By Joe Guillen
The personal cost of health care will increase next year for many City of Detroit retirees.
The city announced today that, effective Jan. 1, it will replace health care benefits for retirees younger than 65 with a stipend of $125 a month to buy coverage.
The city intends to help those retirees figure out the best health insurance plan offered under the Affordable Care Act. Retirees older than 65 would transition to Medicare, and the city would pay all or most of the premium costs.
The idea was introduced late last month by emergency manager Kevyn Orr. Orr has consistently stated that the city needs to cut pensioners’ benefits, in part because unfunded retiree health care liabilities make up nearly $6 billion of the city’s $18 billion in long-term obligations, according to a report he filed to support the city’s bankruptcy filing.
"Our goal has always been to provide quality coverage that the city can reasonably afford, and we have done that," Orr said in a statement.
This week, the city began mailing retirees pamphlets with information about the changes.
The Detroit Retirees Committee, established to help protect the interest of retirees as the city goes through Chapter 9 bankruptcy, criticized the plan.
"This action seeks to reduce health care-related payments to retirees by more than 80% 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. Worse still, this payment is only for retirees. There is nothing for spouses or dependents," said Terri R. Renshaw, who chairs the group.
The changes are expected to help slash the city’s annual health care costs for retirees from $170 million to $50 million or less, city officials have said.
Retirees younger than 65 who will receive a $125 stipend can seek a federal subsidy to help pay for health coverage under the state health care exchange, also known as the Michigan Health Insurance Marketplace.
The subsidy will be available for single retirees with an income of less than $45,960 and married retirees with no dependents who have an annual income between $15,510 and $62,040, according to Orr’s office.
The $125 monthly payment will be treated as taxable income, although retirees will not be required to spend it on health care, according to the city.
Most retired city workers receive modest annual pensions. Retired Detroit police officers and firefighters, on average, get about $34,000 a year, and retirees from Detroit’s general city pension fund get less than $20,000.
Ed McNeil, of the Detroit Retiree Sub-Chapter 98 of the American Federation of State, County and Municipal Employees, said the stipend is insufficient.
"I think it’s ridiculous for anybody to say, ‘I’m going to give you $125 to live on,’ " McNeil said. "It’s not going to get you much of anything."
■ Related: Read details of the plan from the city’s website (PDF)
Starting Jan. 1, Medicare-eligible retirees will be able to select either one of three Medicare Advantage insurance plans that include drug benefits for which the City of Detroit will pay most or all of the premium, or, a Medicare Part D drug benefit-only plan for which the City of Detroit will pay all of the premium.
The city has contracted with Blue Cross Blue Shield of Michigan and the Health Alliance Plan of Michigan to offer a Medicare Advantage insurance plan for retirees older than 65. The plan will provide Medicare-eligible retirees with drug benefit coverage, Part A and Part B Medicare coverage and coverage for some services that Part A and Part B do not cover. Blue Cross will offer two Medicare Advantage plans, and HAP will offer one.
Active Detroit city workers also are facing changes to their health care benefits. Orr proposed a new health care plan in early August that he said would save the city nearly $12 million a year while increasing workers’ deductibles and caps on out-of-pocket costs.
Under the plan, annual deductibles for single city workers with no dependents would increase from $200 to $750, and total out-of-pocket expenses would be capped at $1,500. For married city workers with a family, annual deductibles would increase to $1,500 and out-of-pocket expenses would increase from $3,000 to $4,500, according to Orr’s office.
Employees would continue to pay 20% of premium costs; co-pays for prescription drugs and doctor visits would stay the same. The city would continue to offer vision and dental plans.
Source: Detroit Free Press
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