Bankrupt Detroit and its retirees reached an agreement in a health insurance dispute that may end a lawsuit against the city.
Retirees filed suit in November to stop the city from shifting retirees to Medicare and giving those under age 65 a $125 monthly stipend to get their own insurance.
The parties reached a deal in principle Thursday night covering benefits through the end of 2014, mediators in Detroit's bankruptcy said Friday in a statement.
Some features of the deal include the increase to $300 in the monthly stipend for retirees over age 65 who are not eligible for Medicare. The stipend for retirees under age 65 will be upped to $175 if the household income is less than $75,000 and the retiree acquires insurance under a health care exchange.
A court hearing set for next week has been canceled.
"The settlement was reached after intensive bargaining sessions over the past few weeks," mediators said.
The office of state-appointed emergency manager Kevyn Orr said Friday in a release that the city also will extend the deadline to Feb. 7 for Medicare-eligible retirees to opt out of a city-sponsored Medicare Advantage plan.
"The agreement must be reduced to writing and approved by the respective clients," Orr's office said. "Once executed, the lawsuit will be dismissed."
Orr was hired last March to fix Detroit's finances. He has said Detroit's debt is at least $18 billion and filed for bankruptcy in July. The city's bankruptcy petition was approved in December.
Earlier this week, he submitted a preliminary plan for restructuring Detroit's debt to city creditors. He expects to file the plan in bankruptcy court in about two weeks.
Download: Detroit Bankruptcy filing December 2013
The following details are from the Detroit emergency manager's office:
1. An increase in the City’s monthly stipend from $125 to $300 for each retiree over the age of 65 who generally is not eligible for Medicare.
2. A monthly stipend of $125 for a retiree’s spouse who is not Medicare eligible, if such spouse acquires health insurance coverage under the Exchanges created by the Affordable Care Act, and the retiree’s annual household income is less than $75,000.
3. An increase in the City’s monthly stipend from $125 to $175 for each retiree under the age of 65, if such retiree acquires health insurance coverage under the Exchanges created by the Affordable Care Act, and the retiree’s annual household income is less than $75,000.
4. A new City-sponsored healthcare plan option that will be offered to retirees not eligible for Medicare: retirees enrolling in such option will be required to pay the full cost of the premium for such option and administrative fees, less a $100 per month contribution to be made by the City toward the cost of such coverage.
5. The City will pay certain amounts for certain retirees with household income near or below the federal poverty line who may nonetheless not be eligible for Medicaid.
6. The City will reimburse Medicare eligible retirees who are enrolled in one of the City-sponsored Medicare Advantage Plans for certain catastrophic out-of-pocket drug costs.
7. The City will sponsor health reimbursement accounts and provide a $115 monthly contribution for Medicare eligible retirees who opt out of Medicare coverage under the City-sponsored Medicare Advantage Plans.
It should be noted that several benefits will not be implemented until at least May 2014, although certain cash payment benefits will be retroactive to March 1, 2014.