Audit of the Financial and Operating Practices of the Joint Health Insurance Stabilization Fund

The audit was conducted to assess the financial condition of the Health Insurance Stabilization Fund (HISF) and to determine whether the Fund was used for its intended purposes. The audit also determined whether expenditures were reasonable, appropriate, adequately supported, and properly authorized.

The audit found that HISF is insolvent , and the Office of Labor Relations (OLR) and the Municipal Labor Committee (MLC) did not take adequate steps to improve the Fund’s position. OLR and MLC authorized significant transfers or payments from HISF that were not consistent with the Fund’s declared purpose(s). In addition, HISF has accrued significant liabilities totaling $3.1 billion through Fiscal Year 2023 for equalization payments owed to the City, and amounts owed to vendors as of April 2025, which it is unable to pay. Moreover, these liabilities have not been reported on the Fund’s Annual Certifications.

The audit also found that HISF lacks transparency and has inadequate governance and decision-making capacity. HISF does not have governing documents that set forth the Technical Committee’s purpose or authority, membership appointments, committee meeting frequency, attendees, or a process for disseminating information to OLR and MLC for decision making.

The Health Insurance Stabilization Reserve Fund (HISF or Fund) was created in 1985 to help support the cost of health insurance coverage for City employees, retirees, and their dependents and is jointly administered by OLR, representing the City, and the MLC, representing municipal labor organizations.

OLR was created through Mayoral Executive Orders and is authorized to represent the Mayor in all labor relations matters, including negotiating and signing contracts with unions authorized to represent City employees. In addition, OLR administers health benefit programs for City employees and retirees.

Under Section 12-126(b)(1) the New York City Administrative Code, the City must pay for the entire cost of health insurance coverage for City employees, retirees, and their dependents, and specifically, must pay the rate for the Health Insurance Plan of Greater New York Health Maintenance Organization (HIP-HMO) plan. In 1982, the City began providing a second no-cost health insurance plan option to City employees, the Group Health Incorporated Comprehensive Benefit Plan (GHI-CBP). At that time, the GHI-CBP plan cost more than the HIP-HMO plan.

Since HISF was created, OLR and MLC have entered into multiple agreements through collective bargaining in which the MLC agreed to generate savings to address escalating healthcare costs. Most recently, OLR and the MLC entered into Healthcare Savings Agreements in 2014 and 2018 with the goal of saving $3.4 billion for FYs 2015 through 2018, and $1.1 billion for FYs 2019 through 2021, respectively, and recurring savings thereafter.

In both agreements, the MLC could meet its savings targets by reducing the City’s obligation to make payments to the Fund, even if that did not actually reduce the City’s healthcare expenditures, and in this way, opened the way for significant deviation from the original equalization payment calculations.

In the 2018 Healthcare Savings Agreement, the parties recognized that the longer-term sustainability of healthcare for employees and their dependents required further study, savings, and efficiencies in healthcare delivery. To that end, OLR and the MLC established the Tripartite Health Insurance Policy Committee (THIPC) to study the financial status of the HISF and potential savings and efficiencies (such as self-insurance or minimum premium agreements for the HIP-HMO plan, the adoption of a Medicare Advantage plan for retirees, and consolidated prescription drug purchasing, among other things). Under the agreement, THIPC was to make recommendations to OLR and the MLC by June 2020.

Based on HISF Annual Certifications submitted by OLR to the Comptroller’s Office, HISF’s combined fiscal year-end account closing cash balances decreased from nearly $1.6 billion in FY2019 to $843 million in FY2024, as shown below in the Total Cash Balance column in Table

III. This represents a decrease of $744.7 million (46.9%).

This amount, however, is further reduced to $3.09 million as of FY2024 once required reserves are considered. The Fund must hold sufficient funds in reserve to cover the annual cost of claims incurred but not yet paid; once these are accounted for, the net cash balance is significantly lower, as shown below. Required reserves increased year over year, from a base of $490.9 million in FY2019 to $839.9 million in FY2024. For FY2024, OLR reported that HISF had a fiscal year-end closing cash balance of approximately $843 million. For that year, HISF was required to maintain reserves of $839.9 million, leaving an available cash balance of $3.1 million.

