Retirees file suit against health care plan cuts

DETROIT (AP) — Attorneys for a committee representing retired Detroit municipal employees and other unions filed a lawsuit Tuesday in federal court to stop health care benefits cuts imposed by the city’s state-appointed emergency manager and slated to go into effect Jan. 1.

The suit in U.S. District Court in Detroit asks a judge to issue an injunction and seeks a jury trial.

It claims Kevyn Orr is violating a commitment by the city to provide workers and their dependents with health care benefits at a significantly reduced cost — or no cost — upon their retirement.

“Many of the retirees need the city to fulfill its end of the bargain,” the lawsuit said. “Many of them are economically vulnerable, living near the poverty line, of advanced age and incapable of returning to the workforce. Many of them simply cannot afford to go out-of-pocket an additional several thousand dollars per year and will be unable to procure comparable health care benefits on their own.”

Earlier this month, notices started going out to about 8,000 retirees under 65 that Detroit will cut their $605-per-month retiree health insurance coverage and instead give them a monthly $125 payment to use toward a private health insurance exchange plan.

Disabled retirees under age 65 will get a $200 monthly payment. More than 10,500 retirees over 65 will be offered a Medicare Advantage plan with city-funded premiums.

Detroit’s 10,000 active city workers will see their individual deductibles nearly quadruple from $200 annually to $750.

The changes will impact about 28,500 current and retired city workers and are part of Orr’s efforts to reduce the amount of money being spent by the cash-strapped city. On July 18, he made Detroit the largest city in the U.S. to seek bankruptcy protection.

Orr was appointed in March to oversee Detroit’s finances. He has said the city’s $18 billion or more debt includes underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.

“Unlike pensions, no money has ever been set aside to fund retiree health care costs, and the city faces an unfunded health care liability it cannot afford,” Orr’s spokesman Bill Nowling said Tuesday. “The city has put forward a health care plan for retirees that is fair and commensurate with retiree health care coverage offered in the private sector and being pursued by other municipalities.”

Retirees and unions are among the creditors opposing Detroit’s bankruptcy petition. Hearings begin Wednesday before federal Judge Steven Rhodes on whether the city is eligible for bankruptcy.

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