NYC Retirees: With Court Case Lost At Highest Level, Focus Turns To Politicians, Upcoming Primaries, Election

NYC Retirees: With Court Case Lost At Highest Level, Focus Turns To Politicians, Upcoming Primaries, Election

Update: Mayor’s Office announced that they won’t be pursuing Medicare Advantage as the only choice for retired City workers.  

The NYC Organization of Public Service Retirees lost the case against the City of New York and the Office of the Mayor earlier this week.  As it turned out, the contract between municipal workers and the city, both individually and as a whole, did NOT contain any specific provisions about healthcare.  So the contract could not be shown to explicitly instruct the city to pay for workers (active and retired) health insurance.  That was actually covered in a city law that is over 50 years old. 

Since the promises were given to employees orally only, with the understanding that their healthcare would be taken care of, they were unable to meet the very strict requirements for “promissory estoppel,” which basically has to do with contract law.  If the contract itself had stated that healthcare was to be paid for  by  the City, then they would have met this requirement.  Instead, this was actually spelled out in the brochures that retirees were given, and it was told to them in person by workers and representatives of the City over the course of their hiring.  The lower courts were applying a less stringent reading of promissory estoppel, but when it comes to contract law and following the letter of the law rather than the spirit of the law, this standard was not able to be shown to have been met.  

See below for background and the details of the case that may be relevant to those seeking a deeper understanding of why this happened and what the next steps are;  

The Court of Appeals is the highest court in state of New York. This court is higher than the Supreme Court in the statae, and this decision reverses the rulings by those lower courts. The Court of Appeals said the retirees didn’t sufficiently prove that the city broke its promise, and now this is remitted back to the lower court.

For retirees, there were other issues where litigation can be brought, but the broken promise allegation was the strongest among the cases. Since the only two things that mattered were decided on by the Appeals Court, going back to the lower court on the other seven legal issues on which lawsuits could be brought is basically starting all over from scratch.  These other legal issues may not be as strong, and litigation right now (i.e. before the election) is likely not going to be pursuesd.

At this point in time, the litigation is stalled. For now, everything is in limbo. Basically, the election is what matters right now. It is also the case that Michael Mulgrew, recently re-elected to his post as president of the United Federation of Teachers, has changed his mind. He is now no longer in favor of taking away the choice of healthcare plans for retired workers that they previously enjoyed. See his statement below.

So where the city and the Municipal Labor Committee were previously pushing for this change to the retiree’s healthcare plans as a way for the City to save money on retired workers’ healthcare by changing to Medicare Advantage, since the largest union is now not backing that plan, this may be its end.  The UFT is one of the largest members of the MLC, and they may also be successful in changing the attitudes of the other unions that are members.

In NYC, there are so many unions and workers that they formed this group (the MLC), which negotiates with the City on behalf of all of the unions, and their decisions and agreements bind them all.

It should also be noted that prior to retirement, the City pays 100% of each worker’s health insurance policy premium.  By the very action of reaching the age of 65, the City is immediately saving 80% on that worker’s healthcare premium, since that portion is then being paid by the federal government. So that retiree already costs them 80% less than active workers.

It’s part of the law, not the contracts themselves, that require the City to pay for health insurance

In the most technical sense, the City is reneging on the requirements of Administrative Law 12-126. This law states that the City must pay for the healthcare of its active and retired workers and their dependents, for their whole lifetimes. When the healthcare is switched to a Medicare Advantage plan, this is “free” to the City. These plans are similarly free to employees when they choose them as their healthcare plan, if they work for a private company and aren’t in a union.  During their working career, in most cases they are given a choice, each of which has a premium that must be deducted from their paycheck.  If they choose the Advantage option, there’s no monthly fee, but the coverage tends to be terrible.  They always have to get pre authorizations, and they are often denied.

Some employers pay for the whole of their insurance, just like union employers do, but for the most part, private sector employees must pay something.  This is unless they have a really good employer or are in a union.  Most unions, including non-municipal ones, tend to take care of insurance costs.  If the City had taken the full insurance benefit from all employees, this might have been fair, but it was targeted at retirees only, whose choices for non-Advantage plans were removed.  This is at least in part because these particular types of healthcare plan are terrible.  They have a reputation, which some say is well-earned, of delaying care by denying approvals for standard care practices.

In other words, with a better insurance policy (better usually meaning more expensive premiums leading to lower out of pocket costs – but if one doesn’t routinely need or use intense healthcare, they will likely choose to opt out of such a plan. If the City had offered all workers, including active and retired, only this type of healthcare, they would have likely faced a retention and hiring problem. It has been acknowledged by both parties that these benefits helped to attract and retain employees, but the City contends that it was never actually guaranteed in writing in a contract. So they felt that they could be free to change it, since they knew that it had never been spelled out in exact words in the contract that the City signed with its new workers through the Union. While there were periods of time that municipal workers were not covered by a contract, since it had been allowed to expire, most of the time union members were covered by contracts. Unlike with private sector workers who are not members of a union, these city workers were always protected in terms of their salary and their benefits. It was ruled by the lower court that since the City was offering their active workers plans that were much better, they had to offer similar plans to their retired workers.

