FOR IMMEDIATE RELEASE
August 2, 2013
MAYOR BLOOMBERG AND DEPUTY MAYOR HOLLOWAY ANNOUNCE NEW YORK CITY'S PRIMARY HEALTHCARE PROVIDER WILL NOT SEEK A RATE INCREASE, RESULTING IN POTENTIAL SAVINGS OF MORE THAN $300 MILLION ANNUALLY
Decision follows the Administration’s Work to Redesign and Competitively Bid the City’s Healthcare Plans for the First Time in More Than a Decade
Mayor Michael R. Bloomberg and Deputy Mayor for Operations Cas Holloway today announced that, following the Administration’s announcement of a competitive bid for the City’s healthcare plans, the current primary healthcare provider will not seek a premium rate increase for the next fiscal year. This is the first time that the provider, EmblemHealth, has not sought an increase in 15 years, and will result in potential savings of more than $300 million annually. The decision by EmblemHealth follows the Administration’s work to release a Request for Proposals for a new healthcare provider for City employees and retirees – the first competitive bid for a City healthcare provider in more than a decade – and the Administration’s formal challenge to the rate increase EmblemHealth proposed last year, which was cut by nearly 50 percent. The Administration is working with the Municipal Labor Committee to develop the new Request for Proposals. The projected savings are dependent on EmblemHealth remaining the City’s healthcare provider after the competitive bidding process is complete and would lower healthcare expenses by an estimated $363 million in Fiscal Year 2015; $397 million in FY 2016; and $435 million in FY 2017. EmblemHealth provides healthcare for approximately 95 percent of City employees, retirees, and their families.
“Through some of the most difficult economic challenges New York City has faced, we’ve balanced budgets, strengthened services and invested in our future, leaving our city on firm financial footing,” said Mayor Bloomberg. “But that security is being threatened by healthcare costs that have grown at an exponential rate and are swallowing more and more of the budget, taking dollars away from public safety, education, and all the areas so vital to our future. EmblemHealth’s decision shows that by introducing competition and modernizing our healthcare plan, we can improve the care that our employees and retirees get and reduce the amount that City taxpayers have to pay for it.”
“We were convinced that City workers and retirees were not getting the best possible care at a competitive price,” said Deputy Mayor Holloway. “EmblemHealth’s virtually unprecedented decision not to seek a rate increase for next year shows that we were right. While the decision is very welcome news, we believe it is a fraction of the cost savings that the City and its taxpayers will achieve through a robust competitive process for the City’s multi-billion dollar healthcare business, and we are moving quickly to release a Request for Proposals as soon as possible.”
In a presentation the Citizens’ Budget Commission last April, Deputy Mayor Holloway demonstrated that, if left unchanged, the cost of the City’s healthcare obligations would continue to grow at astronomical rates, from $6.3 billion in FY 2013 – twice as much as FY 2002 – to $8.3 billion by FY 2017. By transitioning to a modern plan, the RFP is expected to generate proposals that will both improve care for the approximately one million people covered under City health plans (includes current City employees, retirees and their dependents), and lower costs through disease prevention; wellness programs; and the competition that a robust public bidding process will generate. In its notice to the City, Emblem noted that it would not need to seek a rate increase for next year in part because it has successfully implemented elements of modern plan design—including the creation of Accountable Care Organizations and incentives for physicians to prioritize quality care—that have reduced forecasted operating costs by more than was anticipated. Allowing companies from around the State and the country to make similar proposals and compete for the City’s business could significantly increase the savings that the City and taxpayers could achieve.
Deputy Mayor Holloway notified Harry Nespoli, Chair of the Municipal Labor Committee, of Emblem Health’s potential rate adjustment in the letter copied below.
July 31, 2013
Mr. Harry Nespoli
Dear Mr. Nespoli:
Yesterday Emblem Health senior leadership informed the City that it does not plan to file a request for an increase to the HIP premium rate with the State Department of Financial Services (DFS) for insurance plans that renew through 2014. Provided that Emblem does not seek an off-cycle increase for Fiscal Year 2015 (in the normal course HIP has only filed for rate increases on an annual basis) the July 1, 2014 rate will be 1.2 percent higher than the rate the City began paying on July 1 of this year, significantly less than the 9 percent rate the City has projected. This is very good news that we estimate could save the City up to $360 million in Fiscal Year 2015 alone.
Clearly the City’s aggressive appeal last Fall of Emblem’s proposed 2013 rate increase, which resulted in a reduction by DFS of Emblem’s requested increase from 10.13% to 5.18%, and the pending release of an RFP next week have stimulated this competitive business decision by Emblem. We are strongly encouraged by this marketplace reaction, and expect that the RFP process will stimulate even better proposals by the City’s current providers and others who may seek to compete for the City’s multi-billion dollar healthcare business.
At yesterday’s meeting, Emblem attributed their revised financial outlook in part to several initiatives that demonstrate the value of moving to a modernized plan design, as the draft solicitation we have been working on envisions, including:
These initiatives—a number of which I have raised from the outset of this process in April—are paradigmatic examples of the marketplace transformation that is taking place commensurate with the Affordable Care Act. We expect to not only learn about and evaluate the initiatives that competitive bidders will bring to the table in the RFP process but we also expect to drive investments in New York City healthcare. The actions Emblem has taken, and the business results they have produced conclusively demonstrate the benefits of competition and the clear marketplace opportunities that exist to obtain better healthcare for the 1 million people who depend on City-funded health insurance at a lower cost than City taxpayers are currently paying. It is imperative that these and other initiatives, singularly or collectively, be made at the scale necessary to meet these common-sense and very achievable goals.
As we have to date, the City looks forward to continuing our work with the MLC on the healthcare RFP solicitation as we prepare to release it next week.
All the best,
Marc La Vorgna/Lauren Passalacqua (212) 788-2958
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