16 October 2008
County Executive Suozzi & Comptroller Weitzman:
‘Let's reduce health insurance premiums.’
Approximately $540 million in total excess payments and $375 in premium reductions identified; County seeks to recoup $21 million and get $15 million premium reduction from State Health Insurance Program
County Executive Thomas R. Suozzi and County Comptroller Howard S. Weitzman released a report today announcing that the State, County and other governments who participate in the State’s health insurance plan have been charged in excess of $540 million on their premiums and they are asking for it to be refunded. Premiums for 2009 can also be reduced by $375 million, a recurring savings for State and local governments.
County officials are seeking a refund of $540 million for excess charges from insurers under the New York State Health Insurance Program (NYSHIP) to local governments statewide, including Nassau County, that participate in the employee health benefits program. According to Weitzman, Nassau is looking to recoup approximately $21 million paid out in excess premium payments to NYSHIP. Nassau officials are also asking that premium rates be permanently reduced to end the practice of insurance companies accumulating the excess charges. In 2009, officials calculate Nassau’s premium would be $15 million lower.
“The extraordinary collapse of the world economy has greatly changed the financial playing field for all municipalities and our residents,” said the County Executive. “Allowing insurance companies to keep our excess payments does not benefit State and County taxpayers during this time of need for immediate budget relief.”
According to both the County Executive and Comptroller, the premiums paid to NYSHIP for benefits provided by insurance companies have far exceeded what is needed to cover the cost of the program. Up until now, NYSHIP has labeled those excess premiums as “dividends” and paid back the overcharges over the following years by reducing the premium. By the close of 2008, the report estimates the insurance companies that NYSHIP contracts with will have accumulated approximately $540 million in overcharges, which they would normally pay back over time in 2009 and 2010. By inflating the premiums, the insurers build ever larger overcharges into their rates every year.
In addition, if the level of cushion on NYSHIP premiums is permanently reduced from the current 9% to 3%, the statewide savings would be another $375 million and Nassau County would save an additional $15 million in premium payments in 2009.
Nassau County has budgeted $236.6 million to pay for health benefits in 2009, 9% of the County budget.
The analysis of NYSHIP's excess charges is based on a report by the County’s healthcare consultants, George Kalkines and Jeffrey Thrope of Manatt, Phelps & Phillips, LLP, assisted by Charles Pendola of Hidden Assets, LLC.
The report recommends that the money be repaid immediately to the State, public agencies, Nassau County, school districts and governments that participate in the program. The State’s share would be over half of the excess premium or $297 million; Nassau’s would be approximately $21 million. (See Chart Proposed NYSHIP Distribution).
“These overpayments were never justified or affordable, but this practice is especially onerous in these difficult economic times,” said Weitzman. “We want our money back now, and we want the rates adjusted so that the overcharges are no longer accumulated.”
The report explains that the amount of excess charges built into the premiums has grown exponentially since 2002. In 2002, the charges were 1.57% more than premiums charged. By 2007, the charges were 8.61% more than premiums. (See Chart “NYSHIP Excess Premium”). In that time, NYSHIP charges for family health coverage increased by 86%. (See Chart “NYSHIP Annual Premium Family Coverage).
“The allegations are particularly troubling given that they come at a time when the confidence of taxpayers has been rocked by widespread corporate greed,” said Town of North Hempstead Supervisor Jon Kaiman. “I support the Comptroller in calling for rate adjustments and putting a stop to the practice of overcharging.”
Art Gianelli, President and CEO of the Nassau Health Care Corporation stated, "Once again, County Executive Suozzi and Comptroller Weitzman asked the right questions and, as a result, have identified hundreds of millions of dollars to provide relief to our overburdened taxpayers. In these difficult times, we call upon NYSHIP to return these overpayments."
NYSHIP was established under the New York State Civil Service law as the mechanism through which the State provides health benefits to its employees and retires. Many local government entities, including counties, cities, towns, public authorities, school districts and others provide health benefits to their employees and retirees through NYSHIP as “participating agencies.”
County officials believe the excess premiums can be eliminated without reducing benefits or increasing costs to the employees, retirees and dependents who receive healthcare benefits through NYSHIP.
Comptroller Weitzman repeated his call for an independent review of NYSHIP to provide clear accounting for premiums, reserves and earnings on funds held by the program and to review their operations. County officials are also asking that NYSHIP operate with more transparency, allowing state and participating agencies to access data and that the program develop new projects targeted at improving employee health.
The County Executive and Comptroller have discussed the report’s findings with State officials, who are reviewing the report.
Click here for the full PDF report 
