City retirees win in court again, as Adams vows to press on

The retired New York City civil servants fighting to keep their traditional Medicare won their biggest court battle yet thanks to a ruling by the state’s highest court on Tuesday. In its unanimous decision, the state Court of Appeals ruled that the “City must pay – up to the statutory cap – for each health insurance plan that it offers employees and retirees.” The court ruling blocks the city’s plan to stop paying for retirees’ traditional Medicare coverage in order to force them onto a Medicare Advantage plan managed by private insurer Aetna.

The decision represents a major blow to both Mayor Eric Adams and leaders of municipal unions, who have backed the switch to Aetna’s Medicare Advantage plans despite vocal opposition from retired city workers.

During former Mayor Bill de Blasio’s administration, the Municipal Labor Committee – dominated by the city’s largest public unions, including the United Federation of Teachers, DC 37 and Teamsters 237 – signed off on a plan to migrate the city’s 250,000 retired civil servants onto a Medicare Advantage Plan. Its boosters said the switch would save the city $600 million a year – though retirees dispute that number – and the windfall would be used to fund raises for active workers. In effect, this pitted the interests of the active workforce against retirees.

In response, a group of retirees sued the city to try to stop the plan. They have since won a number of legal victories. 

“The City’s plan to defund retiree healthcare has now been analyzed by 13 different judges across all three levels of the state judiciary.  Every single judge – all 13 of them – have concluded that the City’s plan is unlawful,” said Marianne Pizzitola, a retired FDNY EMT and the president of the NYC Organization of Public Service Retirees. “We once again call on the City and the Municipal Labor Committee to end their ruthless and unlawful campaign to deprive retired municipal workers of the healthcare benefits they earned.”

Not giving up

Despite this latest legal setback, the Adams administration has no plans to give up on its strategy to force retired city workers off of Medicare and onto privately-managed Medicare Advantage plans. In a statement, City Hall Deputy Press Secretary Liz Garcia pointed to related litigation that is still pending.

“While we are disappointed in the court’s decision today, we will continue to pursue the Medicare Advantage plan – which would improve upon retirees’ current health plan and save hundreds of millions of dollars annually – and await the court’s next decision in the coming year,” Garcia said.

There are actually two remaining cases, one concerning millions of dollars in copays paid by city retirees that they are looking to recover and a second challenging the Adams administration’s attempt to narrow retirees’ options for health care, which would leave them with no choice but to switch to the new Medicare Advantage plans.

Adams wasn’t always a supporter of Medicare Advantage. As a candidate for mayor in 2021, Adams said that he was “really troubled” by the de Blasio administration’s plan to switch retirees onto Medicare Advantage.

“When you start talking about cuts in health care, they’re my cuts,” Adams said at a campaign event in the Bronx, according to the Daily News. “I know what people are going through, and so we’re going to take a close examination of this because it’s going to traumatize our retirees. Some of the stories I’m hearing about increases in payments, you’re on a fixed income – this is devastating.”

Once he became mayor, though, Adams changed his tune. In February 2022, he announced his support for the switch to Medicare Advantage, which he said was “the product of many months of negotiations between the city and the Municipal Labor Committee” and would provide “new and enhanced benefits” to retirees.

Union support and opposition

The strategy to shift retirees to Aetna’s Medicare Advantage plans was strongly supported by the leaders of municipal unions who make up the Municipal Labor Committee. The committee’s controversial embrace of Medicare Advantage was the outgrowth of deals it had cut with the de Blasio administration to find billions of dollars in healthcare costs savings, which came as the unions settled well over 100 labor contracts with the city that former Mayor Michael Bloomberg had left unsettled for years.

But in a dramatic reversal in June, United Federation of Teachers president Michael Mulgrew notified the Municipal Labor Committee that the union was withdrawing its support of the controversial Medicare Advantage plan.

Mulgrew’s reversal came after members of his United Caucus, which had supported the Medicare Advantage strategy, were soundly defeated in a leadership election for the UFT’s Retired Teachers Chapter. They were defeated by the Retiree Advocate slate, which was expressly created to shut down the mandatory shift to the for-profit Medicare Advantage plan.

“He’s kind of listening to his members – he turned around on this after a big loss with the retirees last week,” Harry Nespoli, the chair of the Municipal Labor Committee, told City & State at the time.

With 120,000 members, the UFT makes up close to a third of the city’s workforce. Without its backing, it’s hard to see how the Adams administration and the Municipal Labor Committee could actually implement the switch to Aetna’s Medicare Advantage plans.

As the controversy has grown, other public sector union leaders have come out publicly against giving up Medicare for Medicare Advantage. They include Mike Carrube, president of the Subway-Surface Supervisors, and Philip Valenti, president of TWU Local 106. 

