Unions: Merger Of GHI/HIP To Help Members; Question 'Monopoly' Fear Raised By Mayoral Aides

By RICHARD STEIER

Union officials said last week that they believe the merger of Group Health Incorporated and the Health Insurance Plan of Greater New York will benefit their members, despite Bloomberg administration claims that the move could drive up health costs.

MICHAEL A. CARDOZO: Predicts cost will rise.

United Federation of Teachers President Randi Weingarten, who as chair of the Municipal Labor Committee leads the unions in bargaining on health benefits, said that the chief executive of both health-care providers had assured them there would be no adverse consequences for employee subscribers as a result of the merger.

'Might Improve Benefits'

She said she and her colleagues were satisfied that "the benefits [will] stay intact and maybe [be] improved" after the merger is completed.

The chief negotiator for District Council 37, Dennis Sullivan, said he believed city attorneys unsuccessfully sought a temporary restraining order against the consolidation as the first step in a campaign to force employees to pay for part of their health coverage.

"I think they're trying to leverage the city's premium costs," he said during a Nov. 16 phone interview. He noted that one reason Mayor Bloomberg had indicated he believed the scuttled deal between Transport Workers' Union Local 100 and the Metropolitan Transportation Authority was a good one was that it would have required union members to pay 1.5 percent of their earnings towards their health premiums.

DENNIS SULLIVAN: City objection a red herring.

An attorney for Local 100, Thomas Kennedy, shared the view that the consolidation could benefit public employees, saying that it figured to reduce the two companies' administrative costs and "it will give some advantages to our members because they'll be able to choose the best features of each plan."

Cornering the Market

In contrast, mayoral officials have argued that by reducing competition and creating a virtual monopoly regarding municipal-employee subscribers, the merger could lead to substantial rate increases that would cost the city dearly. Between them, GHI and HIP provide health coverage to 560,000 employees and retirees - about 93 percent of the eligible municipal universe.

RANDI WEINGARTEN: No reason to fear merger.

A day before the court hearing on the matter, Corporation Counsel Michael A. Cardozo issued a statement warning, "The merged entity could raise prices substantially, because the next competitor is still far more expensive. Employees who pay for the additional coverage could see an increase in payroll deductions for enhancements, and the city, which today pays more than $3 billion annually in basic medical premiums, would have to pay millions and millions more each year for city health-care costs - money that comes out of all New Yorkers' pockets."

No Irreparable Harm

U.S. District Court Judge Kenneth M. Karas, however, rejected the city's claim that because the merger would violate state and Federal anti-trust statutes, a temporary restraining order should be issued, stating that the city would not suffer irreparable harm if the merger occurred.

It is expected that the administration will renew its argument early next year in a subsequent court bid to have the merger nullified. Mr. Cardozo announced that in the interim, the city would issue a request for proposals for new health-care providers "who can offer comparable - but less-expensive - health-care benefits."

That move prompted Ms. Weingarten to remark, "I didn't know that Michael Cardozo now bargains with the unions. I assume that he said whatever he said to save face."

Earned Their Large Share

Union officials say that GHI and HIP have such large shares of municipal employee subscribers precisely because they offer cheaper, more-comprehensive services than their competitors. Ms. Weingarten called them "the two providers who have been most responsive to the city work force." HIP was jointly founded by the unions and the city more than 60 years ago and is known for offering good hospitalization rates, but more municipal workers are enrolled in GHI because it offers a wide network of participating physicians. Both health-care providers have several union leaders on their boards, including Ms. Weingarten and TWU Local 100 President Roger Toussaint.

Added Volume Helps

Union officials say that the merger will give the new entity the opportunity to improve in both areas, because what it will offer in the volume of subscribers could make doctors and hospitals more willing to take their members even if the reimbursement rates are significantly below what they could get for patients with private insurance.

"I think HIP and GHI have been pretty economical for the city," Mr. Sullivan said. "GHI is a strong regional carrier based in New York City which our members like, and HIP is a safety net for them."

He argued that the city's concerns about the reduction in competition were offset by the fact that HIP's rates are uniform whether they are offered to public or private entities. "If HIP were to raise the premiums to the city, it might put their commercial business in jeopardy" because of the corresponding increase for private businesses, Mr. Sullivan said.

Unwarranted Suspicion?

Ms. Weingarten questioned why the city would be pursuing an anti-trust action when the two bodies that would normally initiate such a proceeding - the Department of Justice and the State Attorney General's Office - had declined to do so.

She said she was particularly surprised by the city's court move because the last conversation the two sides had regarding HIP's future had occurred two years earlier. At that point the issue was whether HIP would convert to a for-profit entity and how the proceeds from an initial public offering (IPO) of its stock would be divided. The prospect of the joint firm becoming a for-profit is likely to be a prime topic of discussion between the city and its unions next year.

The MLC leader speculated that, with Mayor Bloomberg having made clear his desire to reduce the city's health-benefit costs, Mr. Cardozo's court action was the first step in trying to gain some leverage with either the carriers or the unions.

'Wants Piece of the Pie'

"I think this was about the city wanting something from these carriers in exchange for their support for the merger," she said. "If GHI/HIP converts [to a for-profit], who are the beneficiaries? The city is staking its claim on a lot of things right now, including that it should have no financial responsibility in the [Campaign for Fiscal Equity] case, and I'm sure the city is trying to stake its claim on the conversion."

The municipal unions are also looking to share in what has been estimated as up to a $5 billion windfall from an IPO if the new company becomes a for-profit. There was actually some internal friction a couple of years ago after a group of uniformed union presidents led by Sergeants' Benevolent Association head Edward Mullins supported a bill in Albany that would have allowed Service Employees International Union Local 1199 to share in a significant piece of the windfall if HIP became a for-profit. While Local 1199 is one of the state's largest unions and a political powerhouse in Albany, it represents only about 2,000 city workers, and there were concerns expressed by Ms. Weingarten and others that it might wind up with a disproportionate share of the IPO money.

No date has been set for formal negotiations between the city and the MLC on health benefits, although Ms. Weingarten and Labor Relations Commissioner James F. Hanley said the subject often comes up in conversation.

The UFT is awaiting a membership ratification vote on a wage contract reached two weeks ago with the Bloomberg administration, and that process, combined with the approach of the holiday season, could delay those talks until the beginning of next year.