The news article below is a follow-up to the story from the last issue of the Health Care Report (FebruaryMarch 2011) (http://www.bw.edu/academics/bus/programs/hcmba/nl/QHCR_February-March_2011.pdf)
As I noted in the last issue of the Health Care Report, I believe that the real culprit in all of this is less the retirees, but the politicians at all levels of government who did not have the courage to say No! It is only natural for public employees' unions, etc. to argue for increased pay and retirement benefits for their members. The problem is that government, at all levels, has never had effective check and balances in place that would ensure prudent decisions during these negotiations. It is much easier to give into these employee demands than to face a strike. It is much easier to allow future administrations, legislators or generations to bear the brunt of these fiscally irresponsible decisions than to address them now.
All governmental retirement plans, even those that are managed prudently, have a vested interest in addressing the overall solvency of these programs. As some plans go down the road of bankruptcy, there will be widespread anger by the citizens as they see their taxes increase significantly and their governmental services cut back dramatically. That anger could carry over to all retiree programs, no matter how fiscally prudent they are being managed.
Judge rules City of Cincinnati may alter retirees' health coverage
A Hamilton County judge ruled Thursday that City Hall has the right to alter retirees' health coverage to require most to absorb a higher share of the cost. The ruling was a major legal and financial victory for the city of Cincinnati's troubled pension system.
If upheld on an almost certain appeal, Common Pleas Judge Norbert Nadel's decision could save Cincinnati's $2 billion retirement system tens of millions of dollars on city retirees' medical coverage, which this year will cost about $46 million.
This is a very big step in helping us to provide equitable health coverage for retirees and that helps with the health of the system as well, said Paula Tilsley, executive director of the Cincinnati Retirement System. The system provides health care to more than 6,000 city retirees, spouses and dependents.
Neither retirees who filed the lawsuit seeking to overturn the health coverage changes nor their lawyer returned phone calls for comment Thursday.
The lawsuit stemmed from City Council's decision in 2009 to switch from a health plan that cost many retirees only negligible amounts such as a $50 annual deductible and $5 payments for brand-name prescriptions.
The new program has higher deductibles, co-payments and yearly out-of-pocket limits. Annual deductibles now range from $200 to $600 for most families, brand-name prescriptions cost $15 to $20, and yearly out-of-pocket maximums are $2,000 to $3,000 for in-network coverage. Retirees drawing pensions of less than $30,000 a year pay reduced amounts.
Council adopted the health coverage changes after experts warned that, without major adjustments, the city's retirement system could be insolvent within 20 years. Earlier this year, the council made additional charges that will increase retirement ages and service requirements, reduce annual cost-of-living adjustments, curtail death benefits and alter pension formulas in ways that will require many city employees to work more years for a smaller eventual pension. As with the health changes, those alterations were made to help the city rein in a projected $1 billion long-term deficit in the retirement system.
Those changes are the subject of another lawsuit now pending in federal court that could have an even greater financial impact on the city's pension plan. If that gets undone, we're back to square one, said City Solicitor John Curp.
At the heart of the case before Nadel was City Hall's argument that while retirees' basic monthly pension benefits are legally protected, health coverage is, at the city's discretion, subject to change or even elimination.
Nadel's decision is likely to draw statewide and national attention because it delves into the thorny legal question of how far, if at all, governments may go to alter benefits for existing retirees.
As in Cincinnati, the medical coverage issue could significantly affect the financial health of countless other local and state public retirement systems across the country. (Judge rules city may alter retirees' health coverage,Cincinnati.com, September 1, 2011)