Detroit city retirees represented through the federally appointed Committee of Retirees in bankruptcy court are rejecting the recommended changes to health care benefits for their families under emergency financial manager Kevyn Orr.
The group said the City of Detroit began mailing books to retirees on Oct 11, advising them that the city will unilaterally impose significantly worse health care benefits at significantly greater costs to retirees.
The group said its current health care benefits are vested and lifetime in nature that were negotiated by retirees in lieu of compensation.
“This action seeks to reduce health care related payments to retirees by more than 80 percent and would eliminate all health care benefits for the 8,000 retirees who are not eligible for Medicare, only providing them with $125 per month to purchase far inferior coverage,” said Terri L. Renshaw, chair of the committee. “Worse still, this payment is only for retirees. There is nothing for spouses or dependents.”
According to the group, for retirees who are Medicare eligible, “the city’s action is devastating as it doubles their out of pocket maximum expenses for medical care and increases prescription drug costs anywhere from 200% to 1,000%. The plan offers no coverage at all if someone is in the Medicare ‘donut hole,’ with prescription costs skyrocketing for those with any specialty prescription drug requirements.”
However, Orr’s spokesman, Bill Nowling, in a release sent out Tuesday evening, said the new arrangement is the latest in a series of city restructuring initiatives aimed at lowering benefit costs while ensuring employees and retirees have adequate access to health care.
Nowling said most active employees will see a decrease in their share of insurance premiums, but will pay higher deductibles and certain out of pocket maximums under the new structure. Retirees who are younger than 65 will receive a monthly stipend of either $125 or $200 with which to help purchase coverage from state health care insurance exchanges, or to pay for coverage provided by a new employer.
“This new health benefits structure allows the city to provide quality health care to its active employees. It also will provide retirees who are enrolled in Medicare with supplemental coverage, and it will help younger retirees who are not yet Medicare eligible to afford coverage until they are old enough to transition to Medicare,” Orr said. “Our goal has always been to provide quality coverage that the city can reasonably afford, and we have done that.”
The group said retirees who are Medicare eligible and who reside outside the state of Michigan will get hit even harder, with little choice, higher premiums and costs for prescription drugs potentially increasing 1,500% to 3,000%.
“The city’s actions were taken without court approval and were made over the objections of the Retiree Committee and others closely associated with the bankruptcy case who had been seeking a more humane, long-term solution to health care issues,” Renshaw said. “Higher costs, less coverage and huge increases in prescription drug payments are the key components of this plan. These reductions, coupled with the city’s threatened pension reductions, is draconian, inhumane and unprecedented. Exposing thousands of retirees on fixed and limited incomes to this burden is unacceptable and we will spend the days and weeks ahead fighting this plan.”
In an interview with the Michigan Chronicle, Brenda Goss Andrews, president of the Retired Detroit Police Members Association, said Detroit needs to put a face on the financial crisis in the city, to show how much suffering is about to be meted out on “people who have worked hard, earned their pensions.”
FACT SHEET FOR CITY OF
DETROIT PROPOSED CHANGES
RETIREE HEALTH CARE BENEFITS
■ There are more than 20,000 retirees from the city of Detroit, who include police officers and firefighters, as well as the city’s many non-uniformed employees. Most of them retired between 1980 and 2000. Most live in Michigan, with approximately 7,500 still living in Detroit itself. Also affected by changes to the retiree health care benefits are the many spouses, dependents and survivors of retirees who depend on the city’s promised health care benefits.
■ The city’s new plan seeks to go into effect on January 1, 2014.
■ The plan will eliminate all healthcare benefits for the 8,000 Retirees who are not eligible for
Medicare, except to provide them with $125 per month to purchase far-inferior coverage that could easily triple their share of healthcare expenses — or worse, depending on their circumstance — and require them to go out-of-pocket to pay premiums.
The Harm From The City’s Plan to Retirees Who are Not Medicare Eligible (Generally Those Under 65 Years of Age and Certain Uniformed Retirees)
■ Currently, the city contributes between $605 per month for a retiree and spouse not eligible for Medicare and $1,834 for a non-Medicare eligible family. Now, the retiree — and only the retiree — will receive a check for $125 per month. If a retiree was disabled in the line of duty, the check will be $200 per month.
■ These monthly checks will constitute income and thus be taxable to many Retirees.
■ The drop to $125 per retiree in city funding is insufficient to enable a retiree or a retiree and
spouse — let alone a retiree and family — to procure comparable coverage on the health care exchanges without incurring significant out-of-pocket premium charges. Given that many such retirees and their spouses and families live on fixed and limited incomes, the economic impact will be significant and in many cases dire.
■ The health insurance the city contractually agreed to provide — promised to provide — and the retiree earned, as deferred compensation — has covered approximately 90% of the health care costs incurred. The city’s plan will eviscerate such coverage.
■ On the Affordable Care Act exchanges, a couple making $31,000 annually (twice the federal poverty level) would have to pay an additional $453 annually — above the city’s contribution and any federal subsidy.
■ For a couple who incurs an average amount of medical charges in a given year, this will result in an annual increase in out-of-pocket health care spending that could easily exceed $5,000 or more.
■ The new plan eliminates many retiree contributions to Medicare eligible Retirees, their spouses and dependents.
■ The city’s plan eliminates the city’s premium payments for all dental and eye care.
Detroit retirees say health care cuts ‘inhumane’