For this court, that was not sufficient. Since it was not explicity spelled out in the contract, these policy types (ie those the City paid for) could be used as a point of negotiation. Most current union members agree that selling off retired worker healthcare so that the active workers can get a raise is unfair, and as Amy Arundell mentioned, it kind of sours the gain, making it not a gain but a loss overall. Especially when you consider Marianne’s fair point that every active worker will one day be retired. That means that the healthcare that was sold off while they were working will not be there for themselves and their dependents once they reach retirement age.

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There is such confusion about traditional Medicare and Medicare Advantage. The following attempts to clarify this mystifying topic.

Number one, every single person who is of retirement age is eligible to enroll in Medicare. It does not matter what your other factors are, you become eligible at that point. The only place where the income and assets matter is with regard to what is known as the “Part B” contribution of Medicare. If you are not of retirement age, you have probably heard that term, but unless you help a retired relative with their finances and insurance, you don’t know what it is. The Part B contribution is a sliding scale amount, which is based on income and assets, that a retired person must pay every month if they wish to see a doctor. Like, ever. What is never mentioned is “Part A,” which represents hospitalization. So, if you are a totally healthy person and never want to see a doctor, ever, you might opt out of the Part B portion.

After the City would have made the proposed change (which is presently in limbo and a large part of the mayoral race is focusing on this issue, because it now will affect ALL City workers, whether right away or in the future). We will get to this shortly, but traditional Medicare causes the federal government to pay for a portion of the cost of a retired person’s healthcare, while Medicare Advantage is completely paid for by the federal government, whether for a union worker or a regular worker. In the case of a City worker, the 20% that the federal government does not pay is paid by the City. For a non-union worker, they must pay that 20% monthly premium, which varies in cost with the plan chosen on the marketplace. The same is true for Medicare: the plans have a monthly premium cost, so the City has negotiated with companies to offer their plans as choices to the workers. Every worker can choose what health insurance plan they choose.

So by the City making the change from traditional Medicare to Medicare Advantage, they only must pay the workers’ Medicare Part B premium (which, as previously mentioned, allows them to see doctors). This cost is calculated on a sliding scale, and it is based on their pre-retirement income. If someone is on Medicaid when they become retired, then they would likely not have a monthly premium. However, this is not the actual cost of healthcare. Everyone, including those on Medicare Advantage plans, must pay this cost, which is capped at $150 per month for most people. These Part B costs were and are costs that the City picks up. But by taking away the traditional Medicare choice that they previously offered, the City is not actually paying for the healthcare of those who choose traditional Medicare. They are paying only for Part B, which they must also pay for everyone. Part B is withdrawn directly from Social Security checks for other workers.

If a judge or panel of judges was to look at the Administrative Law previously mentioned, and follow exactly the letter of it as well, then it is likely that the retirees might prevail with the argument that the Part B premium is not paying for their healthcare.

Where the case stands now:

At this point, this fight goes to the legislative agenda at the labor organizations. Since there was no explicitly written evidence in the contract, the main issue at hand is that it needs to be negotiated going forward. Since the largest union is not in favor of it (and union members should find ways to make their voices heard and their wishes known), it can be renegotiated. As of today, it is not in effect. Retirees still have healthcare that is paid for in full by the City, with a choice of multiple traditional Medicare and Medicare Advantage plans. The contract with Aetna has, in essence, expired. The contract was negotiated over two years ago, and will need to be negotiated again.

There is no written evidence, and it was assumed that these provisions, where the City had to offer multiple healthcare plans that were equivalent to thee active worker plans, would be written into the decision. The decision was that they did not prove that the city broke its promise.

This all began when the City signed a contract several years ago with Aetna to take over the retiree medical care from traditional Medicare. This was the union agreement that started retirees on the fight for their rights to what was promised them. However, the promise was never written, it was always oral, and the booklets that workers received was not enough to hold the City to as a contract.

What happens now is that contract has a clause that it gets renegotiated based on changed circumstances every two years. It has already been two years. That’s what the City and Aetna were doing in this arena. What is happening at the level of UFT for teachers, they are saying that – what was written by Michael Mulgrew head of teachers union. This is what he said:

“We oppose the city’s Medicare Advantage plan and we, as part of the Municipal Labor Committee (MLC), will not support it. We believe other unions will join us in opposing this plan. At this point, the plan should no longer be considered valid due to the amount of time that has passed since it was negotiated. The city and the MLC would need to start from scratch negotiating a new plan, which, if they choose another Medicare Advantage plan, we would not agree to. 

Despite this ruling, we remain firmly committed to preventing this plan from moving forward. We have heard the voices of our retirees loud and clear, and we are committed to fighting to keep your access to traditional Medicare. We will keep you updated as the case makes its way through the legal process”

The unions have made clear that if the city tries to go forward, the municipal labor and other unions will not support it.  If it becomes part of the City’s plan, then at this time, they wont accept it. Naturally, all retirees who were concerned about this issue and case are very disappointed in the court’s decision.

