By Joseph Lichterman
DETROIT, Sept 12 Detroit's emergency manager is
considering ending its health insurance coverage for city
retirees under age 65 and giving them a modest stipend to
purchase insurance from the health exchanges being established
under Obamacare, according to a lawyer who represents two
associations of public workers.
Brian O'Keefe, an attorney who represents associations of
Detroit police, firefighters and other city employees, said on
Thursday that the emergency manager, Kevyn Orr, is considering
offering a stipend of about $125 a month for retirees under age
65. Those over 65, who now get city-paid health insurance to
supplement their Medicare coverage, would get only Medicare.
Orr's spokesman, Bill Nowling, said he could not comment on
the specifics of the current proposal, but he said Orr initially
spoke with the city's unions and pension boards in June about
the changes to their healthcare plans. At that time, Nowling
said, Orr proposed offering retirees under 65 $110 per month to
purchase coverage from a health exchange.
Detroit in July became the largest city in U.S. history to
seek bankruptcy protection, and Orr is struggling to pare down
its more than $18 billion in debt.
Nowling said it was imperative for the city to quickly reach
a deal with the retirees about their healthcare because the
insurance exchanges being established under the U.S. Affordable
Care Act are scheduled to launch Oct. 1.
"This is absolutely crucial to getting (Detroit's financial
situation) figured out," Nowling said. "What's even more
important is we have to get an agreement and move forward on a
plan because retirees are going to have to start making
decisions about what provider they want to seek out."
O'Keefe said the plan to offer younger retirees a stipend
was "outrageous then and is outrageous now," saying the monthly
payment is "not even close to comparable to what they've been
Converting younger retirees to a plan offering a $125
monthly stipend would reduce Detroit's annual retiree healthcare
costs to less than $50 million from $170 million, Lamont
Satchel, the city's director of labor relations, told the
Detroit Free Press.
All retirees under 65 who belong to the General Retirement
System or the Police and Fire Retirement System would be
Detroit's $5.7 billion in liabilities for healthcare and
other retiree benefits account for about half of its $11.5
billion in unsecured debt. There are about 23,500 retired city
workers, more than double Detroit's current city payroll.
The city has not finalized the plan for the monthly stipend,
but Orr could make a decision as soon as this week, Satchel told
Satchel could not be reached immediately for comment. The
city's offices were closed on Thursday after a widespread power
outage knocked out electricity throughout downtown Detroit.
But O'Keefe said the process could go on for months, well
beyond the Oct. 1 deadline.
"This is an initial proposal or an initial shot across the
bow," he said. "There's a long way to go."
Michigan's insurance exchange, which will be run by the
federal government because the state legislature failed to
approve a state-run exchange, will go into effect on Jan. 1,
On Wednesday, the General Retirement System said it will
contribute more than $1.3 million toward new healthcare plans
for current employees, the Free Press reported.
Last month, Orr proposed changes to health benefits for
current city workers that are projected to save the city $12
million annually by reducing the number of plans available and
by raising deductibles.
The annual deductible for a single city worker would nearly
quadruple to $750 from $200 now under the new proposal.
The annual deductible for married employees would increase
to $1,500, and out-of-pocket expenses for a family would be
capped at $4,500, up from $3,000 currently.