Akron wants city retirees to pay toward health care and end the benefit altogether for new workers
By Rick Armon
Beacon Journal staff writer
Published: September 12, 2016 - 07:46 PM
Akron wants city retirees to start paying toward their supplemental health insurance and would like to eliminate the perk altogether for new workers.
Mayor Dan Horrigan introduced a series of proposed ordinances to City Council on Monday, saying that the community can no longer afford to offer the free benefit, which is expected to cost the city just over $6 million this year and grow to more than $11 million in 10 years if left untouched.
“We are one of the few remaining governmental entities both within the state and across the nation that offer this level of supplemental health benefit to retirees,” Horrigan’s chief of staff James Hardy said.
There are 2,406 retirees covered by the city now, with the health care extended to an additional 1,648 dependents.
City leaders estimate that the changes would save $1.8 million the first year. The council, which was briefed Monday afternoon, plans to take its time studying the proposal. Members will get together at 3 p.m. Thursday to review it.
The legislation calls for retirees to pay $30 a month for health plans for singles and $60 for families. That would fall in line with what current employees pay. It also would mirror the plan offered to current workers and require spouses who are eligible for health care elsewhere to take it, in most cases, or pay a surcharge.
As part of the effort, the city would do an eligibility audit. New employees hired after Dec. 31 wouldn’t be eligible for the retirement benefit at all. The plan is still generous and competitive for retirees, the administration said.
Several city union representatives attended the council presentation. They were briefed on the proposal earlier in the day by the mayor. The union leaders declined to comment until they discussed the issue with their members. Horrigan said the proposal doesn’t need approval by the unions. But union leaders said their contracts protect benefits for retirees.
The supplemental health benefit was designed to serve as a backup to Medicare. But with many city workers retiring well before the age of 65 and state pension systems adjusting their plans, the city has become the primary insurance in many cases, especially for dependents, said Diane Miller-Dawson, the city finance director.
Private companies and the public sector have been cutting back on retiree benefits for decades as they try to reel in costs.
“That has led to employers increasing contributions, reductions in benefits and in some cases employers are terminating benefits, but when they do, they tend to start with new hires,” said Tricia Neuman, senior vice president at the Kaiser Family Foundation.
A Kaiser survey last year found that only 23 percent of firms that offer benefits to active employees and have more than 200 workers extended benefits to retirees. The figure was 73 percent for state and local governments. A new Kaiser benefits survey is expected to be released this week. Hardy said few public sector retiree plans are as generous as Akron’s, with its lack of a contribution and extended coverage for dependents.
Horrigan expects complaints from retirees. “Is it probably going to upset some people? Of course it is,” the mayor said. “I absolutely know it is. I know we’ll get flooded by calls.” But he and others said the city cannot continue offering it. The mayor has been trying to reduce expenses and grow revenue since he took office this year.
A blue ribbon task force set up by the mayor had recommended that the city look at those long-term benefits, also called “legacy costs.” Councilwoman Linda Omobien, who was part of the task force, said other members were surprised at the health benefits offered by the city. “The fact of the matter is we cannot sustain this,” she said. Councilman Mike Freeman noted that many people refer to the city’s health care plan as a “Cadillac plan,” referring to the upscale car brand, but he said it’s more like a luxury Maserati in this case.
Rick Armon can be reached at 330-996-3569 or firstname.lastname@example.org. Follow him on Twitter at @armonrickABJ