We're Restoring the Pre-65 Subsidy

Dear friends and fellow employees,

Today, I decided to approve a partnership with a private health insurance exchange for City of Memphis retirees, which includes restoring a city subsidy to help reimburse pre-65 retirees for their health care. And I am writing you today to clearly explain why.

When we took office, we actively listened to our current employees’ concerns about benefits. They repeatedly told us that restoring a health insurance subsidy for pre-65 retirees would be a major step toward retaining employees, particularly in public safety.

I am committed to retaining employees, particularly public safety employees. And this is a major step in that direction.

Unfortunately, conflict has grabbed the headlines and sound bites on this topic, largely drowning out the substance of what’s happening. That’s why I want to make sure you understand what’s going on.

Some context is in order. Benefit changes in 2014 eliminated the city’s 70 percent subsidy to pay for health insurance for retirees, and those savings were paid into the vastly underfunded pension system. Those 65 and older were able to join Medicare, but retirees younger than that faced large premium hikes that created a financial burden.

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.

Even more, the HRA rolls over -- retirees will be able to keep what they don’t use and build it up over time.

A one-on-one benefit advisor, something we do not currently have, will work with retirees throughout the process. And we’re far from the only city, state, or county to choose a private exchange as a solution.

This new arrangement is better for retirees than the current one. 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. More information will go to the retirees in the coming days.

I want you to know the single decision point to which we boiled it down: The private exchange is the only realistic option to save pre-65 subsidies without a significant tax hike.

We’re proud of what this will offer retirees, and I hope you remember this as you follow the story in the coming days and weeks. And if you have questions about these changes, please email memphishr@memphistn.gov.

Yours,