Table III: HISF Fiscal Year-End Closing Cash Balances and Required Reserves for FY2019 through FY2024

The objectives of this audit were to assess the financial condition of the HISF and to determine whether HISF funds were used for their intended purposes, and whether expenditures were reasonable, appropriate, adequately supported, and properly authorized.

The matters covered in this report were discussed with OLR and MLC officials during and at the conclusion of this audit. An Exit Conference Summary was sent to OLR and the MLC and discussed with OLR and MLC officials at an exit conference held on October 15, 2025. On November 13, 2025, a Draft Report was submitted to OLR and the MLC with a request for written comments. The audit team received written responses from OLR and the MLC on December 3, 2025. The full text of OLR’s and MLC’s responses are included as addenda to this report.

In their responses, OLR and MLC disagreed with the findings of this audit, arguing that HISF could be used for any mutually agreed upon purpose, and that there is nothing in law or practice that prevented them from modifying or expanding the use of the Fund through collective bargaining. Both responses asserted that efforts were made to generate savings ̶ through the effort to shift retirees to Medicare Advantage, and through the procurement of the recently–adopted NYCE plans. OLR argued that the original 1985 agreement permits HISF to be used to pay for new benefits if sufficient funds were available, that funds were used to pay for essential benefits, and that funds were not mismanaged or misused.

These responses, however, do not sufficiently reckon with the nature of the original 1985 agreement and their mutual obligations as a result of the restricted nature of the Fund. This purpose is found in the 1985 agreement between OLR and MLC which states that City contributions would be used to provide a “health insurance stabilization reserve fund which shall be used to continue equalization and protect the integrity of health insurance benefits,” and further, that the “Fund must be used to provide a sufficient reserve to maintain to the extent possible the current level of health insurance benefits, and if sufficient funds are available, to fund new benefits.” The stated purpose of the Fund was never modified, and was in fact restated in subsequent agreements entered into by the parties,

While it is true that the obligations for restricted funds held by City agencies were spelled out in greater detail in Comptroller’s Directive 27, issued in 2020, to specify compliance with GASB requirements, the HISF was nonetheless established as restricted fund with a stated purpose in 1985, and that purpose was never modified, even as uses of the Fund were agreed to in collective bargaining that were not consistent with this purpose.

Furthermore, OLR subsequently submitted false annual certifications to the Comptroller’s Office, asserting in writing that the Fund is in compliance with Directive 27 requirements, that Fund balances are accurate, and that the Fund will be used for its stated purposes. The Fund balances were not accurate, and the Fund, which was established for the purpose of maintaining a reserve, has no reserves and is unable to meet its financial obligations.

HISF remains a restricted fund; HISF was used to make payments that were therefore not permitted. OLR and MLC used $4.3 billion to make payments to union-administered welfare funds, cover the cost of employee raises, and defer layoffs, among other things which were inconsistent with HISF’s stated purpose, and authorized $3.3 billion in offsets to equalization payments which eroded fund balances.

The MLC argues that, over time, the structure of the HISF “created a perverse incentive” to reduce payments into the Fund, rather than real reductions in medical spending. The auditors do not disagree. However, OLR and MLC continued to use HISF to fund additional benefits when they knew the Fund was nearing insolvency, leaving some benefits that have not been paid for because the Fund is insolvent. These remain unpaid liabilities, which were not disclosed.

OLR and MLC were aware that the Fund was nearing insolvency since at least 2018, when they established the Tripartite Health Insurance Policy Committee (THIPC) to make recommendations by June 2020. However, they did not act in a timely manner to identify and implement sufficient savings or new alternative revenue streams. With regard to Medicare Advantage, OLR and MLC started a negotiated acquisition in 2020, but the City’s legal authority to implement the switch was cast in doubt in September 2021, leaving a large and looming risk. OLR and MLC also initiated a procurement for a new healthcare plan in June 2022—after the Fund was already insolvent. That plan goes into effect on January 1, 2026.

