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September 22, 2009

DiNapoli: Excess Premiums Should Be Used For Fiscal Relief

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The Department of Civil Service has accumulated as much as $600 million in health care premiums that could be used to provide fiscal relief to New York State and local government taxpayers, according to an audit released today by State Comptroller Thomas P. DiNapoli. The audit recommends the money be returned to employers as soon as possible through reduced premiums.

“The state is facing huge deficits and local governments are struggling to make ends meet,” DiNapoli said. “Now is not the time to lock these funds away; taxpayers are making up the difference. Reducing the premiums employers have to pay would provide immediate relief for local taxpayers. The time to act is now.”

The Empire Plan is the primary health insurance program in the New York State Health Insurance Program (NYSHIP), covering nearly 1.1 million state and local government employees, retirees and their dependents. In addition to the state, 98 public authorities and more than 800 local governments participate in the Empire Plan. Employers and employees that participate pay monthly premiums based on the plan’s estimated costs for the year.

The audit, initiated in part at the request of Nassau County Comptroller Howard Weitzman, found that the Health Insurance Fund balance has been rising consistently since December 2004 when it totaled $142 million. As of December 31, 2009, the fund will total an estimated $711 million, a fivefold increase. From 2004 to 2008, the cost of the plan grew just 33 percent, from $3.87 billion to $5.13 billion.

Civil Service officials said they were planning on using $275 million of the balance to reduce monthly premiums through 2010. The department was reluctant to reduce the balance further, in case additional funds were needed to prevent future rate spikes. Auditors agreed with the need for strong reserves to maintain rate stability, but indicated that at least $479 million is available for rate reductions while maintaining sufficient reserves.

“I commend Comptroller DiNapoli and his staff for this important audit of state health insurance over charges. Potential savings for local governments, including school districts, on Long Island could easily reach more than $100 million,” Weitzman said. “That is why County Executive Tom Suozzi and I will continue to work with NYSHIP to ensure that excess premiums are returned to taxpayers by keeping rate increases at historic lows.”

"The unprecedented financial crisis facing our nation has greatly changed the financial playing field for the State and its municipalities,” said Stephen J. Acquario, executive director of the New York State Association of Counties. “Comptroller DiNapoli's audit has identified hundreds of millions of dollars that can provide relief to our overburdened property taxpayers. This could not have come at a better time."

Because of statutory restrictions on the use of premium overpayments, the funds cannot be refunded, but the money can be used to reduce future monthly premiums and reduce taxpayer burden.

Click here for a copy of the full audit. A spreadsheet of the potential savings for governmental entities participating in the Empire Plan can be found here.




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