Introduction to the Crisis
This story was published in partnership with New York Focus, an independent, investigative news site covering New York state and city politics. Sign up for their newsletter here.
A key fund that pays for New York City employees’ health benefits has run dry, opening up a $600 million hole in the city budget and threatening potential cuts to public workers’ health benefits.
For years, a cash pot known as the Health Insurance Stabilization Fund has been used to pay some health insurance premiums for city workers and offer supplemental health benefits like coverage for prescription drugs, dental, and vision plans.
But that fund’s balance has been declining for years and hit zero in October 2024, according to the Feb. 25, 2025, meeting minutes of the executive board of a major city workers’ union, DC37, which were obtained by New York Focus.
The Current Situation
So far, that hasn’t threatened the roughly 960,000 city workers, under-65 retirees, and their dependents who rely on the health care and benefits. That’s because the city has been picking up the tab, according to Dina Kolker, a private attorney and spokesperson for a coalition of city unions known as the Municipal Labor Committee (MLC).
“The city is responsible for paying for employee medical coverage and continues to do so. There has been no interruption of care nor is any expected,” Kolker said.
That responsibility could soon change. The city government and the MLC are currently in negotiations to find ways to salvage the stabilization fund and cut overall health care expenses. This could result in cuts to city workers’ benefits or increased health care costs for employees, potentially including the city imposing $1,500 premium charges on health plans that have historically been provided to workers premium-free. Any changes to city workers’ health care would be subject to collective bargaining between the city and MLC.
“I already don’t get paid enough, and now you want to charge me extra?” said Tali Zabari, a teaching assistant at a Manhattan pre-K. “I only make around $1,300 biweekly and I have expenses to pay.”
Zabari told New York Focus that the news is making her reconsider her plans to move out of her parents’ house in southern Brooklyn.
DC 37 leader Henry Garrido announces with Mayor Eric Adams at City Hall a tentative five-plus year contract agreement, Feb. 17, 2023. Credit: Ed Reed/Mayoral Photography Office
Background of the Issue
The funding shortfall has its roots in a story that New York Focus broke in 2021, when we reported that the city was seeking to save billions by switching its retired workers’ health insurance to private Medicare Advantage plans, which has a smaller network and more barriers to care than traditional Medicare. Since lawsuits from retired city workers have stalled that plan, the city has sought alternative means for achieving the savings.
The current negotiations are being moderated by arbitrator Martin Scheinman, who has overseen previous disputes between the city and the MLC.
“The City simply wants a solution to the shortfall and is suggesting various alternate ways to accomplish this,” Scheinman told New York Focus. “Understandably, the MLC is against additional financial costs being shouldered by the people they represent.”
“It’s my job to find the right answer.”
Will City Workers Pay?
City Comptroller Brad Lander’s office estimates that covering the Stabilization Fund will cost the city $612 million during its current fiscal year, which ends in June.
That cost will likely repeat in future years. To fill this gap, the city is considering a variety of ways to cut costs on employee health care, according to the DC37 meeting minutes.
One option includes a $1,500 annual payment from all city employees who choose insurance plans other than the most basic and limited plan. The city currently covers the premium payments for these insurance plans, though workers still have to pay part of the cost for the care they receive. Defenders of this perk argue that it helps compensate for salaries that are lower than what many employees could get in the private sector.
City budget expert Ana Champeny of the fiscally conservative Citizens Budget Commission said this is potentially a good idea. “It is a very rare benefit to not have any contribution to your premium,” she said. “State employees contribute, most private sector employees contribute, and that should be on the table.”
Medicare Mayhem
The battle over the stabilization fund is only one part of the city’s disputes with unions over health care costs, according to the DC37 documents.
Another major sticking point is the city government’s insistence that the MLC owes it billions due to two deals struck in 2014 and 2018 to cut down on health care costs.
In those deals, the city and the MLC agreed to cut health care costs by $4.5 billion. In 2021, city labor commissioner Renee Campion reported that this goal had been achieved.
The attempt to move retired city workers to Medicare Advantage was a result of the 2018 deal. That switch was supposed to save $600 million per year, which was set to go to the stabilization fund to bolster its shrinking balance.
But due to their successful lawsuits, retirees have maintained their coverage under traditional Medicare, and the city has been unable to use those savings to salvage the fund.
Now, according to the minutes from DC37’s February meeting, the city contends that the MLC still owes it $3.4 billion in savings as a result of these two deals.
Conclusion
The city’s attempt to cut health care costs for its employees has led to a complex and contentious situation. With the Health Insurance Stabilization Fund depleted, the city is exploring options to reduce expenses, including potential cuts to benefits or increased costs for employees. The negotiations between the city and the MLC will determine the outcome, and it remains to be seen how the situation will be resolved.
FAQs
Q: What is the Health Insurance Stabilization Fund?
A: The Health Insurance Stabilization Fund is a cash pot used to pay some health insurance premiums for city workers and offer supplemental health benefits.
Q: Why is the fund running out of money?
A: The fund’s balance has been declining for years due to various factors, including the city’s attempt to switch retired workers to Medicare Advantage plans.
Q: What are the potential consequences for city workers?
A: City workers may face cuts to their benefits or increased health care costs, including a potential $1,500 annual payment for insurance plans.
Q: What is the current status of the negotiations between the city and the MLC?
A: The negotiations are ongoing, with the city seeking to find ways to salvage the stabilization fund and cut overall health care expenses.
Q: How much does the city estimate it will cost to cover the Stabilization Fund in the current fiscal year?
A: The city estimates it will cost $612 million to cover the Stabilization Fund in the current fiscal year.