The auditors also note that the Fund’s unpaid financial liabilities total $3.1 billion as of April 2025, but for FY2024 and FY2025, they do not yet include equalization payments. Once included, the total Fund liabilities will likely be much higher.

OLR states that the report focuses solely on the financial health of the HISF, and does not address the broader challenges of containing rising health-care costs while maintaining high-quality health benefits for City employees. The auditors acknowledge that this report focuses on the HISF, its solvency, and whether it was used for its intended purposes.

OLR agreed with one recommendation, did not expressly agree or disagree with another recommendation, and stated the remaining recommendation will no longer be applicable. OLR’s and the MLC’s written responses have been fully considered and, where relevant, changes and comments have been added to the report.

The audit found that OLR and the MLC authorized significant transfers or payments from HISF that were not consistent with the Fund’s declared purpose(s). OLR and the MLC knew as early as 2018 that the Fund would be insolvent by FY2021 unless significant action was taken, but did not take timely or effective action to identify and implement sufficient savings or new alternative revenue streams. HISF has also continued to fund additional benefits that it could not support.

As a result, HISF is insolvent and is unable to meet its outstanding obligations. OLR and the MLC made a plan with the de Blasio Administration in 2020 and subsequently reaffirmed with the Adams Administration, to switch retirees to a Medicare Advantage plan to cover the anticipated annual shortfall, which was projected to generate savings of approximately $600 million per year. The City’s legal authority to implement the switch was cast in doubt by a lawsuit in September 2021; while that lawsuit was recently resolved in the City’s favor, Mayor Adams indicated that he did not intend to move forward with it, and the future of the plan remains in doubt.

HISF was established in 1985 to provide a budgetary reserve to support the continued existence of a second no-cost health insurance for City employees and retirees (the GHI-CBP plan) and, if sufficient funds were available, to fund new benefits. As noted above, HISF is a Designated Fund and subject to Comptroller’s Directive 27 which requires agencies to ensure that the purpose(s) of the fund are being fulfilled and that disbursements are consistent with the declared or intended purpose(s). Given its insolvency, and the funding of new benefits it could not support, these purposes have not been met.

OLR and the MLC have effectively used HISF as a collective bargaining tool, authorizing significant lump sum or recurring transfers either to the City or union-administered welfare funds to cover the cost of pay raises, deferred layoffs, and other benefits, that were inconsistent with the Fund’s stated purposes. Since 2001, these lump sum payments and recurring transfers have resulted in at least $4.3 billion being transferred from HISF to the City ($2.8 billion) and welfare funds ($1.5 billion), as detailed in Tables IV and V below.

2014 Healthcare Savings Agreement

Most notably, as part of the 2014 Healthcare Savings Agreement, OLR and the MLC agreed to transfer $1 billion from HISF to the City “to support wage increases and other economic items” agreed to in collective bargaining.” In addition, OLR and the MLC agreed to continue making annual contributions of $65 per member to union-administered welfare funds over four years and to transfer up to an additional $150 million to union-administered welfare funds over four years, from July 1, 2014 through July 1, 2017.

In exchange for raises for City employees and contributions to union-administered welfare funds, the MLC agreed to generate $3.4 billion in healthcare savings during FYs 2015 through 2018, and recurring savings each year thereafter. In lieu of actual cost reductions, the MLC was permitted under the terms of this agreement to meet this obligation by reducing the equalization payments otherwise due by the City under the original agreement.

None of these transactions were consistent with the declared purpose of HISF, i.e., to support a second no-cost health insurance plan or new benefits. At the Exit Conference, OLR and MLC officials stated that the decision to transfer $1 billion from the Fund was made in connection with the collective bargaining process for labor agreements settled in 2014. At the time this decision was made, every contract with municipal workers had expired—a majority had expired in 2010 and some had expired as far back as 2007. They also indicated that the City’s healthcare costs were skyrocketing at that time.

