In 2015 the City of Glendale took advantage of Obamacare to dramatically reduce its spending on health insurance for retired employees and free up funds for spending on active employees and public services. Before Obamacare, both active employees and retired employees in Glendale were “blended” into the same health plan pool. That resulted in retirees experiencing artificially lower insurance premiums at the expense of active employees and (since the City was paying a great deal of the active employees’ medical premiums) public services. But then Obamacare became law, which meant guaranteed issuance of insurance coverage and hefty federal premium support for applicants. For example, a retired police officer with a $100,000 per year pension and a family of four could be guaranteed coverage and provided with $20,000 per year of federal premium support. As a result, it was no longer necessary for Glendale to include retirees in its insurance pool. That step reduced premiums for active employees and freed up more than $200 million for public services. Unblending was the key step — and that is an example that all CA state agencies, transit agencies, localities, colleges and universities and schools should follow before complaining about budget cuts and funding shortfalls.
The City could even top up that insurance and still save money. In order to ease the transition for retirees, the City worked with an insurance broker to provide a concierge level service to retirees who wished to explore their options at Covered California, the state’s excellent health insurance exchange. Second, the City Council approved a temporary “Transitional Subsidy” program for a period of one year, as well as a longer term “Lower Income Subsidy” program for retirees who could exhibit a total household annual income of $50,000 or less. With the latter subsidy program, the benefit would continue until age 65, at which point the retiree would transition over to Medicare.
Linked below are the staff report, presentation and a summary of both GASB 45 and 75, which were the two Governmental Accounting Standards Pronouncements that impacted how OPEB liabilities were to be accounted for moving forward.
OPEB Staff Report to City Council (10-06-15)
City Council OPEB Presentation Final (10-06-15)
GASB No. 45 (Summary of Statement)
