October 2, 2013
City cuts retiree health costs
Stipends will be given to retirees who drop city health insurance
A resolution to pay stipends to retirees willing to voluntarily withdraw from the city’s health care plan was approved Tuesday by the Common Council amid criticism from a number of aldermen.
The city will pay stipends to 25 retirees willing to forego the city’s expensive health care program for Medicare supplements. The city covers 111 individuals who are retired and Medicare eligible.
The city hopes to stem rising health care costs.
Aldermen Linda Ferguson (D-7th Ward) and Carlos Ferrer (D-6th Ward) said they did not understand why retirees stay with the city’s health care plan, which is expensive and is not targeted toward the needs of retirees.
“I pay $104 a month for Medicare,” Ferguson said. “The city plan is $300. Sounds like a no-brainer.”
Ferrer, who was the lone dissenting vote on the resolution, said that he had a hard time justifying payments for people to get off the city’s plan.
“These are the contracts that have been decided,” said Mack Cook, the city’s director of finance and administration, on the union contracts of those remaining on the plan.
The stipend program could mean big savings for both groups, with a net savings of $200,000 for the city annually and greatly reduced out-of-pocket expenses for participants as well.
Cook calculated the projected costs and savings for a retired, Medicare-eligible couple across a 14-year span. If the couple accepted the family-plan stipend that begins at $7,400 per year and increases 3 percent annual to match the inflation index, they would receive a total cash stipend of $126,439 in 14 years.
An individual will receive a $3,400 stipend.
The stipends would go toward paying for Medicare Part B and Part D and a medical supplement insurance beginning at $4,272 annually. The total for the 14 years would be $133,316, which would leave the couple with only $6,877 in out-of-pocket costs across that span.
Compared to paying the 15 percent share of the city’s health care plan, in addition to Part B and Part D, the couple would save over $130,000. Even with paying out the stipend, the city would save $364,955 on the projected $491,394 in premium expenses during that span.
According to Cook, 11 retirees have already contacted him with interest in voluntarily leaving the city’s health care plan.
Alderman Kathryn Silliman (D-2nd Ward) supported the proposal, which should result in savings for both the city and retirees.
“It’s nice to be in the position to offer a win-win,” Silliman said.
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