2009 Healthcare Savings Agreement

In 2009, OLR and the MLC agreed to transfer $112 million annually from HISF to the City in connection with cost savings generated by changes to the GHI-CBP plan, including a change to the minimum premium hospital plan and the establishment of certain emergency room co-payments. As of FY2024, these transfers totaled $1.5 billion.

In addition, in 2009, OLR and the MLC agreed to a one-time transfer of $90.3 million to the City in connection with cost savings associated with the HIP-HMO plan based on new and/or increased co-payments and the elimination of preventative dental benefits. At that time, the HIP-HMO rate exceeded the GHI-CBP rate and the City effectively applied anticipated cost savings to equalization payments that would have been transferred from the City to HISF—the amounts that would have been paid if the costs of GHI-CBP and HIP-HMO benefits were not reduced.

As part of this same agreement, OLR and the MLC agreed to make a one-time $200 per member contribution to union-administered welfare funds, for each active employee and retiree. This amounted to $117 million. They also agreed to use HISF to bear the cost of $18 million in deferred layoffs.

Table IV: HISF Lump Sum Transfers

Table V: HISF Recurring Transfers as of Fiscal Year 2024

Since HISF is insolvent, OLR and the MLC agreed to suspend recurring annual payments to the City and to union-administered welfare funds, effective FY2023. This includes payments to welfare funds for widows, domestic partners, and the children of first responders who died in the line of duty.

Between FYs 2010 and 2014, the HIP-HMO rate exceeded the GHI-CBP rate, and the equalization payments made by the City to HISF increased from $203.4 million to $573.2 million, as detailed in Table VI below. These were consistent with the stated purpose of HISF. Due to the increasing equalization payments made by the City to HISF, the Fund had accumulated a balance of $1.7 billion as of June 2014. This was subsequently eroded by offsets to equalization payments between FY2015 through FY2023 that were predicated on the MLC delivering $4.5 billion in total health care cost savings over the same period, as well as continuing annual savings in subsequent years.

Table VI Equalization Payments Made by the City to HISF (in Millions) and Fund Fiscal Year-End Balance, FY10 through FY14

2014 Healthcare Savings Agreement

In the 2014 Healthcare Savings Agreement, the MLC agreed to generate cumulative savings of $3.4 billion for FYs 2015 through 2018, and recurring savings thereafter.

Under the agreement, the MLC committed to generating savings of $400 million for FY2015, $700 million for FY2016, $1 billion for FY2017, and $1.3 billion for FY2018, and recurring annual savings of $303.5 million thereafter. OLR and the MLC agreed to consider initiatives that were intended to achieve these savings. These included switching to minimum premium health insurance plans or self-insurance; conducting a dependent eligibility verification audit (DEVA); and adjusting the equalization payment formula. OLR and the MLC agreed to select an independent healthcare actuary to calculate the savings realized at the conclusion of the agreement.

In 2018, OLR reported that total cost savings of $3.5 billion were successfully generated between FY2015 and FY2018. Of this amount, $641 million were direct savings which resulted from lower healthcare costs. For example, this included combined savings of $443 million due to ineligible dependents being removed from health insurance plans based on DEVA.

The remaining “savings” of $2.8 billion were achieved through a combination of savings claimed because actual healthcare costs were less than projected costs ($1.9 billion) and reductions in the City’s equalization payment obligations to HISF, referred to as “offsets” ($932.5 million).

In June 2017, OLR and the MLC amended the 2014 Healthcare Savings Agreement, ostensibly to help meet the $3.4 billion cost savings target. In actuality, the agreement merely shifted certain costs to HISF. OLR and the MLC agreed that HISF would be used to pay certain HIP-HMO healthcare costs, including coverage of preventative care and prescription drugs required by the federal government, and State-mandated opioid treatment effective FY2018.

In all four fiscal years, from 2015 through 2018, the HIP-HMO rate exceeded the GHI-CBP rate. This should have resulted in annual equalization payments to HISF from the City. However, the combined offsets significantly reduced the amounts the City owed to HISF for FYs 2015, 2016 and 2017, and resulted in a small payment from the Fund to the City for FY2018. The impact of the offsets and payments for certain HIP-HMO mandated coverage on equalization payments for FYs 2015 through 2018 is shown below in Table VII.

