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Memphis Mayor Announces Restoration Of Subsidy To Help Retirees Pay For Health Care

Memphis Mayor Jim Strickland announced Wednesday the city is restoring a subsidy to help reimburse pre-65 retirees for health care. And the Memphis Police Assoc...
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Memphis Mayor Jim Strickland announced Wednesday the city is restoring a subsidy to help reimburse pre-65 retirees for health care.

(UPDATE)

The Memphis Police Association isn’t happy with the mayor’s plan, according to this Facebook post from Wednesday afternoon.

(Facebook post reads: “The Mayor of Memphis has made his decision I assume because the Memphis Police Association only found out via the news media. This is not good. The administration also wants you to believe that it is to restore the pre- 65 retiree’s healthcare, when they originally took it away. Now we should be greatful for the high premiums, out of pocket payments and deductibles. Thank you.”)

The full statement from the mayor is below.

Today, I decided to approve a partnership with a private health insurance exchange for City of Memphis retirees, which includes restoring a city subsidy to help reimburse pre-65 retirees for their health care. And I am writing you today to clearly explain why.

When we took office, we actively listened to our current employees’ concerns about benefits. They repeatedly told us that restoring a health insurance subsidy for pre-65 retirees would be a major step toward retaining employees, particularly in public safety.

I am committed to retaining employees, particularly public safety employees. And this is a major step in that direction.

Unfortunately, conflict has grabbed the headlines and sound bites on this topic, largely drowning out the substance of what’s happening. That’s why I want to make sure you understand what’s going on.

Some context is in order. Benefit changes in 2014 eliminated the city’s 70 percent subsidy to pay for health insurance for retirees, and those savings were paid into the vastly underfunded pension system. Those 65 and older were able to join Medicare, but retirees younger than that faced large premium hikes that created a financial burden.

Our solution to return the subsidies is using the private exchange. This is not the public exchange, commonly known as Obamacare. It’s a marketplace where people can purchase plans — including from Cigna, our current City of Memphis provider — that best suit their needs. We will return the subsidy in the form of a Health Reimbursement Account (HRA), which will reimburse retirees for premiums and out-of-pocket expenses.

Even more, the HRA rolls over — retirees will be able to keep what they don’t use and build it up over time.

A one-on-one benefit advisor, something we do not currently have, will work with retirees throughout the process. And we’re far from the only city, state, or county to choose a private exchange as a solution.

This new arrangement is better for retirees than the current one. We shared with employees earlier in the week a couple of examples in which pre-65 retirees will save money in the private exchange versus their current, non-subsidized plans. We expect the majority of post-65 retirees will see significant savings, too, by choosing a plan that best fits them. More information will go to the retirees in the coming days.

I want you to know the single decision point to which we boiled it down: The private exchange is the only realistic option to save pre-65 subsidies without a significant tax hike.

We’re proud of what this will offer retirees, and I hope you remember this as you follow the story in the coming days and weeks. And if you have questions about these changes, please email memphishr@memphistn.gov.

Below is the City of Memphis’ news release:

Nov. 9, 2016 — Memphis Mayor Jim Strickland announced today the approval of a partnership with a private health insurance exchange for City of Memphis retirees, which includes restoring a significant city subsidy to help reimburse pre-65 retirees for their health care.

“When we took office, we actively listened to our current employees’ concerns about benefits,” Strickland said. “They repeatedly told us that restoring a health insurance subsidy for pre-65 retirees would be a major step toward retaining employees, particularly in public safety. I am committed to retaining employees, particularly public safety employees, and this is a major step in that direction.”

Benefit changes in 2014 eliminated the city’s 70 percent subsidy to pay for health insurance for retirees. Those 65 and older were able to join Medicare, but retirees younger than that faced large premium hikes that created a financial burden.

Returning the subsidy in the form of a Health Reimbursement Account (HRA) will help retirees get reimbursed for eligible premiums and out-of-pocket expenses.

The private exchange will allow retirees to have multiple options that best suit their individual needs.

A one-on-one benefit advisor — a benefit the City of Memphis does not currently offer — will work with and advise the retirees through the process and as an advocate thereafter. The private exchange will be available to eligible retirees and their spouses during an open enrollment period, with benefits to go into effect for most retirees in March of next year.

“It’s an opportunity for them to not only have options but to have a subsidy,” Chief Human Resources Officer Alex Smith said. “We think it’s an absolute win-win for everyone.”

This new approach will provide individuals with access to more options, control over their health care and support that will better suit their health care needs. The City of Memphis expects the majority of Medicare retirees will see significant savings by choosing a plan that best meets their needs. Eligible retirees will find out more information about HRA contributions and plan rates through additional communication in the coming days and weeks.

A private exchange solution for retiree health care has been used by several cities, states, and counties.

“We want our current employees to know that if they retire younger than 65, this new approach ensures they will not be left in the dark,” Mayor Strickland said. “The private exchange is the only realistic option to save pre-65 subsidies.”