A rival health insurance provider is claiming in a lawsuit that a plan adopted by the administration of outgoing New York City Mayor Bill de Blasio to cover up to 275,000 retired city workers is flawed and will wind up costing taxpayers “tens or even hundreds of millions of dollars” in lost revenue.
The suit, filed by Aetna, New York’s largest Medicare provider, alleges that the de Blasio administration rigged the bidding process to favor health insurer 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,” the New York Post reported Sunday.
In addition, a group of retired city workers has filed a separate suit that aims to block implementation of the new 11-year, $34 billion Medicare supplemental plan known as Alliance Medicare Advantage, claiming they are going to be forced to accept a plan that comes with higher costs and fewer benefits.
City officials, meanwhile, are defending the choice of Alliance, saying the group came in with the better plan; Aetna was second in the bidding process and said that company officials discovered the issue regarding profit-sharing after looking over terms of Alliance’s contract proposal with the city after the insurer filed suit.
According to the Post: “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.”
In a protest letter to city Office of Labor Relations Director Renee Campion, Aetna attorney Claude Millman said, “A close reading of the proposed contract reveals that the public is being taken for a ride.”
According to the contract, Alliance will not have to share any profits in any year the city isn’t required to pay a premium, meaning at most, the city would receive roughly $23 million from the contract because the consortium has said it will only charge the city premiums for the first year, Aetna calculates.
However, The Post adds, it’s more like that New York City and taxpayers will get little-to-nothing in savings the first year “because profits don’t typically materialize until later,” Aetna’s protest notes.
Millman went on to say that it is very clear now, if it was not beforehand, that his company actually submitted a better 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,” The Post reports.
Aetna says the city probably would have accumulated “hundreds of millions of dollars in possible gain share payments from Aetna” over the course of the contract.
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