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Detroit Cuts Health Insurance Benefits For Employees, Retirees, Cites 'Dire' Situation

Wednesday, October 23, 2013
By Nora Macaluso

Oct. 16--City of Detroit employees and retirees will see reduced health insurance benefits effective Jan. 1, 2014--the result of the “dire financial situation” the city is facing, Emergency Manager Kevyn Orr said in materials distributed to benefit plan participants.

The city, which filed for Chapter 9 protection in July (25 BBLR 1005, 7/25/13), is seeking to cut costs “while ensuring employees and retirees have adequate access to health care,” Orr said in an Oct. 14 statement announcing the changes.

Retired employees eligible for Medicare will be able to either enroll in a Medicare Advantage plan that includes prescription drug benefits under which the city will pay “most or all of the premium,” or a Medicare Part D drug benefit plan for which the city will pay all of the premium.

Retirees not eligible for Medicare will receive monthly stipends of either $125 or $200, which may be used to help pay for insurance coverage under the Affordable Care Act or under a new employer.

Medicare-eligible retirees will be able to choose from plans offered by Blue Cross Blue Shield of Michigan, which will offer two Medicare Advantage plans, and the Health Alliance Plan of Michigan, which will offer one. Retirees will be responsible for deductibles and other co-insurance rules, the city said.

Current employees will see their annual deductibles rise $550 for single employees with no dependents. Paying $200 in 2013, they will pay $750 next year. Copayments for prescription drugs and doctor visits won't change.

On July 18, Detroit became the largest city ever to file for Chapter 9 protection, a move that has prompted unions and pension funds to take the issue to court (25 BBLR 1185, 8/29/13).

Claude Montgomery, an attorney representing a committee of retired city employees, said in a bankruptcy court hearing Oct. 15 that the changes are part of a plan to “eliminate or reduce already accrued financial benefits” for Detroit pensioners.

Montgomery, arguing that Michigan's constitution forbids the impairment of pension rights, said Orr's proposal to reduce pension benefits represents a “taking of property” and that the health plan changes represent imminent harm to city retirees.

Judge Steven Rhodes of the U.S. Bankruptcy Court for the Eastern District of Michigan was hearing arguments on whether Detroit is eligible to file for bankruptcy, with a trial on the issue scheduled for Oct. 23.

To contact the reporter on this story: Nora Macaluso in Lansing, Mich., at nmacaluso@bna.com

To contact the editor responsible for this story: Phil Kushin at pkushin@bna.com

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