De Blasio administrator’s $ 34 billion health insurance contract doesn’t match

Blasio’s administration missed a glaring mathematical error when choosing a new health insurance provider for 275,000 retired municipal workers, which could cost taxpayers “tens or even hundreds of millions of dollars “loss of income, according to an explosive complaint filed by competitor Aetna. , the state’s largest health insurance provider.

Aetna sued the city alleging that the selection process was set in favor of Alliance, a consortium that includes Emblem Health and Anthem / Blue Cross Blue Shield and has close ties to union leaders, to manage the new Medicare program. Advantage Plus.

A group of retirees have filed a separate lawsuit to block implementation of the new 11-year, $ 34 billion Medicare supplemental plan – called Alliance Medicare Advantage – claiming they are being forced into a new, more expensive plan for fewer benefits.

City officials have repeatedly defended the choice of the winning bidder Alliance, saying it offered the best plan.

Aetna came in second in the bidding process and said she discovered the issue of profit sharing when reviewing the terms of the Alliance’s proposed contract with the city after her complaint was filed. .

The Alliance’s contract included a “win-share” clause in its contract that ensures it will keep the overwhelming majority of the profits it originally promised to share with the city – a “sleight of hand” which went unnoticed by the city and union leaders. negotiating health care changes, or was subsequently slipped as “a bait and a switch,” according to a November 9 protest letter filed by Aentna with the city’s labor relations office, a copy of which has was obtained by The Post.

“A careful 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 the director of the city’s labor relations office, Renee. Campion.

Insurance company Aetna sued the city, claiming the selection process favored the winning bidder Alliance.
AP Photo / Jessica Hill

The contract stipulates that the Alliance will not have to share any profit each year when the city is not required to pay a bounty.

This means that, at most, the city could receive around $ 23 million from the Alliance contract, as the Alliance agreed to only charge the city bounties for the first year, according to Aetna’s calculations.

But the city – and taxpayers – are actually more likely to receive little or no savings in the first year, as the benefits usually don’t materialize until later, according to Aetna’s protest.

Millman said it was clear now – if not before – that Aetna had submitted the upper offer.

According to Aetna’s proposal, no bonus would have been charged for a six-year contract, but unlike the Alliance, Aetna’s proposal “does not cap its earnings-sharing proposal at any dollar amount,” the company said. protest letter.

According to Aetna, the city would likely have raked in “hundreds of millions of dollars in possible Aetna winning share payments” over the course of the contract.

“A representative sample of Aetna’s major clients includes four public employers, one private employer and one large union; within this sample, in the past year alone, Aetna made over $ 320 million in earnings share payments to these clients, with one private employer receiving around $ 98 million and one public employer receiving around $ 81 million. dollars in earnings share payments, although these clients have member populations that are 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 was at risk of receiving hundreds of millions of dollars in possible winning share payments from Aetna.” From the Alliance, it will raise, at most, $ 23 million, ”Frommeyer said.

Aetna claimed the city would miss
Aetna claimed the city would miss “hundreds of millions of dollars in possible winning share payments” by forwarding its offer.
AP Photo / Jessica Hill, File

Steven Cohen, an attorney for retirees fighting to cancel contract and transfer of Medicare Advantage retirees, said mathematical stupidity is “just one more mistake” in a comedy of them

“It’s outrageous,” Cohen said.

A spokesperson for the city’s legal department on Sunday evening acknowledged the earnings-sharing discrepancy in the proposed contract, but insisted it was removed from the final contract.

“As the court determined, the city’s supply was adequate and we believe the Alliance will provide superior coverage to our retirees. The earnings-sharing provision referred to here was a provision of a draft contract which was subsequently revised. The profit sharing provision in the final contract is beneficial to the City, ”said Nick Paolucci, legal representative.

The wording of the draft contract was “inconsistent with the parties’ intention on profit sharing,” city officials said.

All retirees are eligible for Medicare, the federal insurance program for the elderly. But Medicare only covers about 80 percent of the costs.

Under agreements in union contracts, the city provides additional coverage called Medigap for retirees that covers the 20 percent of costs that Medicare does not cover. Subsidized coverage costs the city more than $ 500 million per year. The move to Medicare Advantage is aimed at reducing costs.

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