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Grosse Pointe City

City approves changes to retiree health care

New plans include higher co-pays and deductibles

November 14, 2012

GROSSE POINTE CITY — Changes are coming in the health care of City retirees as of Jan 1, 2013.

New plans that include higher prescription drug, emergency room visit and doctor’s office visit co-pays, as well as higher deductibles, were approved unanimously by the City Council at an Oct. 15 meeting, despite protests from a number of retirees, several of whom said they are living on fixed incomes and can’t afford these changes.

City Manager Peter Dame said the changes take effect Jan. 1 and are expected to save the City about $100,000. Retiree health care cost contributions from the City totaled about $500,000 this year, he said; the changes represent about a 20 percent savings and bring the retiree plans in line with the health care plans that cover current employees. Retiree health care costs have more than doubled since 2006, rising at an average annual rate of around 15 percent, he said.

“The City has been struggling to deal with the decrease in property tax revenues,” Dame said. “We have been investigating any and every way to save money. … We are unfortunately at the point where we are asking retirees to pitch in.”

David Yarrington, a Department of Public Works employee for 32 years before his retirement nearly 13 years ago, said his wife isn’t eligible for Medicare for another six years, and these changes represent a big hit for him.

“I’m scrimping right now. … Why bother having contract talks if you’re going to take it away down the line?” he asked the council. “I don’t think it’s very fair” to do this now.

Paul Onderbeke, a public safety lieutenant who retired after 28 years in 2011, said the changes would be devastating to older retirees, especially those who retired before 1980, “when our health care was abominable.” He also noted that police and fire retirees aren’t eligible for Medicare unless they had another job after retirement, because they didn’t pay into that federal program.

“Some of these older retirees are going to really be hurting (with) this,” Onderbeke said. “They’re going to be wiped out.”

In an email, Dame disagreed.

“None of the people in this subset of retirees will be financially worse off as a result of these changes, including the one public safety retiree who is not eligible for Medicare,” Dame wrote, referring to those who retired before the full defined benefit medical plan was adopted in the 1980s. “Most will actually see a substantial reduction in the overall cost of their health plan, even factoring in the added out-of-pocket costs for deductibles or co-pays. This is attributable to the fact that the plans the City has adopted as of Jan. 1, 2013, are significantly less expensive to the City — for those we are obligated to pay their cost by contractual obligation — and to this group of individuals who pay the remainder of the cost of the plan for whatever is not covered by their monthly stipend.”

Karen Johnson, who retired as the finance director, treasurer and pension system administrator more than two years ago after working for the City for more than 34 years, said retirees paid 5-6 percent of their wages into the retirement system for future retirement and health care benefits. She said the City expects to save about $1,500 annually for her health care premium, but she’ll be faced with additional deductibles and co-insurance costs of up to $2,000, not including the increased costs for prescriptions and other services.

“What you will be doing is setting precedent,” Johnson told the council. “You will be throwing past practice out the window. Realize that the City of Grosse Pointe is the only community considering such action. It saddens me that my 34 years of service to this community is being taken so lightly. … I fear that if you continue with this action, someday I will get a letter in the mail telling me that I’m no longer covered by health care.”

Johnson asked officials to give retirees the option to pay the difference in premium cost so that they could retain their current level of coverage.

City Council member Andrew Turnbull, a health care benefit expert according to fellow City Council member John Stempfle, said he wasn’t sure if Johnson’s request to retain present coverage was possible. Turnbull said even after switching to the current structure in 2006, costs for health care have escalated so rapidly that, coupled with the loss in property tax revenue, officials have been left with few options.

“We are trying with changes to plan designs to … still give a valuable, valuable plan to our retirees, because of the valuable service that’s been given over the years,” he said.

City Council member Christopher Walsh said they “need to maintain financial viability” as a City. He acknowledged that the City could have perhaps had more interaction with the retirees while working on these changes.

“It’s not fair, but it’s not fair to all of the active (employees) who’ve taken all the cuts (in recent years),” City Council member Jean Weipert said. “There’s nothing fair about what’s going on (with reduced property values). These are terrible choices, hard choices that we have to make. We have to look at every choice. We have to save. … It makes me sad. I’m very sorry about it. … It’s just the reality of where we are.”

Mayor Dale Scrace, who has been in office for the last 20 years, said health care costs have risen much more than the cost of living during his tenure.

“At the end of the day, we have to balance the budget and we have to look at the whole picture,” he said. “It’s not singling out retirees. … We have to look at this holistically. We’re not out of this (financial crisis) yet.”

In the last fiscal year, Turnbull said the City used its entire “surprising surplus” of about $500,000 for retiree health care costs.

But that’s of little comfort to retirees, a number of whom have said they retired earlier than they would have liked because they were trying to preserve the benefits they had, and some of whom are trying to now figure out how they can cover rising health care expenses when they’re no longer working.

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