Everybody’s Doing It
Health Insurance Premium-Sharing by Employees and Retirees in the Public and Private Sectors
The cost of health insurance for New York City public employees and retirees has more than doubled in the last ten years, and its continued growth will be a major driver of projected budget gaps. While the total city budget is projected to grow 11 percent from fiscal years 2012 to 2016, health insurance costs will grow by almost 40 percent and comprise 70 percent of the projected budget gap in 2016.
Currently, more than 90 percent of the municipal workforce is enrolled in health insurance plans that require no employee contribution toward the cost of the premium for basic individual and family coverage. The City continues to pay the full cost for employees and their families if they retire before the age of 65. When they enroll in Medicare at age 65, retirees are reimbursed by the City for the full cost of the Part B premiums.
Employees and retirees should share the premium cost of their health insurance. Reducing the taxpayer burden for premiums will not reduce the City’s attractiveness as an employer and is essential to balance the budget and reduce the City’s long-term financial obligations. Sharing premium costs also gives employees and retirees a vested interest in controlling future premium increases by selecting cost-effective features in plan design.
To determine a reasonable level of contribution, the Citizens Budget Commission undertook a comparative analysis of prevailing premium-sharing arrangements for employees and retirees in the public and private sectors in the U.S. This report reviews the health insurance premium sharing policies for employees and retirees of the federal government, the State of New York and six large U.S. municipalities: Los Angeles, Chicago, Boston, Houston, Phoenix and San Francisco. It also presents data on health insurance offered by large corporations in New York State and nationwide.
The analysis has a clear finding: New York City’s health premium policies for employees and retirees are more generous than those of comparable employers in the public and private sectors. The City is especially generous with respect to retiree health benefits – particularly its reimbursement of Medicare Part B premiums for retirees and their spouses. Savings can and should come from an agreement between labor and lawmakers to implement premium-sharing in the largest plans. If CBC’s recommendations are adopted, the savings would total $1.8 billion in fiscal year 2014 and rise to $2.2 billion in fiscal year 2016.