Why public employers are paying retirees to use private insurance exchanges

In the past two years, public employers' unpaid healthcare liabilities for retirees have ballooned by $100 billion to total nearly $700 billion nationwide, according to an S&P Global Ratings report cited by Governing.

Five things to know:

1. Retiree healthcare — known as other post-employment benefits — for public workers like firefighters and police is one of the quickest-growing costs for governments. Two reasons for the growth are that retirees are living longer and medical costs are rapidly increasing.

2. Dearborn, Mich., recently borrowed funds to help cover retiree healthcare costs, which analysts deemed considerably risky, according to Bloomberg.

3. One way public employers are combating this pressure is by getting rid of government-sponsored health plans and, in turn, paying for retirees to buy a health plan off a private health insurance exchange, according to Governing. Private exchanges, which are different from the ACA exchanges, are run by insurance and benefit companies and often offer supplemental Medicare coverage.

4. Shifting to private exchanges is expected to save some cities hundreds of millions of dollars, according to the report. For instance, Alexandra Smith, Memphis' chief human resources officer, said the city's other post-employment benefits liability will fall by $300 million to $415 million with the change, and costs will become more predictable.

5. However, some police and firefighter unions have raised concerns about the change, and have requested that cities reinstate old retirement benefits.

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