The Bloomberg administration has reversed the decision of former Mayor Rudolph W. Giuliani to shortchange city employees by withholding more than $100 million from their health insurance carriers.

Mayor Michael R. Bloomberg has agreed to meet the state-approved funding rate for city health-care plans.

Since July 2001, the city had refused to pay for the full cost of the recent rate increase. That action triggered hikes in deductions from paychecks and pensions of tens of thousands of city employees and retirees, who were forced to contribute more toward their premiums.

"We are very pleased with the city's decision to restore the funding," said DC 37 Executive Director Lillian Roberts.

"By not fully funding the plans, the Giuliani administration was failing to meet its legal obligation to pay for the annual increase in the cost of health care for its employees. That was fiscally irresponsible and morally unconscionable," she said.

Under an agreement between the city and municipal unions, funding for all plans is set by the HIP/HMO rate, which is the amount that the Health Insurance Plan of Greater New York charges for each individual enrolled in its plan. Participants in health-care plans whose basic premium is greater than the HIP/HMO rate make up the difference through payroll and pension deductions.

DC 37 members in HIP, DC 37 Med-Team/Choice and GHI - about two-thirds of the union's 125,000 members - do not pay premiums for their basic coverage.

But tens of thousands of members and retirees in other plans were hit with increased deductions that their insurance carriers imposed because of the funding shortfall.

City officials have told the union that April, May and June payroll and pension deductions for employees and non-Medicare eligible retirees would be adjusted to reflect the overpayments of the previous nine months. But, beginning in July, some plans will raise premiums sharply because of rising health-care costs.

Last year, the state Insurance Dept. approved an 11.88 percent increase. But the city only agreed to pay 4 percent. In response, HIP sued the city and DC 37 filed for arbitration, charging that the city's action violated the 2000-2002 contract.

Senior Assistant General Counsel Mary J. O'Connell said DC 37 would drop the arbitration request once the city officially agrees to meet the HIP rate increase and reimburse affected members and retirees.