City Workers Have a New Health Plan. Mayor Mamdani: Good Luck With That.
An historic changing of the guard took place at City Hall on January 1st – and no, in this case I’m not talking about Zohran Mamdani’s inauguration as mayor. With considerably less hoopla, City government also terminated the health insurance plan that has covered most municipal employees and their dependents for the past 70 years – some 750,000 beneficiaries (which also include non-Medicare-eligible retirees).
Out with the old: the comprehensive benefit plan provided by EmblemHealth (for doctors’ visits) and Anthem Blue Cross (for hospital care). In with the new: the NYC Employee Preferred Provider Organization, or NYCE PPO, administered by United Medical Resources (UMR), an arm of the UnitedHealthcare insurance empire, under a five-year, $60 billion contract, approved in the final months of the outgoing Adams administration.
(Although two lawsuits have challenged the new contract, one, brought by Anthem, was dismissed last week; the other, brought by some plaintiffs covered by the old plan, is still unresolved.)
What will change under the new arrangement? Initially, not much. But down the road, it’s likely quite a lot – and exactly how, is something the new administration will have to face.
On the surface, NYCE PPO looks like the old benefit plan with new branding.
Rather than separate insurers operating parallel systems, NYCE PPO consolidates coverage in a single, integrated structure. Participants will have one health insurance card and a unified claims system, which should improve efficiency and transparency. The existing EmblemHealth physician network will be preserved and modestly expanded. So will hospital coverage; employees and retirees living outside the 13 downstate New York counties will gain access to UnitedHealthcare’s national network – a meaningful improvement.
Out-of-network deductibles, out-of-pocket maximums, and copayments remain unchanged. Reimbursement for out-of-network care will increase slightly, reflecting higher physician payments by Emblem. Members will continue to enjoy premium-free coverage.
So far so good, right? Well, that’s not the whole story – not by a long shot.
At the outset, it’s important to understand that, despite the logos on the new cards going in member wallets, NYCE PPO is not insurance in the conventional sense, in which a carrier sets a premium and bears the risk if claims exceed that amount.
NYCE PPO is a self-insured plan. As its administrator, UMR will be paid approximately $1 billion over the next five years to manage benefits, assemble provider networks, process claims, and handle participant inquiries and benefits appeals. The City is the plan sponsor, responsible for benefit design and legally obligated to pay 100 percent of medical and administrative costs.
Being a self-insured public-sector plan largely exempts NYCE PPO from state and federal oversight or solvency reviews. The City’s plan must comply with the Affordable Care Act’s minimum benefit requirements. But participants will lose important consumer protections, reporting requirements, and accountability mechanisms that accompany regulated insurance. The City could voluntarily incorporate many of these safeguards into NYCE PPO. To date, it has chosen not to.
So: Why these changes? The answers lie in City government’s long struggle to contain employee health insurance costs. Those efforts have been facilitated by municipal unions agreeing to cost-containment initiatives in exchange for higher wages.
For the most part, benefits have been preserved, and the City has absorbed remaining costs. But those costs just keep growing. In 2000, health benefits accounted for 4.5 percent of City spending. In the current fiscal year, with a larger workforce and sharply rising hospital prices, the City has allocated 12.5 percent of its budget to employee health benefits.
Touting the NYCE PPO deal, an August 2025 press release from then-Mayor Eric Adams projected taxpayer savings of up to $1 billion a year. To be sure, its administrative integration features will generate savings – but they’re expected to come to only about $50 million annually.
Where might really big savings come from? The extensive redactions in the portions of the contract made public don’t provide many answers. There are no commitments (other than no premiums charged for the contract’s duration) regarding benefits or savings for 2027 through 2030.
But if the hoped-for savings fail to materialize, the City may have to resort to restricting provider choice and/or increasing participants’ out-of-pocket costs. Both would be deeply unpopular.
There are, in fact, dozens of “what-if” provisions in the NYCE PRO agreement that would permit such significant plan design changes. Section 6.2(c), for example, states:
Plan Sponsor may modify its Plan Design at any time during the Term. Such modifications may include, but are not limited to: (i) modifications to copays, deductibles, covered services, benefit reimbursement levels … or (iv) any change designed to create varying cost-sharing and/or reimbursement levels for preferred and non-preferred providers/facilities.
Alternatively, the City would have to keep paying uncovered employee health care costs, which would reduce its capacity to meet other priorities or fill gaps left by diminishing federal support for safety net health and social programs. That might not sit well with the new mayor.
Further uncertainty about the plan’s future stems from the role – and fate – of EmblemHealth. Emblem has deep roots in City health care; locally controlled and historically labor-friendly, it was created in 2006 by a merger of two physician groups: HIP, organized as an HMO, and GHI, the city’s first physician network.
Emblem’s inclusion was critical to securing support for the NYCE PPO deal from municipal unions. But its role in the new plan is highly limited. Under the agreement, UnitedHealthcare will control nearly all administrative functions, down to designing the phone system Emblem will use to answer calls from City participants.
The contract also establishes a two-year period during which any change to Emblem’s corporate structure is subject to City veto. It’s silent on subsequent “change of control” provisions – defined as consolidation, merger, sale, or transfer – implying the potential for eventual acquisition of EmblemHealth by UnitedHealthcare, a company with a well-documented record of predatory practices.
The Mamdani administration will have only a brief two-year window to prevent such corporate capture. It could protest. More boldly and effectively, it could decide to make Emblem the first municipally owned insurance company. In the process, “EmblemHealthNYC” could become a public option model of health care quality, equity, and administration for all other local purchasers.
Whatever path it chooses – swallowing uncovered costs, planning an Emblem takeover, imposing moderate benefit cuts or cost shifts, or allowing UnitedHealthcare to tighten utilization management and benefit denials – the administration must also first upgrade its internal capacity. That requires establishing a Mayor’s Office of Employee Health Benefits staffed with experts in health insurance management.
Today, the City’s Office of Labor Relations – whose primary mission is negotiating collective bargaining agreements – also oversees a massive health benefits program with a tiny staff largely composed of customer service agents. This is an untenable status quo. The new administration should seize the opportunity to create a new office drawn from the deep pool of experienced professionals displaced by the Trump administration to provide the oversight capacity the City lacks.
Barbara Caress has worked for many years in non-profit, union, and public agency health care policy and administration. She teaches public health policy at Baruch College.
Photo by: Stephane Tardif