As for the recurring savings of $303.5 million that the MLC promised to generate every year after FY2018, OLR provided documentation generated by healthcare providers to show how these savings were met in 2018, but since then, have not been reviewed or verified by any healthcare actuary or other independent expert. No updates to the documentation created in 2018 have been made.

Table VII: HISF Equalization Payments for FY15 through FY18 (in Millions)

2018 Healthcare Savings Agreement

In 2018, the City announced that the 2014 Healthcare Savings Agreement was a success and further, that OLR and the MLC had entered into another agreement. In the 2018 Healthcare Savings Agreement, the MLC agreed to generate cumulative savings of $1.1 billion for FYs 2019 through 2021, and recurring savings of $100.7 million annually thereafter. As with the 2014 Healthcare Savings Agreement, the 2018 agreement provided for cost savings to be generated through “offsets” against the equalization payments that would normally be made by the City to HISF when the HIP-HMO rate exceeded the GHI-CBP rate. In other words, to meet its obligation to generate savings, the MLC would accept from the City reduced equalization payments into the Fund. In addition, the 2018 agreement provided for cost savings to be generated if actual healthcare costs were less than projected costs.

In 2021, OLR reported that total cost savings of nearly $1.2 billion were successfully generated between FY2019 and FY2021. This amount included claimed savings of $719 million because actual healthcare costs were less than projected costs, and offsets to equalization payments of $233 million.

Based on the cost differential between the two plans, which was the original basis of equalization payments, the City should have made equalization payments to the Fund for FYs 2019 and 2020, and the Fund should have made an equalization payment to the City in FY2021. However, because of the savings commitments made by the MLC in the 2014, 2017, and 2018 Agreements, and the application of offsets to meet those goals, the Fund was required to make payments to the City in all three years.

When the offsets allowed under the 2014 Agreement, which continued by virtue of the promised ongoing additional annual savings, and payments for certain mandated HIP-HMO coverage provided under the 2017 Agreement were added to the offsets provided under the 2018 Agreement, the cumulative impact on the Fund was substantial. The use of offsets to meet the savings targets resulted in a combined obligation on the part of the Fund to pay the City more than $1.1 billion. This is shown in Table VIII below.

In FYs 2022 and 2023, both the GHI-CBP family and individual rates exceeded the HIP-HMO rates, and the annual savings commitments from the 2014, 2017, and 2018 Agreements remained in place. The higher GHI-CBP rate and the combined offsets required to meet the annual savings targets mean that the Fund still owes the City close to $2 billion for FYs 2022 and 2023. The calculation for FY2022 shows an equalization payment of $918.9 million due to the City from the Fund, and an additional amount exceeding $1 billion due to the City from the Fund for FY2023.

The Fund is insolvent, however, and has been unable to make equalization payments to the City since FY2019. Cumulatively, the Fund still owes the City $2.9 billion for FYs 2020 through 2023. There will likely be additional liabilities generated for FYs 2024 and 2025, but these have not yet been calculated.

Table VIII: HISF Equalization Payments for FY19 through FY21 (in Millions)

Offsets Significantly Impacted Fund Balance

The offsets from Healthcare Savings Agreements caused equalization amounts owed to the Fund to be significantly reduced, or payments to the City to be increased, depending on the difference between the HIP-HMO and GHI-GBP rates. As detailed in Table IX below, under the initial agreement, the Fund would have received payments from the City for FYs 2015 to 2020 ranging from $525.1 million to $170 million per year. While the Fund would have made payments to the City for FYs 2021 through 2023, under the terms of the initial agreement the equalization payments would have been substantially less, between $505 and $517 million per year.

Table IX: Savings Agreement Offset Impact on Equalization Payments

Comptroller’s Directive 27 states that agencies must ensure that the purpose of funds in the account is being fulfilled.

