Blue Cross Hijacked

How the Governor and the State's Most Powerful Union Shortchanged Health Consumers

"That's when things started to go south," said Charles Bell, program director for Consumers Union, which has monitored more than 100 nonprofit conversions worth $16 billion around the country. The advocates, working with Grannis and Assemblyman Richard Gottfried from the West Side, continued to press for a single foundation. As recently as last fall they thought negotiations were moving along. Then, in late December, the Albany rumor mill began to buzz with talk about a deal between Pataki and Rivera that called for sinking all of the Empire conversion proceeds into the state's pool of health care funds. A major chunk of that money would go to "workforce retention,"i.e., raises for state health care workers, including 1199's members.

The political rationale wasn't hard to determine. With 210,000 members, 1199 has become the state's most powerful union, and there was already strong talk that Rivera might stay neutral or even support Pataki's re-election in this year's gubernatorial race. Pataki appeared at 1199's Christmas party, where he was cheered by members. At the same time, advocates later learned, he was deep in secret talks with the labor leader, and another 1199 ally, State Senate Majority Leader Joe Bruno. Someone floated a trial balloon to the press in early January.

"At the time the announcements were in the paper of the governor and Rivera striking a deal, there was no bill," said Grannis. "It wasn't until the first week of January that we saw any language on the bill."

Hung up for six years, the Empire conversion now raced toward approval in a new bill. Now 95 percent of the proceeds were dedicated to state health funding, including worker raises. Only a last-minute push by Grannis and Gottfried won a small foundation, which will receive 5 percent of the assets, a potential $50 million.

The raw politics shocked the advocates. "One would've expected the political leadership to have resisted this blatant grab for the assets and push them back," said Bell.

"You can't sneeze at $50 million, but it's just not going to make a meaningful difference," said Mark Scherzer, counsel for New Yorkers for Accessible Health Coverage, the coalition brought together to watchdog the conversion.

Jennifer Cunningham, Rivera's political director, acknowledged that 1199 had changed its position on the conversion, but said her union has nothing to apologize for. "People can differ about the best use of the dollar, but we have been incredibly vigorous supporters of expanding access to affordable health care in the state," she said. "I'm willing to go toe-to-toe with any advocate who wants to tell me that a home care worker making $7.49 doesn't deserve a raise," she said.

In fact, none of the advocates opposed the raises, only the funding source. "We believe health care workers need and deserve decent salaries," said Dooha. "But this isn't how the conversion money should be used."

There are other concerns. On a national level, advocates fear Pataki's move could be duplicated by other governors facing budget shortfalls and eager for a quick fix. Locally, other nonprofit insurers, such as Health Insurance Plan of New York, have also indicated an interest in converting. To that end, Bell and Scherzer said they are considering a legal challenge against the legislation.

"This is just a horrible precedent," said Grannis, a 28-year veteran of the legislature. "Even if you give up and say this is an extraordinarily difficult time, it would have been a unique opportunity—unparalleled and unprecedented in my career—to put together something that would have a real impact."

"We are really grieving an incredible loss," said Dooha. "Especially coming at this moment, when New York is in recession and so many people are losing their health insurance. There was hope on the horizon."

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