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Detroit Retirees Will Lose Health Insurance In 2 Months If City Manager Gets His Way

By Alan Pyke on January 6, 2014 at 10:41 am

"Detroit Retirees Will Lose Health Insurance In 2 Months If City Manager Gets His Way"

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CREDIT: AP

About 24,000 retired Detroit public servants will soon receive letters notifying them that they are losing their health insurance on March 1, even as the city claims to be negotiating with retirees’ groups to strike a better deal on health care. The bankrupt city’s emergency manager Kevyn Orr is sticking to the same proposal for drastic retiree health care cuts that he initially intended to implement this month, prompting a group that represents retired Detroit workers to threaten they will sue the city.

For the two-thirds of the retiree group who are old enough to be eligible for Medicare, the plan means shifting onto the government-run insurance program for seniors. But 8,000 younger retirees will have their insurance plans replaced with a monthly stipend check of just $125 to subsidize the cost of insurance plans they will have to find on their own. When that plan was initially floated last fall, a pair of retired firefighters young enough to be stuck with stipend checks told ThinkProgress that the change would doom their recoveries from the serious injuries they sustained protecting the city. Retired librarian Gwendolyn Beasley, 67, said the shift to Medicare’s less-generous coverage would mean choosing between groceries and prescriptions.

Orr first pushed the transition date back from January to February, citing issues with the rollout of Obamacare. Then the retirees’ representatives sued to block the move, leading the bankruptcy judge overseeing Detroit’s insolvency to order the city to renegotiate the retiree health care cuts under the supervision of a mediator. According to retirees’ representatives, though, the city is going ahead with essentially the same plan even as those negotiations are ongoing.

Terri Renshaw, the chairwoman of the court-appointed committee representing retirees, said that disregard for retiree interests and disinterest in negotiating with workers’ representatives is in keeping with Orr’s approach to the city’s problems ever since he was appointed. “The Retiree Committee is frustrated that the City renewed its effort to fundamentally and unilaterally alter health care coverage for retirees on the eve of continued mediation aimed at resolving all retiree issues, including health care,” Renshaw said. “Such actions would be shocking but for the city’s track record of acting unilaterally and failing to negotiate in good faith.” The committee says the city is ignoring plans that could save money but give retirees better coverage, and that as a result it could reinstate the suspended lawsuit.

Orr’s spokesman responded that the mailed notifications don’t conflict with the ongoing negotiations and insisted that Orr’s office is only trying to keep retirees informed of what would happen in March should the negotiations fail. Orr’s previous bad-faith dealings with retiree groups earned him a reprimand from Bankruptcy Judge Steven Rhodes late last year, though Rhodes still ruled that the city was eligible for bankruptcy protections despite Orr’s misdeeds.

Emails that Orr and Gov. Rick Snyder (R) never intended to become public show that the two men were already dead set on bankruptcy before Orr was even appointed, rendering his negotiations with retirees a charade. The man who was State Treasurer at the time of the filing said that it “looks premeditated.” Municipal finance experts and pension experts warned well ahead of the July filing that Orr appeared to be rushing the city into a pre-ordained bankruptcy in order to make pension cuts possible.

But the lack of good faith didn’t derail Orr’s machinations, and now he’s pushing steep retiree health care cuts while offering far more generous deals to the banks that bear the real responsibility for bankrupting Detroit. The cuts Orr wants would save the city 82 percent on retiree health care, giving retirees just 18 percent of what they were promised. By contrast, he initially wanted to give banks upward of 75 percent of what they were owed, prompting Rhodes to block the deal for being too generous. Now Orr’s team wants Rhodes to approve a revised version of the deal that still pays banks 60 percent on those debts.

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