Employers have a legal obligation to continue paying pensions, although bankruptcy can change that. But most legal experts would agree that employers can do away or dramatically change health insurance for retirees—even if they had promised it for life. Take GM, for example: In the '70s and '80s, employees received notice that “your basic health-care coverages will be provided at GM's expense for your lifetime,” but a court later ruled that GM could alter or do away with coverage.

“Health insurance doesn’t have the same degree of protection that the pension plans do,” said Robert Clark, an economics professor at North Carolina State University.

Indeed, public employers across the country may soon begin following Detroit’s lead and withdrawing coverage for retirees, instead sending them to the health-care exchanges set up by the Affordable Care Act.

“Since the passage of the Affordable Care Act, I think it is fair to say that 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,” said Olivia Mitchell, executive director of the Pension Research Council and a Wharton professor. “People are becoming more expensive to take care of.”

Last year, for instance, Chicago announced that it was phasing out health-care benefits for people who retired after August 23, 1989. And Sheboygan County, Wisconsin also voted last year to stop allowing county retirees to use the county’s health-insurance plan, instead shifting them onto the health-care exchanges.

“We had to make a decision about what we could afford, and we’re obligated to fund pensions by law, but not health-care benefits," said Bill Nowling, a spokesman for Detroit's emergency manager, Kevyn Orr. “I know it sounds crass, but we can’t afford it.”

Detroit was spending $180 million a year for healthcare for its current employees and retirees; once it moved the retirees to the exchanges, costs dropped to $60 million, Nowling said.

"Ford, GM, and Chrysler got out of retiree health care years ago," he said.

For Blair, the public exchanges represented less choice and more money.

She bought an HMO plan though the exchange, which costs her $449 a month, although she receives a $125 subsidy from the city. It was a more frustrating plan, she said: Doctors in the HMO were overbooked and she wasn’t able to schedule appointments for weeks or months. She paid $100 to see an out-of-network doctor when she needed blood pressure medication but couldn’t get an appointment in network. A doctor wanted her to have a mammogram and a colonoscopy, but she put it off, since she couldn’t afford the co-pays.