NYC teachers union contract-saving $13,000 in health care costs per worker

A key element in the recent agreement between the City of New York and the teachers union calls for $1.3 billion in health care savings in exchange for an 18% raise over nine years plus back pay.

Here is how the New York Times describes that part of the agreement.

It was unclear on Thursday exactly how the union would reduce its health care costs. City and labor officials declined to give details, except to pledge that the reductions would not involve raising workers’ premiums.

You bet it’s unclear because they don’t have a clue. I bet what is also unclear is how they will measure any claimed savings. A good bet though is that somehow it will include something like “while our costs would have risen by 8% a year they only rose by 6.5% so we saved money.” Kind of like we will assume a long-term rate of return of 9% in our pension fund and thus lower our funding costs.

For the record, that amount of savings equals $13,000 per union member. Even if it is over nine years (which would be ridicules) that’s a hefty amount of savings. Now if you take raising employee premium sharing off the table, which they have done, it presents an incredible challenge … 👎 I’d use the word impossible. The key is how these supposed savings are quantified and measured.

Memo to teachers: If there is any credibility to this commitment at all, get ready for much higher out-of-pocket costs. And looking at your plans, there is plenty of room for that occur. But not to worry, this is a progressive/union agreement after all. Yikes, even Obama only promised $2,500 in lower costs. 👀