The auditors requested HISF financial projections that were prepared by OLR or OMB for FYs 2014 through 2024. Only projections made between November 2018 and May 2022 were provided. Based on a review of the November 2018 cash projections, which were prepared five months after the 2018 Healthcare Savings agreement was signed, OLR and the MLC expected that HISF would be insolvent by FY2021 with a negative balance of $228 million. They also projected that the negative balance would grow to $1.8 billion by FY2023, as detailed in Table XII below. Despite these projections, OLR and the MLC did not take corrective action.

Table XII: HISF November 2018 Cash Balance Projections (in Millions)

The 2018 Health Savings Agreement included a provision creating THIPC to study the issues facing the Fund and to make recommendations, no later than June 30, 2020, for changing the way health care was provided or funded. The committee was tasked with discussing the financial status of HISF and potential savings and efficiencies, such as self-insurance or minimum premium agreements for the HIP-HMO plan, the adoption of a Medicare Advantage plan for retirees, consolidated prescription drug purchasing, auditing health insurance carriers including claims and utilization, and issuing RFPs for all medical and hospital benefits, among other things. In addition, the committee was tasked with investigating how health benefits are delivered in other unionized settings, including the possibility of cooperating to increase purchasing power and reduce administrative expenses.

The THIPC did not issue formal findings or recommendations by the due date or otherwise. According to OLR officials, based on committee discussions, OLR and the MLC sought to improve HISF’s financial position in two primary ways—by moving City retirees from a Medicare Supplement Plan (also known as Medigap) to a Medicare Advantage Plan and issuing a procurement for a new hospital and medical plan for active employees and pre-Medicare retirees. However, the City’s legal authority to switch retirees to a Medicare Advantage Plan was called into question in September 2021, and even if permitted, the projected savings were insufficient to address HISF’s near-term insolvency. In addition, the City did not start to procure a new health plan until 2022—after the Fund was already insolvent. These issues are discussed further below.

In 2022, the City began procurement of a new employee health plan. This was conducted in collaboration with the MLC. In June 2025, the City announced that it had selected a joint proposal from Emblem Health and United Healthcare to establish a self-funded health plan that would replace the GHI-CBP plan for active City employees, pre-Medicare retirees, and their dependents. This contract was submitted to the Comptroller for registration in October 2025.

Comptroller’s Directive 27 states that restricted accounts are used for assets held by the City that are restricted for a specific purpose, and agencies are required to track and monitor the balances in that fund independently. Restricted funds are also required to undergo an annual certification which is used to verify the account’s status, its balance, verification that it will be used for its original purpose, and additional annual reporting criteria.

GASB Statement No. 54 states that restricted fund balances are reported at the same level of detail as required for restricted net assets in accordance with GASB Statement No. 34, which states that the difference between a government’s assets and its liabilities is its net assets.

However, as detailed in Table XV below, OLR and the MLC did not report significant HISF liabilities including equalization payments and payments to vendors for benefits such as PICA, GHI Mental Health, BC Managed Care, Teladoc, and others. Instead, OLR and the MLC only reported the Fund’s balance on a cash basis which does not reflect the true balance of the Fund. As a result, OLR and the MLC have been materially underreporting the Fund’s deficits since FY2022. This underreporting of deficits totals approximately $3.1 billion as of April 2025.

Table XV: Unreported Liabilities and Fund Balance

*FY2024 and April 2025 amounts do not include equalization payment amounts for FY2024 and therefore the unreported liabilities will be higher and the fund balance will be lower.

Primarily, OLR and the MLC have failed to report equalization payments that are owed to the City as part of its fund balance. As detailed in Table XVI below, OLR calculated equalization up to FY2023; however, these equalization payments have not been paid since 2020 because the HISF is insolvent.

Table XVI: Unreported Equalization Payments

Additionally, OLR and the MLC have not yet calculated or estimated the FY2024 and FY2025 equalization payments. However, in FYs 2024 and 2025, the HIP rates were significantly lower than the GHI rates, which would result in equalization payments to the City. Using FY2024 and FY2025 health insurance rates and FY2023 headcount, adjustments, and savings, the equalization to the City would be approximately $1.2 billion and $1.3 billion, respectively.

