Detroit is facing bankruptcy, and Chicago wants to cut retiree benefit costs. Both are turning to President Barack Obama’s health-care overhaul in what could become a road map for cash-strapped cities. …
“That will become an option that I think a lot of employers and a lot of cities would look at,” said Ario, now a managing director of Manatt Health Solutions, a Washington consulting firm that advises insurers. …
In Detroit, reducing benefits for 30,000 employees and retirees is part of Emergency Manager Kevyn Orr’s plan to avoid the largest U.S. municipal bankruptcy by erasing a $386 million deficit and attacking a long-term debt of at least $17 billion.
The city had 19,389 retirees eligible for health, life-insurance and death benefits as of June 30, 2011, according to Orr’s plan. The insurance benefits cost the city $177.4 million in fiscal 2012. Retirees contributed an additional $23.5 million.
Orr wants to give current and former workers health-reimbursement accounts. The city would pay from $100 to $250 a month to help with medical costs or premiums under the Patient Protection and Affordable Care Act, according to a proposal to city unions.
That would cost the city as little as $27.5 million annually, according to Orr’s plan.