Should RI move public retirees to the Obamacare marketplace?July 19th, 2013 at 5:29 pm by Ted Nesi under Nesi's Notes, On the Main Site
As I reported back in 2011, the state’s municipalities have promised more than $3 billion in medical coverage to retired public-sector employees – but have set aside almost nothing to cover the costs. On paper, at least, the underfunding is actually worse for retiree health than it is for pension funds.
Detroit’s bankruptcy filing, however, suggests a new option for Rhode Island cities and towns – moving their retirees into the new HealthSource RI insurance marketplace being created under President Obama’s Affordable Care Act. Detroit thinks it will save millions of dollars a year if it does so with its roughly 19,000 retirees. Rahm Emanuel has already announced plans to move Chicago retirees to the exchange there.
“The big benefit to moving workers into the state marketplaces is that it shifts the burden of paying for health care from the city to the federal government,” The Washington Post’s Sarah Kliff notes. “That’s a benefit for the city, at least” – and likely for Rhode Island’s state government, as well.
“There are some drawbacks for states,” Kliff adds. “Some city workers might not qualify for subsidies in the new marketplace because their household income is too high. Others might not be able to find an affordable plan in their area, leaving them in a bit of a lurch until they turn 65 and qualify for Medicare.”
There could be other benefits to shifting public retirees into HealthSource RI.
Doing so would increase the pool of individuals covered by plans inside the exchange, spreading the insurers’ risks over a larger population. Some of those retirees might be relatively young, in the case of public-safety officers who finish work in their 40s. Additionally, centralizing management of health coverage could – in theory – provide for economies of scale and streamlining of benefits.
Retirees might not like the idea, however, and it’s possible unions could challenge the legality of such a move. Then again, if HealthSource RI proves to be a success there may be less reason for opposition.
“I think that there is real potential for public-sector government entities to slowly move pre-Medicare retirees to the public exchanges,” Stuart Wohl, a retiree health expert at The Segal Co., told Governing.com earlier this week. “The amount of time for planning would make it difficult for public employers to have everything ready in time. All the facts aren’t going to be out until open enrollment [on Oct. 1].”
• Related: Pensions was easy – RI’s bigger problem is health care costs (Nov. 28, 2011)