Published October 16, 2013
As bankruptcy hearings continue in Detroit to determine the legality of the city’s historic Chapter 9 bankruptcy filing in July, state workers are hoping to get some clarity on the future of their pension benefits.
While bankruptcy and union lawyers continue to battle it out, the city has already announced significant changes to its retiree health benefits program. Effective Jan.1, retired city workers under age 65 will no longer receive full coverage from the state and will instead receive a $125 stipend to shop in Michigan’s health-care exchange under the newly-rolled out Affordable Care Act.
Retired city workers already eligible for Medicare will continue to have “most or all” of their costs covered by the city, according to The Detroit Free Press . At $6 billion, health-care benefits for retired city workers are nearly one-third of the city’s total $18 billion in liabilities. The Detroit Free Press also reports the city estimates these cuts will reduce coverage costs for retirees to $50 million or less from $170 million.
The Department of Health and Human Services estimates the average American will pay $328 per month for a premium health insurance plan on the exchanges before any subsidies. HHS reports the weighted average premiums in Michigan for a lowest cost silver plan are $271, $306 for the second-lowest cost silver plan and $222 for the lowest-cost bronze plan. The retired workers receiving the $125 monthly stipend in place of full benefits could still be eligible for subsidies under the ACA, for those making up to 400% of the federal poverty level—about $45,000 for an individual, according to the Kaiser Family Foundation.
FOXBusiness.com reached out to Detroit Emergency Manager Kevyn Orr, who is leading the bankruptcy restructuring, multiple times for comment but did not receive a response at press time.
Steve Kreisberg, AFSCME director of Collective Bargaining, says the drop to a $125 monthly stipend to cover health costs isn’t enough for retirees younger than 65, especially since spousal and child coverage is being eliminated.
“This will have a major impact, especially if they insured their spouses and children, there is no longer room for that,” Kreisberg says. “They are also replacing coverage that cost between $500 and $600 a month with $125 a month.”
He says the changes have left former city workers confused, angry and concerned, and the union feels the city has made these announcements discreetly to have minimum media attention.
“These guys would like to do this in the dead of night if they could,” he says. “These [pensioners] are feeling fear and panic—they have had a health-care plan throughout their retirement, and they are put into a changing situation without notice, systems or process.”
Of the more than 20,000 retirees and city workers impacted, Kreisberg estimates nearly half have been AFSCME members at some point. He adds the retiree pension benefit estimates put out by the city are “wildly overblown.”
“Even outside analysts have said that—the only ones who believe those numbers to be true are the city,” he says.