Detroit retirees have made their feelings known throughout the bankruptcy process. (David Coates / The Detroit News)
Detroit — City retirees struck a tentative deal Friday with the city that provides better health insurance options for the remainder of the year in an attempt to resolve a fight over previously imposed cuts.
The settlement-in-principle is expected to resolve a U.S. Bankruptcy Court lawsuit concerning insurance and other post-employment benefits for Detroit’s retirees.
In a joint statement late Friday, the city and retiree groups said the program, which would run from March 1 to Dec. 31, must be approved by the respective parties. Once executed, the retirees will dismiss their lawsuit against the city and Emergency Manager Kevyn Orr.
The agreement, however, does not address retiree health or welfare benefits in later years, an issue that remains in dispute in the city’s bankruptcy.
The proposed terms include several additional benefits for retirees. Among them, is an increase in the monthly stipend from $125 to $175 for each retiree under age 65, if the retiree acquires health insurance coverage under the U.S. Affordable Care Act, and the retiree’s annual household income is less than $75,000. For those over 65 and not eligible for Medicare, the monthly stipend would be $300, rather than $125, as the city originally proposed.
Other terms include:
■A monthly stipend of $125 for a retiree’s spouse who is not Medicare eligible, if the spouse acquires health insurance under the exchanges created by the Affordable Care Act, and the retiree’s annual household income is less than $75,000.
■A new city-sponsored health care plan option to be offered to retirees not eligible for Medicare: Retirees taking this option will be required to pay the full cost of the premium and administrative fees, less a $100-per-month contribution from the city.
■Paying certain amounts for some retirees with household incomes near or below the federal poverty line and are not eligible for Medicaid.
■Reimbursing Medicare eligible retirees enrolled in one of the city-sponsored Medicare Advantage Plans for certain catastrophic out-of-pocket drug costs.
■Sponsoring health reimbursement accounts and providing a $115 monthly contribution for Medicare eligible retirees who opt out of Medicare coverage under the city-sponsored Medicare Advantage Plans.
According to the announcement, several benefits will not be implemented until May, although certain cash payment benefits will be retroactive to March 1.
The city also said it will be extending the deadline for Medicare eligible retirees currently in a city-sponsored Medicare Advantage Plan to opt out. The opt-out date for Medicare eligible retirees currently receiving benefits under a city-sponsored Medicare Advantage Plan was extended to Feb. 7, and retirees were advised to contact the city’s benefits administration center.
The agreement noted that the city will provide additional benefits to those announced in booklets sent in early January to retired city workers. Once the settlement agreement is signed, retirees will receive a detailed written description of these new benefits as soon as feasible, officials said.
According to details in the city’s preliminary plan of adjustment that were revealed Friday, the city plans to set up an independent health care trust — known as a Voluntary Employees Beneficiary Association (VEBA) — to provide health care benefits to current and future city retirees. The trust will hold the partial funding of the obligations toward retiree health care and will determine how much retirees will receive. Detroit’s Big Three automakers also used similar trusts to handle the retiree health care costs of union retirees.
The plan calls for the city to make payments to the VEBA totaling $524 million over 10 years, with no interest rate payments attached to the note. The city’s bankruptcy filing listed $5.7 billion in long-term unfunded liabilities for retiree health insurance.