April 1, 2015
City is Guaranteed Unprecedented $3.4 Billion in Health Savings Over Next Four Years, $1.3 Billion Recurring Every Year After as Part of Agreement with Municipal Labor Committee
Today, the de Blasio administration announced that it will reach $400 million in health care cost savings for Fiscal Year 2015, part of the unprecedented and guaranteed health savings agreed upon with the Municipal Labor Committee last year. In total, the City and the MLC have agreed to at least $3.4 billion in savings over the next four years, and $1.3 billion in recurring savings every year after. The Office of Labor Relations detailed the FY2015 savings – as well as savings already secured for future years – in its FY2015 Q3 report to the Mayor.
For over 20 years, the City was unable to modernize its employee benefit programs and develop more efficient and cost-effective approaches to health care. Any changes required agreement between the City and municipal unions.
When the de Blasio administration took office, every contract with municipal workers was expired. Since then, the administration has reached agreements with 76 percent of the workforce, representing both civilian and uniformed employees. Incorporated in those contract settlements is an agreement with the MLC to fundamentally bend the health care cost curve with $3.4 billion in savings from FY2015 through FY2018, and $1.3 billion in savings recurring every year after.
“For decades, the City’s hands were tied when it came to modernizing our approach to health care. By changing the conversation with our workforce from one of deadlock and confrontation to real problem solving and collaboration, we were able to secure these unprecedented savings – which serve the City, our workers, and taxpayers alike,” said Mayor de Blasio. “We’ve already locked in our $400 million in savings this year, and are on track for even greater savings in the coming years.”
Specific savings for FY2015 and beyond are detailed in the following report, sent to the Mayor earlier today:
April 1, 2015
To: Bill de Blasio
Mayor, City of New York
First Deputy Mayor, City of New York
From: Robert Linn
Re: Report of Status of Healthcare Savings Q3 Fiscal 2015
The Office of Labor Relations (OLR) is pleased to report that we will reach the goal to attain $400 million in healthcare cost savings for fiscal year 2015. The City and the Municipal Labor Committee (MLC) have been exploring many different initiatives aligned with four approaches to generating savings to bend the health care cost curve for the City’s health plans.
First, we aggressively attacked rates on all fronts --both the State-approved HIP HMO rates that drive the premium rates, and the rates from our insurers and vendors.
Second, we are initiating audits of all of our programs. The first was a major undertaking to ensure that we were covering only eligible workers.
Third, we are looking at changes in the way health care is being delivered to our workforce to improve quality and make it more efficient.
Fourth, we are focusing on improving the health of the workforce, our families and our retirees.
All savings are being fully realized by the City. That includes savings from programs and initiatives that result in a lower amount actually paid for services, and savings from agreement with the MLC to lower the City’s equalization payment to the Health Insurance Stabilization Reserve Fund (Stabilization Fund).
Nearly as important as the actual cost savings implications, is the cooperative framework in which these discussions are now taking place. The City and the MLC are working collaboratively on developing the strategies that will achieve the $3.4 billion health cost savings goal for fiscal years 2015 – 2018.
There have been eight specific strategies that resulted in the $400 million savings for FY 2015. In keeping with our agreement with the MLC, these savings are measured against the City’s original budget for FY 2015.
Recognizing that many thousands of employees live with the profound health impact of Diabetes, we are also in the process of implementing a program that will provide case management support services for patients with Diabetes, as well those with as Gestational Diabetes. It is currently in the implementation stage and will begin July 1, 2015, with savings guaranteed by the vendor of at least $3 million in FY 2016. To help the one-third of the workforce that could potentially be pre-diabetic, we are also piloting both worksite and online availability of the CDC’s evidence based Pre-Diabetic Prevention Program.
Work has already begun on other FY 2016 initiatives, putting the City and the MLC on track to reach the $700 million FY 2016 goal. As noted above, many of the FY 2015 programs will have even greater impact once they have been in place for a full year, setting the stage for meeting and possibly exceeding the FY 2016 goal of $700 million in savings.
Some of the many potential cost savings initiatives we are exploring for FY 2016 implementation include:
We also continue to actively pursue our commitment to improving the health and wellbeing of the workforce. Our “Culture of Health” team has been focusing on developing workforce wide strategies to promote smoking cessation, fitness, and better nutrition, and reduce stress and drug and alcohol abuse. To support these efforts, we will be introducing an employee health section of our website that offers valuable information and tools to help educate the workforce about health issues and our wellness programs.
With some of the $400 million of FY 2015 savings recurring next year, along with the full year impact of programs implemented in late FY 2015 and the new programs being planned, we are confident that the FY 2016 goals are also achievable. We have already identified approximately $624 million of the $700 million goal for FY 2016.
We know that meeting the more aggressive FY 2017 and FY 2018 goals will require even greater cooperation to implement programs with even more significant impact to bend the health care cost curve. However, we have successfully changed the dialogue between the City and its workforce to one of collaboration and problem solving – resulting in these unprecedented savings that benefit the City, our workers, and all New Yorkers.