City targets benefits
New hires not eligible for retiree health insurance under proposal
The City of Milwaukee is weighing whether to eliminate retiree health benefits for all of its general employees hired on or after Jan. 1.
Aldermen discussed the plan Wednesday at the city’s Finance and Personnel Committee meeting.
But the proposal was held after Ald. Terry Witkowski suggested a change that would allow city retirees to continue their benefits if they agree to cover all the costs.
“We would make a plan available if they want to pay for it 100%. And that includes our costs for administrating it,” Witkowski said of his plan.
Despite stalling at City Hall, the issue may still go before the Common Council Tuesday.
The change would not affect sworn members of the police and fire departments.
Currently, general workers who retire after at least 15 years of service with the city, the Housing Authority or the Redevelopment Authority are eligible for health benefits.
The city has about 6,600 retirees. Of that total, 3,500 are enrolled in its retiree health care plans and just over half of those enrolled are general city retirees, city officials say. Another 1,200 retirees enroll in Medicare Advantage Plans sponsored by the Milwaukee Retiree Association.
In a letter to the finance committee, city officials said that while Milwaukee is committed to maintaining health benefits for current employees, maintaining benefits for retirees will pose “serious fiscal challenges long term.”
But critics of the change called it a “race to the bottom” that would hurt the city’s recruitment efforts.
The proposal comes as local governments in Wisconsin are facing at least $6.5 billion in unfunded retirement promises, with more than $5.7 billion in the state’s largest county alone, a recent Journal Sentinel investigation found.
Officials say the city’s 2017 budget for health care is about $115 million, with retiree health care expenditures accounting for about 30% of annual health care expenses.
City officials also said health insurance benefits are not offered to new employees by either Milwaukee Public Schools or Milwaukee County. They said MPS employees hired after June 30, 2013, aren’t eligible for retiree health insurance, and county employees hired since 1994 with 15 years of service are eligible only if they cover 100% of the cost.
They also said the change isn’t expected to affect the city’s recruitment and retention efforts, noting that people currently entering the workforce typically look for things such as job flexibility and programs that support work-life balance.
“In my view, I don’t think it would be a large recruiting issue. To be honest, not many private employers offer it anymore,” said Mark Nicolini, the city’s budget and management director. “That’s been going by the wayside, perhaps unfortunately.”
In Milwaukee alone, the county, school district and city each have more than $1 billion in projected health and pension liabilities to retirees, for a total of more than $3.8 billion. That’s enough to run all three entities — the city, school district or county — for just over a year.
“Although the changes recommended here will not realize expenditure savings for 15-30 years, we believe it is the fiscally responsible thing to do,” the letter says.
But Witkowski said many people are “really intimidated by shopping for insurance.”
“This would at least provide a plan that the city says, ‘Yeah, this is a good one, and is reasonably priced.’ Then the retiree could take it or not take it,” he said.
Witkowski noted that the national Affordable Care Act may undergo major changes in the coming years that could affect people’s ability to get health insurance.