Medicare Advantage’s disadvantages

Historically, retired city workers have received Medicare – the popular government health insurance program widely accepted by health care providers – and supplemental plans to cover additional services that Medicare doesn’t cover, with the city picking up the cost. The switch to Medicare Advantage would replace both plans with a single Medicare Advantage plan managed by Aetna – effectively a private health insurance plan, subject to prior authorizations, limited hospital networks and other denials of care.

The debate over Medicare Advantage has become one of national significance. A majority of the Medicare-eligible age cohort are now signed up with some version of the controversial program.

The New York Times and Kaiser Health News have published extensive investigative pieces which raised alarming questions about the nation’s largest Medicare Advantage insurers including Aetna. The news outlets confirmed that the insurers were on the radar of regulators who had documented a sector wide practice of so-called “upcoding” when insurers would say patients were sicker than they were to secure a higher reimbursement from the government while using prior authorizations as well as outright denials of care to reduce their costs.

The increased scrutiny on Medicare Advantage plans has hurt Aetna and its parent company CVS Health, which the city has contracted with to run the new health plans for retirees. The company’s stock price has fallen in recent months as it has drawn criticism from both President-elect Donald Trump and Democratic U.S. Sen. Elizabeth Warren, leading financial analysis firm Morningstar to conclude that “the drug seller may not have anyone in its corner.”

Legal fights

To block the planned Medicare Advantage switch, retired city workers have successfully argued in the courts that the city is bound by promissory estoppel, a legal doctrine that they argue requires the city to continue to make good on benefits that were promised to the retirees when they were working for the city and that the workers relied on to plan the trajectory of their career.

At the same time, NYC Organization of Public Service Retirees – which has supported its court battle with contributions from thousands of retirees, their families and friends – has worked with legislators on the municipal, state and federal levels to try to protect retirees from what the group insists is a diminishment of benefits at a time when they are apt to need them the most.

In the past, the New York City Council had provided such a backstop. But under Speaker Adrienne Adams, the City Council has largely refused to get involved, insisting that the issue of retiree health care must be resolved through ongoing collective bargaining between New York City and the Municipal Labor Committee.

The NYC Organization of Public Service Retirees rejects that argument, arguing that the Municipal Labor Committee and the municipal unions cannot legally bargain on behalf of retirees, just active union members. The group points to a 1971 decision by the U.S. Supreme Court, captioned Chemical Workers vs. Pittsburgh Glass, which found that retiree benefits were not a mandatory subject of collective bargaining since the union did not represent the interests of retired workers.

“Upon retirement, employees are completely removed from the payroll and seniority lists, and thereafter they perform no services for the employer, are paid no wages, are under no restrictions as to other employment or activities, and have no rights or expectations of reemployment,” the majority of the Supreme Court ruled in that case.

Political maneuvering

In 2023, then-Council Member Charles Barron introduced legislation on behalf of the NYC Organization of Public Service Retirees that would preserve and protect their access to Medicare, but the bill went nowhere. Barron later lost reelection, as super PACs affiliated with labor unions spent heavily to boost his primary opponent.

This year, Council Member Christopher Marte introduced a similar bill, which has so far only attracted the support of Council Members Robert Holden, Vickie Paladino, Kristy Marmorato, Inna Vernikov, Kalman Yeger and Linda Lee.

“The Court of Appeals has made it clear: the City cannot break its promises to those who built this city and safeguarded its future. Retirees deserve access to the healthcare they were guaranteed – care that is vital to their well-being and dignity,” Marte said about the latest court decision. “This decision is a resounding rejection of efforts to defund retiree healthcare, and it underscores the need for us, as elected officials, to prioritize people over profits.”

Last year, New York City Comptroller Brad Lander refused to register the city’s Medicare Advantage with Aetna, citing the pending litigation that “calls into question the legality of this procurement and constrains us from fulfilling our Charter mandated responsibility to confirm that procurement rules were followed.” The Adams administration overrode Lander’s decision and registered the contract.

Lander celebrated this week’s Court of Appeals decision in favor of the retirees.

“Today’s ruling is the final win for the 250,000 some retirees fighting to keep the health care they worked for and were promised,” he said in a statement. “New York’s highest court decided seniors will continue to have access to all providers who accept Medicare, a victory for our public sector retirees.”

Lander, now a candidate for mayor running against Adams, went on to criticize the Medicare Advantage program.

“The City’s Medicare Advantage plan would have constrained our retirees to a smaller network with more restrictive requirements on care. Many public servants entered the municipal workforce with the promise of middle-class wages, pensions, and a retirement plan. The shift to anything less than that full promise was a hard pill to swallow,” he said.