By Joseph Lichterman

DETROIT (Reuters) - Detroit emergency manager Kevyn Orr may replace healthcare coverage for about 11,000 city retirees under 65 with a $125 per-month stipend to purchase coverage from insurance exchanges established under the U.S. Affordable Care Act, according to a local news report.

Retirees over 65 would be covered by the U.S. Medicare program, but officials have discussed the potential changes for younger retirees at a meeting of Detroit's General Retirement System, the Detroit Free Press reported.

Orr's spokesman, Bill Nowling, said he couldn't comment on the specifics of the current proposal, but he said Orr initially spoke with the city's unions and pension boards in June about the changes to their healthcare plans. Nowling said that at the time Orr proposed offering retirees under 65 $110 per month to purchase coverage from an exchange.

The plan with a $125 monthly stipend would reduce the city's annual retiree healthcare costs to less than $50 million from $170 million, Lamont Satchel, the city's director of labor relations, told the Free Press. All retirees under 65 who belong to the General Retirement System or the Police and Fire Retirement System would be affected.

Satchel said the city has not finalized the plan for the monthly stipend, but Orr could make a decision as soon as this week.

Satchel could not be reached immediately for comment. The city's offices were closed on Thursday after a widespread power outage knocked out electricity throughout downtown Detroit.

The city's $5.7 billion in liabilities for healthcare and other retiree benefits account for about half of its $11.5 billion in unsecured debt. There are about 23,500 retired city workers, more than double Detroit's current city payroll.

Detroit has more than $18 billion in total debt, and in July became the largest city in U.S. history to file for municipal bankruptcy protection.

Nowling said it was imperative for the city to quickly reach a deal with the retirees about their healthcare because the insurance exchanges are scheduled to launch October 1.

"This is absolutely crucial to getting (the city's financial situation) figured out," Nowling said. "What's even more important is we have to get an agreement and move forward on a plan because retirees are going to have to start making decisions about what provider they want to seek out."

Michigan's insurance exchange, which will be run by the federal government because the state legislature failed to approve a state-run exchange, will go into effect on January 1, 2014.

On Wednesday, the General Retirement System said it will contribute more than $1.3 million toward new healthcare plans for current employees, the Free Press reported.

Last month, Orr proposed changes to health benefits for current city workers that are projected to save the city $12 million annually by reducing the number of plans available and by raising deductibles.

The annual deductible for a single city worker would nearly quadruple to $750 from $200 under the new proposal.

The annual deductible for married employees would increase to $1,500, and out-of-pocket expenses for a family will be capped at $4,500, up from $3,000 currently.

(Reporting by Joseph Lichterman; Additional reporting by Bernie Woodall; Editing by Jeffrey Benkoe and Tim Dobbyn)

 

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