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Columbia Missourian

City retirees could lose health insurance subsidies

By Richard Webner
August 22, 2012 | 8:03 p.m. CDT

COLUMBIA — When Dan Hemmelgarn retired as a firefighter in 2004, the monthly premium for his city health care plan was $625, including dental insurance. This year, the same plan cost him $1,490 a month.

It will rise another $381 if the Columbia City Council passes the proposed budget for fiscal 2013 in its current form.

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"It's frightening," Hemmelgarn said.

The budget proposed by City Manager Mike Matthes, which is scheduled for a final vote by the council at its Sept. 17 meeting, calls for eliminating health care subsidies for all retired city employees. The move would save the city $431,000 in fiscal 2013 and reduce its liabilities for future payments from $4.8 million to $2.9 million, according to the budget document.

"This will make the insurance plans self-supporting," said Margrace Buckler, Columbia's director of human resources.

The city provides subsidies to 166 retired workers for plans that also cover 88 spouses and 10 children, Buckler said.

Retired city workers began receiving the subsidies in 2008, after the Government Accounting Standards Board changed its accounting rules for retiree health benefits. The changes forced the city to reduce its liabilities by putting retirees on a different plan than that of its active workers, Buckler said.

City officials, including Buckler, drafted a new plan structure after seeking the input of an organization of retired city workers. The city created two plans: one for retirees younger than 65, and another for those 65 and older, to supplement their Medicare benefits.

The plan for retirees younger than 65 was a city plan, while the plan for the Medicare-eligible retirees 65 and older was operated by United American. Both groups receive subsidies from the city to help pay the premiums.

Hemmelgarn, who addressed the council on the matter during a public hearing on the budget Monday night, was among the retirees who met with city officials in 2007. He is upset because he thinks the agreed upon subsidies were supposed to be permanent.

"The city made a commitment to a relatively small subsidy, and they said it would never change," Hemmelgarn said later.

Dick Malon, a former director of Columbia Water and Light Department, served on a task force formed in 2006 to address rising insurance premiums for city employees and retirees. He also believed the subsidies would not change.

"I thought the subsidy would stay fixed," Malon said.

Former assistant city manager Charles Hargrove, who served on the 2006 task force, thought the subsidies were intended only for those who already had retired when they were implemented.

"What I understood was that the dollar amount to each individual would be fixed, and new retirees would not get any subsidies," Hargrove said. "They weren't going to be permanent."

Buckler said the subsidies were part of a five-year plan to make city health care plans solvent and were not necessarily meant to be permanent.

"The City Council passed a resolution in 2007 to make employee insurance plans self-supporting in five years. 2012 is the fifth year. Now it's over, what do we do?" Buckler said.

The Dec. 3, 2007, resolution declared the subsidies were part of a "five-year strategy" and were "expected to decrease in future plan years."

The elimination of retiree subsidies is part of an effort by Matthes to reduce Columbia's $2.3 million budget deficit. The fiscal 2013 budget would decrease the deficit by $1 million, according to the budget document.

During this year's budget discussions, city officials considered other ways of reducing the city's health care liabilities, such as raising retirees' premium rates or reducing the subsidies over a period of years, Buckler said. They did not include retirees in those talks.

Second Ward Councilman Michael Trapp has offered an amendment to the budget that would phase out the subsidies over the next two years. If his amendment is passed, the subsidy would be cut in half in fiscal 2013, which begins Oct. 1, before being eliminated entirely in fiscal year 2014.

"It's a matter of wanting to be fair to retired workers, but we also have to be responsible to taxpayers," Trapp said.

Hargrove had trouble thinking of alternatives to ending the subsidies.

"It's a tough problem. I know how tough it is to bring this budget thing together," he said.

A possible alternative would be for the city to help those unable to get insurance somewhere else, he said.

Hemmelgarn believes he and his wife could endure the loss of his subsidy, though they would have to tighten their budget. He is more worried about some of his former colleagues.

"Out of 160 retirees, I suspect it might put a big bind on some of them," he said. "It just doesn't seem right."

Supervising editor is Scott Swafford.