Wednesday, June 19, 2013


Detroit To Dump Retiree Health Costs On ObamaCare

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The federal government isn't among the creditors Detroit has turned to for mercy, but U.S. taxpayers will bear a large share of the cost of its restructuring.
High on emergency manager Kevyn Orr's to-do list: slash health care outlays for thousands of early retirees by shifting them to ObamaCare.
Detroit spent $177 million on health benefits for 19,000 retirees last year but figures it can cut that to $28 million-$40 million a year.
Part of the savings would come from paring supplemental coverage for retirees age 65 and older, most of whom already get Medicare.
But the federal government will pick up much of the slack for early retirees through age 64, who will be eligible for subsidized coverage as long as household income is less than 400% of the poverty level.
The news is hardly surprising. While the Motor City is an early mover when it comes to shifting early retirees to ObamaCare, it's not alone and the road for doing so has been well-paved.
Last month, Chicago Mayor Rahm Emanuel — Obama's chief of staff when the law was passed in 2010 — disclosed that the Windy City would shift 30,000 early retirees to ObamaCare. Last year, retiree health care cost the city $109 million, but that's projected to balloon to $500 million within a decade.
Sheboygan County, Wis., also has crunched the numbers and envisions saving $286,000 in the upcoming fiscal year by shifting early retirees to ObamaCare's exchanges starting Jan. 1.
ObamaCare's crafters intended to provide an alternative to employer-provided coverage for retirees, which had long been in decline.
The law set aside $5 billion to offset employer costs from June 2010 until the launch of the subsidized exchanges at the start of 2014. The funds, to reimburse 80% of per-person claims between $15,000 and $90,000, were exhausted by December 2011. New claims were rejected.
About half of the employers who signed up for the program were government entities, including the city of Stockton, which has sought to dump retiree health care in bankruptcy proceedings.
Stockton public employee retirees recently agreed to accept $5.1 million in a lump sum, which is equal to just 2% of their lost health benefits.
The Early Retiree Reinsurance Program was described by the Department of Health and Human Services "as a bridge to the new health insurance Exchanges."
The implication was that employers would cross that bridge by shifting coverage to the federal government come 2014.
While relatively few government entities have declared such an intention, it seems logical to expect many to make that move in the next year or so.
As governments struggle with massive liabilities for pension and health benefits, court rulings have lent support to the contention that pensions are protected under state constitutions. On the other hand, rulings in a number of states have found no such protections for health benefits.
In a recent column, former Comptroller General David Walker wrote that ObamaCare presented "a huge opportunity for states and localities in desperate need of fixing their long-term finances."
He predicted: "The overall tax burden will shift, and in ways that Americans in other more fiscally responsible states may not appreciate."
Walker also warned that the influx of older, high-cost patients into ObamaCare would put upward pressure on premiums and make it less likely younger workers would sign up.