According to OLR, equalization payment calculations are typically done on a two-year lag. For example, the FY2020 equalization would have been done in 2022. However, health insurance rates, which are a significant part of the equalization calculation, are generally available to OLR and the MLC prior to the start of the fiscal year, or are updated during the year. Therefore, OLR and the MLC should be able to reasonably estimate and report the equalization payment and Fund balance.

HISF is a Designated Fund, comprised of two Restricted Accounts, and jointly managed by OLR and the MLC. A Labor Management Health Insurance Policy Committee, or Technical Committee, which consists of City employees and MLC representatives, discusses all City-related health insurance matters, including the HISF.

According to the Federal Mediation and Conciliation Service, best practices for labor management committees include establishing guidelines that include statements on:

• the purpose and commitment of the committee
• the structure and size of the committee
• a procedure for the timing, size and exchange of agendas
• the time, place, duration and frequency of meetings
• the method for taking and maintaining minutes of the meetings
• other matters unique to their relationship(s)
• the assignment of top representatives as permanent members for each committee, with provisions for the rotation of “at-large” members.

However, OLR and the MLC did not establish any governing documents that detail:

• committee purpose or authority to act
• how committee and subcommittees members are appointed
• how often committees should meet
• documenting attendees, discussion, and decisions made at committee

The auditors requested governing documentation which establishes committees and subcommittees, their responsibilities, member voting rights, and dates they were established. OLR stated that the laws regarding collective bargaining in New York City and Executive Order 13 set forth the authority of the Commissioner of Labor relations, and collective bargaining agreements constitute the Technical Committee’s governing documents. However, Executive Order 13 only relates to OLR’s authority related to collective bargaining, not the Technical Committee, and collective bargaining agreements are prepared as a result of the Technical Committee’s meetings. Therefore, there are no governing documents related to the Technical Committee.

The auditors also requested meeting agendas, materials disbursed at meetings, records of meeting discussions including recordings, minutes, or notes, for all FY2021 to FY2024 Committees and Subcommittees. In response, HISF administrators informed the auditors that there are only meeting agendas and there are no meeting minutes. When the auditors requested meeting agendas, OLR did not provide agendas and instead stated that HISF is a small portion of matters discussed in Technical Committee meetings, which is largely reflected in monthly reports. However, these reports only state HISF’s revenue, expenses, and cash balance; they do not indicate the Fund’s balance net of liabilities or receivables.

By not establishing governing documents, setting agendas, or recording meeting minutes for the Technical Committee, OLR and the MLC significantly reduce transparency and accountability of the HISF.

Ordinarily, the audit would propose recommendations to management to address deficiencies. However, given that HISF is insolvent and cannot fulfill its stated purpose(s), the auditors propose that the City should:

1. Work with the MLC to dissolve HISF and transfer carrier reserves and remaining fund balances to the City.
   OLR Response: OLR did not expressly agree or disagree with the recommendation. OLR stated the parties must first stabilize healthcare costs and the shortages in funding through the establishment of the new healthcare plan which they maintain will provide up to $1 billion in savings. Once the plan is in place, OLR stated that the parties will discuss how to address HISF and generally the long-term framework for health benefits for City employees.OLR stated that when the GHI-CBP plan ends, HISF carrier reserves will be used to pay run-out claims under that plan.Auditor Comment: As previously stated, the HISF is insolvent. Further, it has at least $3.1 billion in liabilities and no path to solvency has been identified. Even if the new health insurance plan generates the anticipated savings, OLR and MLC have not indicated how they intend to address and improve the financial condition of the HISF.

2. Create a new Restricted Account for health insurance carrier
   OLR Response: OLR stated that this recommendation will no longer be applicable.

3. Appropriately budget for healthcare costs and benefits that the City agrees to fund in collective bargaining.
   OLR Response: OLR stated that it agrees that healthcare costs and benefits should be based on what the City has agreed to in collective bargaining and statutory requirements, and that it has consistently modified the budget to address variances caused by HISF’s insolvency.

