola told Work-Bites.

Dearing told the court that the drop was a benefit of “competition.”

“We’ll see if that price holds,” he told Justice Renwick.

Changing the law?

Justice Jeffrey K. Oing asked why the city doesn’t offer just one premium-free plan. “I think the city may have to do that,” Dearing answered.

Gardener, asked the same question, said the city could, but it would have to amend Section 12-126 to do so.

Mayor Eric Adams’ administration, backed by the Municipal Labor Committee, is trying to do just that. It has proposed amending the section to add a clause that the city and the MLC could jointly agree on a new benchmark plan for “any class of individuals eligible for coverage.”

District Council 37, the largest union in the MLC, says in its explanation to members that changing the law would enable unions “to collectively bargain our health-care options.” It says with Medicare Advantage, the city will be able to “access federal subsidies that are not available for Medigap plans such as Senior Care,” and that Medicare Advantage requires pre-authorization “to discourage providers from making unnecessary referrals” that drive up costs.

MLC chair Harry Nespoli told Work-Bites that it would be difficult to comment on the appeals-court hearing because he hadn’t been briefed by the lawyers, but that the committee’s goal in promoting Medicare Advantage had been to offer retirees a choice, “to get a good plan,” and to save money for the city.

“The longer it takes, the longer we’re losing money,” he said. The committee has been trying to negotiate lower costs with the city’s hospitals, but “we’re going nowhere.”

Medicare Advantage “is not the answer” to rising costs, Nespoli, head of the Uniformed Sanitationmen’s Association, says, “but for the next six years, the city’s going to be getting money from the federal government.”

The unions are talking to the City Council about “why the amendment should be changed,” but hasn’t yet found a sponsor, Nespoli says.

If the city loses its appeal and can’t get the Council to change the law, Pizzitola expects it to use the “nuclear option” — eliminating all other health-coverage plans for retirees. Prominent union leaders have told her they would support that, she says.

“Our position is that the city cannot legally do that” under Section 12-126, Gardener says. It offering only one option would be “so antithetical to the letter and spirit of the law.”

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