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VOL. 129 | NO. 181 | Wednesday, September 17, 2014

Retirees Sue As Council Adjusts Health Insurance Changes

By Bill Dries

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Three retired Memphis Police officers and the widow of a Memphis Police officer filed suit Tuesday, Sept. 16, against the city of Memphis seeking a temporary restraining order to stop changes in city government health insurance benefits by the time the open enrollment period begins next month.

The Chancery Court lawsuit came as the Memphis City Council voted Tuesday to make some changes for retirees under the age of 65 who have no other coverage, outside federal health insurance exchanges, to preserve their coverage and coverage for their spouses at least through 2015.

The council’s amendment affects approximately 300 city employees.

The lawsuit, which leaders of the city’s police and fire unions, said at the outset they were certain to file, seeks to specifically preserve the 70 percent city government subsidy of insurance premiums for any and all retirees and their spouses.

The elimination of that premium remains intact effective with the start of the calendar year 2015 with the open enrollment period possibly being delayed from its early October start, according to council chairman Jim Strickland.

The lawsuit, filed by attorneys John F. Canale, Deborah Godwin and Clyde Keenan, argues that the council’s decision to eliminate the premium or city subsidy in June “reversed more than half a century of adherence to the legal obligation of the city of Memphis to provide this benefit.”

The action specifically cites a section of the city’s charter, approved in a 1966 referendum, that reads “The council shall have no power to reduce or in any way diminish the pension benefits and other fringe benefits provided for all city employees as of the date the proposed new form of government becomes effective.”

But when union leaders and retirees made that point earlier this summer as the discussion about benefits changes began to become a debate, the administration of Memphis Mayor A C Wharton Jr. and council attorney Allan Wade said subsequent charter amendments also approved by voters as well as litigation and court rulings changed the terms and the ability of the council to make changes.

Wharton has said the changes in the health insurance benefits are necessary because the liability for city government is unsustainable going forward as well as the city’s pension fund liability.

Wharton has proposed that some of the savings from the health insurance coverage changes go toward paying the pension liability which the state of Tennessee requires the city to pay over the next five fiscal years.

The lawsuit alleges city government leaders “diverted” money that was “required by law” to go toward the pension fund.

“The city of Memphis knowingly failed to make its required contributions to the pension fund and intentionally diverted that money for other purposes,” the lawsuit reads. “The city of Memphis knowingly caused and created the problem resulting in insufficient funds to pay for the lifetime subsidized health insurance coverage in breach of its legal obligation to do so.”

The plaintiffs seek a restraining order on the new health insurance terms until a full hearing on the matter can be held and from there either a temporary or permanent injunction. They also seek a declaration “preventing (the city) from eliminating” the 70 percent subsidy and coverage.

Meanwhile, council members indicated Tuesday there will be a move to delay an Oct. 7 council vote on pension plan changes that are a companion to the health insurance coverage changes already approved by the council.

Strickland said the council will not have heard from its actuary consultant by the Oct. 7 council meeting.

In other action Tuesday, the council approved a resolution by council member Janis Fullilove that directs Wharton and his administration to review another alternative health insurance plan from municipal union leaders and retirees that appears to be a version of the high deductible plan the Memphis Fire Fighters Association submitted earlier.

The resolution does not reverse the council approval in June of the new health insurance terms.

And the city’s actuary firm and healthcare provider have already indicated the broad outline of the high deductible plan did not deliver the $24 million in savings its advocates estimated it would produce.

Since then, backers of the earlier plan have been working on parts of the plan to get a dollar figure closer to the city’s estimates and working with the city’s numbers or assumptions to produce those estimates.

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