When Regal Entertainment Group (RGC) in April blamed ObamaCare for the fact that it was cutting some of its workers' hours, backers of the law mounted a furious backlash against the theater chain, among other things filling its Facebook page with boycott threats.
"Greed and selfishness make me sick," one of them said.
Darden Restaurants (DRI) felt this intense heat last year after suggesting it might shift to more part-time work to minimize the cost of the law's mandate that companies offer coverage to all their full-time workers. CEO Clarence Otis even blamed its lowered outlook for 2013 in part on "recent negative media coverage" over "how we might accommodate health care reform."
President Obama gestures as he talks about the Obamacare in San Jose, Calif., on June 13, 2013. Obama's health care law is called the Affordable Care...
President Obama gestures as he talks about the Obamacare in San Jose, Calif., on June 13, 2013. Obama's health care law is called the Affordable Care... View Enlarged Image
Yet while private companies are getting all this unwelcome and hostile attention, local governments across the country have been quietly doing exactly the same thing — cutting part-time hours specifically so they can skirt ObamaCare's costly employer mandate, while complaining about the law in some of the harshest terms anyone has uttered in public.
The result is that part-time government workers — many of them low-income — face pay cuts that can top $3,000 a year, and yet will still be left without employer-provided benefits.
Here is just a small sampling of local news reports about what local government officials are saying about ObamaCare, and the steps they're taking to avoid or minimize its costs.
Phillipsburg, Kan.: "School administrators here say they are alarmed and confounded by the looming new costs they face with the implementation of the Affordable Care Act," according to the Kaiser Health Institute News Service. Chris Hipp, director of a Kansas special education cooperative, warned that ObamaCare's costs "could put us all out of business or change significantly how we do business," adding that "we are not built to pay full health benefits for noncertified folks who work a little more than 1,000 hours a year."
Dearborn, Mich.: "If we had to provide health care and other benefits to all of our employees, the burden on the city would be tremendous," said Mayor John O'Reilly, explaining why the city is cutting its more than 700 part-time and seasonal workers down to 28 hours a week. "The city is like any private or public employer having to adjust to changes in the law."
Indiana: "What I'm seeing across the state is school districts, unfortunately, having to reduce the hours that they are having some of their folks work, primarily so they don't have to worry about the (ObamaCare) penalties, or they don't have to provide them health insurance, which would be very, very costly," said Dennis Costerison, executive director of the Indiana Association of School Business Officials. Ft. Wayne Community Schools, for example, are cutting yours for nearly three-quarters of its part-time aides.
Omaha, Neb.: "The biggest problem is everyone said that ObamaCare is only going to help cut costs. Nothing could be further from the truth," said Mike Kennedy , who serves on the board of Millard Public Schools, just outside the city, and figures ObamaCare will raise its costs by $400,000. A neighboring school district is reducing hours for up to 281 part-time employees to avoid $2.5 million in new costs, which will result in pay cuts of up to $3,300.
Long Beach, Calif.: "We are in the same boat as many employers," said Tom Modica, Long Beach's director of government affairs. "We need to maintain the programs and service levels we have now." So the city is going to cut hours for 200 part-time workers so it doesn't have to pay $2 million to provide health benefits.
Salt Lake City: "With new provisions in the Affordable Care Act, there was going to be a significant burden upon Granite School District and our taxpayers to offset the cost of benefits," said spokesman Ben Horsley. He says covering the district's part-time workers would cost about $14 million, and so about 1,000 will have their hours cut to 29 a week.
Cape May County, N.J.: "A number of people in the nation who read it are recognizing how detrimental (ObamaCare is) to government and private employers out there," said Gerald Thornton, the county's finance director who is trying to figure out how to budget for the law.
Virginia: "The Commonwealth of Virginia is grappling with the same issues that many businesses in the private sector are as they struggle to deal with the costs imposed by the Affordable Care Act," Paul Logan, a spokesman for Gov. McDonnell, said. The state is requiring that about 7,000 part-time government workers put in no more than 29 hours a week.
Texas: "The Affordable Care Act has added so much complexity and administrative burden that there is nothing affordable about it," said Jared Pope, who is consulting with Texas municipal governments on ObamaCare. Dallas expects its health costs to climb $2.1 million next year. Plano is cutting hours to avoid $1 million in new costs.

Kern County, Calif.: "It will affect multiple departments, a majority of departments," said the county's deputy administrative officer Eric Nisbett, explaining that unless the county cut worker hours for 800 employees, ObamaCare would cost it up to $8 million a year.
Allegheny County, Pa.: "There's frustration and anger and sadness and resentment, you know, but you don't have a voice," said adjunct English professor Clint Benjamin in the wake of the Community College of Allegheny County's decision to cut hours for about 400 adjunct faculty and other employees so it wouldn't have to pay $6 million in ObamaCare-related fees next year.
Medina, Ohio: "We feel bad as a city administration and as a council in having to cut hours from 35 to 29," Medina Mayor Dennis Hanwell said. "We have the budget to pay the people, but we do not have the budget to pay for the health care." If they hadn't made that cut, the city faced up to $1 million in new health costs courtesy of ObamaCare.
Birmingham, Mich. Commissioner Gordon Rinschler may have summed up best the reaction that countless businesses and governments are having to ObamaCare, saying: "We simply can't afford the Affordable Care Act."