Detroit retirees deserve a healthcare plan that works. It's doubtful whether Obamacare is that plan. (Bill Pugliano / Getty Images)
After the flawed launch of Obamacare, President Barack Obama said, “Let me remind everybody that the Affordable Care Act is not just a website — it’s much more.” But even the law’s most ardent supporters are learning that, in fact, it’s much less. That’s the case with union retirees who worked for the city of Detroit.
The unions are suing to block Emergency Manager Kevyn Orr’s plan to reduce the city’s $180 million retiree health bill by replacing benefit plans for retirees under 65 with a $125 per month stipend to shop for coverage on the Michigan health insurance exchange.
Pensioners aren’t happy, and not just because the federal government can’t tell the state’s Department of Insurance and Financial Services whether anyone has yet been able to sign up on the glitchy state exchange. Michigan retirees will likely face sticker shock on the Obamacare exchange relative to their present plans.
While current coverage promises deductibles as low as $175 with an $825 cap on out-of-pocket costs, the city’s stipend would enable retirees to buy basic bronze or silver plans on the exchange that come with higher deductibles, more cost-sharing, and a narrower choice of doctors. A study of Michigan exchange plan options by the Heritage Foundation also found retirees age 50 will see average premium hikes of 43 percent.
“This will have a major impact,” Steve Kreisberg, AFSCME director of Collective Bargaining tells Fox Business. “They are ... replacing coverage that costs between $500 and $600 a month with $125 a month.”
Detroit has no choice other than to dump its retirees on the exchanges, particularly if it expects to preserve pension benefits. The city simply can’t afford to maintain benefits at current levels.
And although the cost increases are likely to be stiff, the average retiree will qualify for federal subsidies, with a pension of $20,000 for a general city employee and $34,000 for a public safety officer. Under Obamacare, single retirees earning up to $45,960 (and married retirees up to $62,040) are eligible for subsidies on the exchanges.
Unmentioned in the unions suit, however, is that many retirees are officers who receive pensions well above average and who will not be eligible for subsidies. Either way, dumping some 8,000 city retirees on the federal exchange also shows the degree to which taxpayers are exposed to rising exchange costs. Add in millions more nationally who will lose their insurance plans (despite the president’s promise to the contrary), and the pain will be widespread.
“These reductions (are) draconian, inhumane and unprecedented,” says Terri Renshaw, chairwoman of the retiree committee that represents workers in Detroit’s Chapter 9 bankruptcy.
Detroit union retirees over 65 will see little change in their plans. But early retirees (in their late 40s or early 50s) on more modest pensions of up to $15,280 will be covered by Obamacare’s expansion of Medicaid coverage, a system notorious for its poor health outcomes.
Kreisberg says union members “are feeling fear and panic,” but they have no one to blame but their union leadership. Municipal and trades unions campaigned hard for President Obama’s re-election, citing the importance of implementing the ACA. Now that the act is in place and union benefits are under fire, unions are having second thoughts.
Unions should advocate for health care reform that deregulates the exchanges and makes health insurance portable by extending employer tax credits to individuals. To remedy the unsustainable pension promises of the past, Detroit’s emergency manager must make necessary cuts in bankruptcy. But Americans still have time to correct the unsustainable mistakes of Obamacare.