The following is a quote from a spokesperson for the retirees in the NYCOMSR: “The short version is that Marianne and the organization are going to begin the next phase of pushing the argument that in the City Council that they should remain in traditional Medicare, and the plan mayor Adams has proposed is not what they signed onto and is completely unfair to them.”

This organization and the retirees they represent are going with their supporters and unions, they are trying to get the City Council to support them, and keep pushing ahead to try to win in the legislative area.

More explanation on the legal issues of the case and of the retirees’ fight:

There is a city law called Administrative Law 12-126 that has been in place for 50 years. That said that the city has to pay for the health insurance for workers, retirees, and their dependents, so that was the statute on which healthcare was based. There is nothing in the actual contract.  The retirees’ legal team had 103 contracts between the city and various humans, but not one of them has a word about retiree healthcare. Had it been in a contract, the court would have ruled the other way. So all of these people were promised, which was the policy, the retirees were told verbally about healthcare being included.  It was past practice, and it was reflected in the booklets that went out every year.  However, that wasn’t enough for the court.

It was also in the booklets that the City gave out to new hires. It was reiterated in the SPD’s (80 page booklets), which state how they get their healthcare. Retirees have been able to choose every year for over 50 years. One of the justices at the appellate court said that one size doesn’t fit all, some plans have eye care or dental, etc. One size never fit all. The appellate court recognized this. At the appellate court, they won 5-0, and at the higher court they lost 7-0. The appellate was acting on the very high bar to get promissory estoppel. They concluded that there was no explicit promise actually made. It was just the way things were always done. Going forward, there will many more explicit promises and also many more limits to promises.

At the trial courts, they had additional causes of action, such as age discrimination.

There is a bill pending in city council, Intro 1096, it has 10 sponsors, it takes 26 to get it passed. Some City Council members might now support it.

Almost all of the candidates running for election support retirees.  Cuomo has put in writing that he won’t support Medicare Advantage. Brad Lander has supported retirees. The main opponent is Adrienne Adams, who the primary will determine what she is running for.

When you turn 65, you have to register for Medicare. You don’t have to take it if you’re still working. Traditional medicare pays for 80% of all doctors and hospitals, but only pays 80%. Since the 1960s, insurance companies have sold policies called a Supplemental or Medigap policy that covers the other 20%. That is what the issue is, as the city has offered and paid for the Medigap plan all of these plans. The cap is being defined as being pegged to HIP HMO ($900per person/per month).

A supplemental plan currently costs about $200 per person per month. A supplemental plan is only paying for 20% of the cost. That’s what people want and what this is about. Traditional Medicare is much better than Medicare Advantage. The City has been paying about $500 million for healthcare for those workers that chose it for those that they pay. With Medicare Advantage as the only choice, this $500m would be found money because they don’t have to pay for the plan.

The Medicare Advantage is paid for 100% by the federal government. So they’re trying to shift to this advantage plan. Medicare Advantage is a private insurance policy that is not as good as Traditional Medicare.

The way the insurers make their money is they have a limited number of doctors that accept it, and it is administered by the private insurance company.

They implement prior authorization on every test, treatment, and visit. The doctor has to ask the insurance company for permission for everything. The insurance company can overrule the doctor’s orders. It actually costs the federal government MORE than traditional Medicare. It was a bipartisan push that started during Bush and Clinton – everyone was behind it. The private sector was going to figure out how to keep people healthier. They would give incentives to eat better, get more exercise, and go for preventive checkups. That would change the cost for healthcare.

Managed care was a big thing back then. One problem. It is very hard for old people to change their habits. An older person is not going to do these things, even though they’ll help them. It was good in theory, but didn’t work in practice. The companies kept telling the federal government that it was working as it was profitable.

Now about 48% of all people choose Medicare Advantage. The patient sees a benefit when his monthly premium was $47 per month, and this year it is $0. So he pays out of pocket nothing. If you wanted to be on traditional Medicare, you would need a supplemental plan for $200 a month. If they get a plan for  medications, it’s another $300 for a drug plan. $0 on advantage compared to $500 per month.

If you’re healthy, Medicare Advantage is great. But if your doctor recommended you to go on Ozempic or Wegovy and it’s not medically necessary, the insurance company wont pay for it for a healthy person.

Changing your mind about your plan after making that choice

In four states, which New York is one of, you can change the decision  between TM and MA. So many people, while they’re healthy, they’re staying on Medicare Advantage. Once they’re not healthy, then they can change it (unless you’re in another state).

In other cities and towns, most of the unions have drug plans. The unions themselves pay for a lot of the employee drug plans. That’s not an issue for this state.

At this point, the Mayor’s Office has just announced that they won’t be pursuing this Medicare Advantage plan either, so this issue is going away for now, and if they pass the bill, it will be gone for good.

Banner Image: Consultation with a doctor. Image Credit – National Cancer Institute