TAKEOUT HEALTH CARE;CITY'S CLOUT IS SLOWING THE INCREASE IN BENEFITS;EARLY INVOLVEMENT WITH MANAGED CARE GAVE NYC EDGE IN HEALTH CARE COSTS
Jonathan Sapers
New York City, which is responsible for the health care benefits of more than 1 million people, is working to cut back its health care costs like most other large employers. And unlike many other portions of the municipal budget, this cost-cutting effort wins high marks.
This year the city actually negotiated a slight drop in its health care rates. That comes after years of increases that were usually comparable with what other large employers were paying.
In fiscal 1996, the city will pay $148.16 per month for an individual and $363 for family coverage. That is up from $84.03 and $226.82, respectively, in 1990. Although that's a 76% jump for individuals and 60% for families, the increases are in line with what companies in the tristate area are paying for health care.
"New York City has had either normal trend increases or below-normal trend increases over that period," says Andrea Maffey, senior vice president with the Hay Huggins Group, an employee benefits and actuarial firm.
Unlike most other large employers, the city had one clear advantage when the world of health care began to change so drastically: a third of its employees were already in some form of managed care plan in 1990.
But that number has not grown. In 1995, 66% of city workers were covered by some form of indemnity insurance. Group Health Inc., which is the major insurer for the city, offers a preferred provider network but also allows members traditional indemnity coverage.
Managed care inducements
To entice more workers to experience managed care, last year the city added four new point-of-service plans. Those programs allow employees to use participating doctors at little or no cost but also give them the option to use their own doctors with an out-of-pocket charge. The city also began offering incentives to get its retirees into Medicare HMOs.
"We wanted people to get used to managed care," says Caroline Sullivan, deputy commissioner of the city's office of labor relations. "It's sort of behavior modification."
But unlike most employers, the city doesn't have to worry about possible higher costs for its major indemnity plan through GHI.
The city pegs its health care contribution at the rate set by Health Insurance Plan of Greater New York, or HIP, its benchmark HMO. A stabilization fund set up by the city and the unions in the mid-1980s picks up the difference (or receives the benefits between the HIP and the GHI rate).
"Many employers would be envious of the financial arrangement because the city is capping its contribution at the lower HMO rate," says Harvey Sobel, principal and consulting actuary at Buck Consultants in Secaucus.
And this year, under pressure from the city and unions, HIP lowered its rate just slightly from last year-reflecting the city's significant clout.
Still, the city has been active in trying to keep down costs at GHI. Leonard Leto, the city's director of health benefits, says GHI, which now offers a preferred provider network of doctors whose fees are capped, is actually a little cheaper for the city these days than HIP.
New managed care features
It's accomplished that by offering a number of new managed care features within GHI over the past few years. They include a mental health program that offers incentives for employees to use GHI doctors, as well as similar programs for home health care and medical equipment purchases.
The city also began offering incentives to employees who use certain hospitals for specific procedures: Saint Vincents, Maimonides and Stonybrook for cardiac treatment and Johns Hopkins in Baltimore for organ transplants. It believes those hospitals can save it as much as $2,000 per procedure without sacrificing quality. As an incentive to employees, the $200-admitting fee and GHI co-payments are waived in these situations.
So far the city has only broken even on the arrangements because of the lack of volume. Mr. Leto says that the city hopes to set up other programs for higher-volume procedures like maternity care.
If there is a downside to the city's health care arrangements, it may be the dizzying array of choices it offers. Currently, workers can choose from 14 options.
"In the private sector, it's rare to see more than two point-of-service plans pitted against a traditional base plan," says Angelo D'Ascoli, vice president-marketing at Aetna Health Plans. "A lot of options may be confusing for the employee. He may end up not doing anything."
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