The Wall Street Journal recently had an editorial about the possible effort by the City of Chicago to eliminate its pre-Medicare retiree liability for health benefits. Good for Chicago. At least Rahm Emanuel read Obamacare.
However, while his acumen may benefit Chicago residents, not so much so for other taxpayers and consumers using the health insurance exchanges.
Here is how it works … don’t tell your employer or local municipality … and it’s really quite simple.
The City ceases to provide health benefits for its early retirees who currently pay a substantial portion of the premium, the City pays between 40% and 55% of the premium. Instead, the retirees must enroll in one of the new health insurance exchanges where their premium and perhaps their out of pocket costs (depending on their total income) is subsidized by the federal government. These subsidies make the cost of health insurance less expensive for the retiree and eliminates the liability for Chicago; neat huh? Of course, as more and more cities and states facing unaffordable health care costs figure this out, the projected cost of the federal subsidizes increase.
No doubt this is not what Obamacare intended as the goal was to extend coverage to those Americans without health insurance. However, when you provide incentives to change behavior, people are going to change and in the process look out for themselves.
As time goes by employers facing the same liabilities may follow this example for their early retirees which may be accelerated if the Medicare eligibility age is raised.
In addition, once the exchanges are up and running some employers may rethink their overall strategy by simply not providing health benefits to active employees, pay the fine or even a portion of the premium and still come out ahead in total cost while eliminating all the administration associated with providing health benefits.
Unintended consequences are alive and well. If the cost of subsidies for health insurance exchanges has been underestimated, in part by a change in employer behavior, we have established an entitlement that may someday be on a par with Medicare.
QUINNSCOMMENTARY 
Older people vote more frequently. There are underwriting preferences in papacy that disproportionately favor old folks – a 3:1 underwriting limit, no per-ex, no annual or lifetime benefit max on essential benefits. But, most importantly, contributions by participants are a function not of the cost of coverage, but as a function of their income. Keep annual ” household” below 400 percent of the fpl, perhaps by taking a lump sum in the year of termination, and voila,millionaire public pension recipients get taxpayer subsidized exchange coverage.
The plus? Well, at Chicago’s commitment goes down, unless that is, they decide to increase pensions as a partial offset!
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Why so guarded in your projections? The unintended consequences are just beginning to bubble to the surface. We may have an new entitlement that surpasses Medicare – depending upon how the numbers play out.
Medicare is limited to people over the age of 65; a segment of the population with shorter lifespans, but higher healthcare costs.
The Affordable Care Act applies to a broader population segment with longer lifespans, but lower healthcare costs in theory. Adverse selection may turn the tables.
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