Memphis is Buzzing About Retiree Healthcare Subsidies

Memphis partners with a private exchange to reinstate a pre-65 retiree healthcare subsidy, an OPEB benefit previously cut to solve its pension deficit.

MEMPHIS, TENN. -- The city of Memphis has decided to reinstate pre-65 retiree healthcare subsidies--much to the chagrin of some union employees.

Memphis cut most retiree healthcare subsidies to shift contributions to the city’s pension fund two years ago. Retirees over the age of 65 could get on Medicare, but it left the younger ones in the lurch.

Last year, the city hired a consultant to study the issue. The consultant recommended against reinstating the 70 percent subsidy because it would require $10 million.

An open letter from Mayor Jim Strickland explains that the city is reinstating the retiree healthcare subsidy through a private Health Reimbursement Account in order to retain public safety employees.

But the Memphis Police Association railed against the decision on Facebook, according to

Mayor Strickland said:

"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...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."

The Memphis Daily reported that the local police and firefighters unions that have pushed for a restoration of the 70 percent retiree healthcare subsidy believe that the private exchange will mean higher deductibles for them. They also are concerned about how it strains retirees to pay healthcare costs upfront, and then wait for reimbursement.

Cities have long promised better retirement benefits to public servants instead of providing salary increases or raising wages, according to the Economist. And many municipalities are stuck with pensions they cannot pay.

The private exchange is the only realistic option to save pre-65 subsidies,” said Mayor Strickland.

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