Since the Affordable Care Act became law in 2010, supporters and opponents have argued about whether the measure would lead employers to drop health coverage for workers. This issue has returned to the news; Wal-Mart recently decided to drop coverage for some of its part-time workers, and The Wall Street Journalreportedthis week that some firms, seeking to avoid employer penalties under the law,have encouraged employees to enroll in Medicaid.

While their private-sector counterparts have received more attention, public-sector employeesparticularly retireescould face similar problems with dropped coverage. The Atlantic reported last weekon the trend of cities in financial distress, from Detroit to Chicago to Sheboygan, Wis., reducing or eliminating coverage and seeking to use the insurance exchanges to get out of their health-care obligations to retirees. As one pension expert quoted in the Atlantic noted, every public-sector employer is looking at the exchanges as a potential way to get out of the unfunded liabilities that the public sector is bearing.

But transferring state and municipal retirees to insurance plans on the exchanges doesnt reduce the amount of unfunded liabilities; it shifts the cost from state and local governments to Washington. Many of the retirees in question could qualify for federal premium and cost-sharing subsidies for their exchange insurance policies. Even by Washington standards, the magnitude of the problem is daunting: A 2012 Pew study found that state governments held $627 billion in unfunded retiree health obligations; adding local government health plans could push those obligations toward $1 trillion.

State governments are grappling with a difficult revenue environment, while the federal government faces long-term fiscal challenges caused by demographic shifts. Given these dynamics, what looks to some mayors like a quick fix to their budget woesshifting retirees to the federal exchangescould, in the broader fiscal sense, amount to shifting deck chairs on the Titanic. If efforts by cities and states ultimately encourage private-sector firms to drop health coverage for their workers and retirees, they will add to our nations collective entitlement obligationsand could end up sinking our federal fiscal ship.

Chris Jacobs is policy director ofAmerica Next, a conservative think tank. He is onTwitter:@chrisjacobshc.

ALSO IN THINK TANK:

In Some States, a Cost Crunch Over Expanded Health Benefits

The Flaw in Using Medicare Price Caps as a Cost-Control Model

One Way to Control Costs: Health Savings Accounts

______________________________________________________

Originally posted here:

A Retiree Health-Care Fix That Isnt