The de Blasio administration missed a glaring math error when choosing a new health care insurance provider for 275,000 retired city workers that could cost taxpayers “tens or even hundreds of millions of dollars” in lost revenue, according to a bombshell claim filed by rival bidder Aetna, the state’s largest Medicare provider.
Aetna has sued the city alleging the selection process was fixed to favor Alliance, a consortium that includes Emblem Health and Anthem/Blue Cross Blue Shield and has strong ties to union leaders, to operate the new Medicare Advantage Plus program.
A group of retirees has filed a separate lawsuit to block the implementation of the new $34 billion, 11-year Medicare supplemental plan — called Alliance Medicare Advantage — claiming they are being forced into a new plan that costs.
Aetna came in second place in the bidding process, and said it discovered the issue over profit sharing while reviewing the terms of the Alliance’s proposed contract with the city after filing its lawsuit.
The contract says the Alliance won’t have to share any profits in any year when the city is not required to pay a premium.
This means that, at most, the city could receive about $23 million from the Alliance contract because the Alliance has agreed to only charge the city premiums in its first year, according to Aetna’s calculations.
But it’s actually more likely the city – and taxpayers – will receive little or nothing in savings in the first year because profits don’t typically materialize until later, according to Aetna’s protest.
The Alliance contract included a “gain share” stipulation in its contract that guarantees it will keep the overwhelming majority of the profits it initially promised to share with the city – a “sleight of hand” that either went unnoticed by the city and the union leaders negotiating the health care changes, or was slipped in afterwards as a “bait and switch,” according to a Nov. 9 protest letter Aentna filed with the city’s Office of Labor Relations, a copy of which was obtained by The Post.
“A close reading of the proposed contract reveals that the public is being taken for a ride,” Aetna lawyer Claude Millman said in the protest letter to city Office of Labor Relations Director Renee Campion.
Millman said it’s clear now — if it wasn’t before — that Aetna submitted the superior bid.
Under Aetna’s proposal, zero premiums would have been charged for six contract years, but unlike the Alliance, Aetna’s proposal doesn’t “cap its gain sharing proposal to any dollar amount,” the protest letter says.
According to Aetna, the city likely would have netted “hundreds of millions of dollars in possible gain share payments from Aetna” over the course of the contract.
“A representative sample of Aetna’s large clients includes four public employers, one private employer, and one large labor union; within this sample, in the last year alone, Aetna has paid out over $320 million in gain share payments to these clients, with one private employer receiving approximately $98 million and one public employer receiving approximately $81 million in gain share settlements, despite these clients having member populations one quarter to one third the size of the City’s retiree population,” Aetna Vice President Richard Fonmeyer said in an affidavit.
“Multiplied over the course of the contract, the City stood to receive hundreds of millions of dollars in possible gain share payments from Aetna. From the Alliance, it will collect, at most, $23 million,” said Frommeyer.
The de Blasio administration is trying to paint Aetna as sore losers. I personally would like to see the whole privatization of retiree healthcare scrapped but right now the switch to Medicare Advantage is only temporarily on hold due to a judge's ruling in October.
From The City:
A state Supreme Court judge...indefinitely halted a proposed cost-cutting change in city government retirees’ health care after former municipal workers filed suit seeking to stop the move.
In a four-page order, Judge Lyle Frank called the rollout of the switch “irrational, and thus arbitrary and capricious” — and ordered the city to maintain the retirees’ current health care plans.
He didn't stop the switch but he delayed it. We have an update on this case from a retiree who sent this out just before Thanksgiving:
The City sent the judge their letter last night. Those idiots never addressed what the judge asked them to do!! They didn't even fight for the personal data (luckily, I found my Athem letter yesterday, but now it's a moot issue). Instead, they are offering a 6-month trial period. Really!! Fish and Hook!!!
No way!!! Emblem's been sneaky from the very beginning. They can take their Silver Sneakers and shove it!!!
So now our lawyer is responding. Our lawyer is very happy because he knows the judge will not be happy that once again the City disregards everything he has told them to do.