Follow-up will be conducted periodically to determine the implementation status of each recommendation contained in this report. Agency reported status updates are included in the Audit Recommendations Tracker available here: https://comptroller.nyc.gov/services/for-the-public/audit/audit-recommendations-tracker/

The scope of this audit was Fiscal Year 2023.

To gain an understanding of OLR’s and MLC’s collective bargaining agreements and their impact on HISF, the auditors reviewed all health benefit agreements related to the administration of HISF including the 1984-87 Municipal Coalition Economic Agreement; 1986 Agreement on Health Insurance Stabilization Fund; Health Benefit Agreements for the period from 1993 through 2021; Agreement on Medicare Advantage; and related OLR letters for the period 2014 through 2023.

To understand HISF operations, auditors reviewed HISF standard operating policies and procedures including HISF Organizational Chart; Stabilization Fund Operational procedures; and Investment Guidelines of Stabilization Funds. The auditors conducted walkthroughs of HISF’s financial and operating practices, revenue, expenses, and equalization payment calculations. Additionally, the auditors conducted a walkthrough with OMB to understand their role in reporting of the HISF.

To identify administrative and reporting requirements applicable to HISF, auditors reviewed relevant rules, laws, and regulations including NYC Administrative Code §12-126; NYC Comptroller’s Directives 12A, 24, and 27; GASB Statement Nos. 34, 54, 84; and the Government Finance Officers Association’s Fund Balance Guidelines for the General Fund.

To assess the financial condition of the HISF, auditors reviewed revenue and expenses using HISF Cash Basis Cumulative Statements, Annual Fund Balance Certifications, and data from the New York City Financial Management System (FMS) for FYs 2002 through 2024 and prepared a Trend Analysis.

To gain additional understanding of equalization payments, revenue, and expenses, auditors reviewed OLR-prepared equalization payment worksheets for FYs 2020 through 2023; obtained and verified HISF’s Cumulative Statement short-term and long-term reserve balances by comparing annual certifications filed with the Comptroller’s Office; calculated HISF’s available funds to pay outstanding and future equalization payments to the City; and reviewed the history and status of the Medicare Advantage implementation and its potential impact on HISF financial condition. Auditors prepared a timeline documenting important dates, information, and decisions pertaining to the Medicare Advantage Plan Implementation.

To determine whether the HISF funds were used only for the Fund’s intended purpose, auditors reviewed HISF’s expenditures and supporting documentation to determine whether expenses were appropriately assigned to HISF, and new benefits were negotiated in Health Benefit Agreements and Health Savings Agreements for FY 2023.

To assess HISF’s efforts in stabilizing HISF’s financial condition and transparency of its decisions, auditors reviewed roles and responsibilities of Tripartite, Technical, and PICA Committees, and requested documentation of their discussions, financial projections, and recommendations. Additionally, the auditors reviewed HISF projections from 2018 through 2022 which included Medicare Advantage implementation forecasts and anticipated health savings.

To determine if HISF administrators had reasonably projected Fund inflows and outflows, the auditors recalculated actual revenues and expenses and compared the projections to assess the accuracy of OLR’s projections for FYs 2021 to 2024.

To assess the impact of expenses on HISF’s financial position, auditors identified lump sum payments, recurring transfers, offsets to equalization payments and routine expenses, and additional health benefits based on Health Benefit Agreements between 2001 and 2018. Auditors then calculated the financial impact of the lump-sum payments, recurring transfers, offsets to equalization payments, and routine expenses on HISF’s fund balance.

The results of the above tests, while not projectable to their respective populations, provided a reasonable basis for auditors to assess the financial condition of HISF, determine whether HISF funds are used only for their intended purposes, evaluate whether HISF revenue is properly assessed and received, and whether HISF’s expenditures were reasonable, appropriate, adequately supported, and authorized.

HISF Recurring Expenses since Fiscal Year 2020

Addendum

See attachment.

Endnotes