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McClatchy-Tribune  07/30/2014 9:24 AM ET
Memphis panel hears proposal for high-deductible health insurance to rescue retiree benefits [The Commercial Appeal, Memphis, Tenn. :: ]

July 30--A union representative on Tuesday proposed the creation of a high-deductible health insurance plan to save Memphis retiree health insurance subsidies and stabilize premiums for city employees.

Matthew Tomek, secretary-treasurer for the Memphis Fire Fighters Association, said unions estimate the high-deductible plan would save $24.6 million. Currently, the city does not offer such a plan, which requires individuals to pay more medical expenses out of pocket.

"I think it's the right thing to do. This gets the retirees right where they are today. It gets the spouses right back in the plan," he said, referring to an earlier vote to carve some employees' husbands and wives out of city coverage.

But only further study will determine if the high-deductible plan would save as much money as hoped.

Tomek made the proposal through his membership in the Healthcare Oversight Committee, a group that makes non-binding recommendations to the City Council.

City Council member Edmund Ford Jr. chaired the meeting and set a deadline of Aug. 29 for the unions and the mayor's administration to verify one another's calculations. If they need extra time, the deadline would reset to Sept. 12. After the due diligence is complete, the proposal would advance to a City Council committee.

For months, labor unions have clashed with the administration of Memphis Mayor A C Wharton over the administration's support of cutting most subsidies for retiree health care. But Tuesday's committee meeting marked a notable change in tone as both sides made concrete proposals to help retirees.

City human resources director Quintin Robinson described a plan that would create a trust fund for some pensioners who are younger than 65, not yet eligible for Medicare and who would have to buy more expensive insurance through the new health care exchanges.

The trust fund would be bolstered through a donation of up to $1 million from hospital group Methodist Le Bonheur Healthcare and a donation of $550,000 or more from insurer Cigna. Other entities have also offered to donate, Robinson said.

The meeting marked a shift away from confrontation and toward problem-solving. But some questions remained unanswered: Would the 13-member City Council approve the changes? And would the math work?

The city faces pressure from state officials to close a big gap in its pension fund. On June 17, the council voted 7-5 to cut most retiree health care subsidies and shift the money toward boosting its pension contribution. That decision prompted protests by employees and retirees, and the council reopened the debate and considered alternatives. Any solution would not only have to address the gap of $551.9 million in the pension fund, but the unfunded liability for retiree health care, estimated at $1.3 billion before the subsidy cut.

The city currently pays the retiree health care costs as they come in each year and has set aside little money toward building a trust fund for long-term costs. Tomek said the city has no legal obligation to build a retiree health care trust fund. But city officials including finance director Brian Collins have said it's just a matter of time before the rules change.

Also Tuesday, committee member Mike Williams, president of the Memphis Police Association, repeated his call for a half-cent sales tax increase. No action was taken.


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