Another unintended consequence of Obamacare

Rick Moran
Federal subsidies for Obamacare insurance policies are mandated spending. That means that anyone who applies for the subsidy - anyone - and if they qualify, will receive it.

But what happens if dozens of cities, towns, and some states, push their retired workers from seriously underfunded health insurance plans on to the subsidized federal plan?

You get a massive explosion in costs to the American taxpayer.

New York Times:

Unfunded retiree health care costs loom larger than ever for localities across the country, and the health law's guarantee of federal subsidies to help people with modest incomes afford coverage has made the new insurance markets tantalizing for local governments. A study issued this year by the Pew Charitable Trusts found 61 of the nation's major cities wrestling with $126 billion in retiree health costs, all but 6 percent of that unfunded.

"The Affordable Care Act does change the possibilities here dramatically," said Neil Bomberg, a program director at the National League of Cities. "It offers a very high-quality, potentially very affordable way to get people into health care without the burden falling back onto the city and town."

But if large numbers of localities follow that course, it could amount to a significant cost shift to the federal government. Authors of the health care law expected at least some shifting of retirees into the new insurance exchanges, said Timothy S. Jost, a law professor at Washington and Lee University who closely follows the law. "But if a lot of them do, especially big state and local programs," he said, "that's going to be a huge cost for the United States government, and it's mandatory spending."

Many cities are also wrestling with unfunded pension programs for retirees. But health care has become an easier target for cuts, in part because of generally stronger legal protections for pensions. Still, changes to retiree health care are playing out in courtrooms. The suit Mr. Underwood joined, filed last week in Chicago, claims that the health care benefits were also protected.

The Chicago plan, announced in May, would phase some of the city's 11,800 retirees and their family members not eligible for Medicare out of city coverage by 2017. While some may seek insurance through new employers or through their spouses' workplaces, others will probably be shifted to the insurance exchanges. Much of the plan for the next few years is in flux, but the changes are expected to contribute to a larger effort to save Chicago $155 million to $175 million a year in retiree health care costs by 2017.

Should the authors of Obamacare foreseen this situation? Even if they did, there is precious little they could do about it. Detroit's bankruptcy has spooked many cities and states, exposing their vulnerability to the skyrocketing costs of health care for retired public workers. There isn't much that cities can do to change pension plans unilaterally. They need to go back to the negotiating table where unions across the country are digging in to protect benefits.

But health care is a different story and it appears that dozens of big cities will take advantage of federal subsidies for insurance to throw their retirees on to the state exchanges - to be paid for by the rest of us.


Federal subsidies for Obamacare insurance policies are mandated spending. That means that anyone who applies for the subsidy - anyone - and if they qualify, will receive it.

But what happens if dozens of cities, towns, and some states, push their retired workers from seriously underfunded health insurance plans on to the subsidized federal plan?

You get a massive explosion in costs to the American taxpayer.

New York Times:

Unfunded retiree health care costs loom larger than ever for localities across the country, and the health law's guarantee of federal subsidies to help people with modest incomes afford coverage has made the new insurance markets tantalizing for local governments. A study issued this year by the Pew Charitable Trusts found 61 of the nation's major cities wrestling with $126 billion in retiree health costs, all but 6 percent of that unfunded.

"The Affordable Care Act does change the possibilities here dramatically," said Neil Bomberg, a program director at the National League of Cities. "It offers a very high-quality, potentially very affordable way to get people into health care without the burden falling back onto the city and town."

But if large numbers of localities follow that course, it could amount to a significant cost shift to the federal government. Authors of the health care law expected at least some shifting of retirees into the new insurance exchanges, said Timothy S. Jost, a law professor at Washington and Lee University who closely follows the law. "But if a lot of them do, especially big state and local programs," he said, "that's going to be a huge cost for the United States government, and it's mandatory spending."

Many cities are also wrestling with unfunded pension programs for retirees. But health care has become an easier target for cuts, in part because of generally stronger legal protections for pensions. Still, changes to retiree health care are playing out in courtrooms. The suit Mr. Underwood joined, filed last week in Chicago, claims that the health care benefits were also protected.

The Chicago plan, announced in May, would phase some of the city's 11,800 retirees and their family members not eligible for Medicare out of city coverage by 2017. While some may seek insurance through new employers or through their spouses' workplaces, others will probably be shifted to the insurance exchanges. Much of the plan for the next few years is in flux, but the changes are expected to contribute to a larger effort to save Chicago $155 million to $175 million a year in retiree health care costs by 2017.

Should the authors of Obamacare foreseen this situation? Even if they did, there is precious little they could do about it. Detroit's bankruptcy has spooked many cities and states, exposing their vulnerability to the skyrocketing costs of health care for retired public workers. There isn't much that cities can do to change pension plans unilaterally. They need to go back to the negotiating table where unions across the country are digging in to protect benefits.

But health care is a different story and it appears that dozens of big cities will take advantage of federal subsidies for insurance to throw their retirees on to the state exchanges - to be paid for by the rest of us.