LAKEPORT – A long-running disagreement between more than a dozen city retirees and the city of Lakeport over a surcharge on health benefits came to a head on Tuesday.
As more than 20 people – retirees, spouses and current city employees – looked on, the Lakeport City Council voted to cover a surcharge on retiree health benefits for one more month, after which retirees will have to pay for the fee themselves if the city can't find a less expensive health insurance option.
For the last three years, “early retirees” – those who retire before age 65, when Medicare kicks in – have successfully convinced the Lakeport City Council to cover the surcharge on their health benefits that went into effect in the 2006-07 fiscal year.
In addition to those early retirees – the youngest of whom is 45 years old – the city has 41 active employees and 22 regular retires in its health insurance program, officials reported.
The surcharge was assigned by Redwood Empire Municipal Insurance Fund (REMIF) – the 15-member group that oversees the city's insurance – because it found in a survey that early retirees cost more money to cover than active employees.
Over the past year the surcharge has grown by about 15 percent, now costing $92.55 per person per month, $194.38 for two or $277.67 for a family on a monthly basis.
What's forcing the issue is the intersection between the surcharge and a memorandum of understanding (MOU) between the city and its employees – the provisions of which were first adopted in July 1, 1998, as Lake County News has reported.
The MOU states that the city doesn't have to pay more for health benefits for retirees than active employees, City Attorney Steve Brookes told the council Tuesday.
Since it was signed, there has been a lot of debate about the MOU's intent. “It says what it says,” said Brookes.
Before that MOU was signed, city retirees had been guaranteed full health care benefits until Medicare became active, after which the city provides a supplemental health plan. New hires no longer are offered the full retirement health care benefits.
Councilman Bob Rumfelt said that he called REMIF – at the urging of retiree Lloyd Wells – and concluded the surcharge was legitimate, and resulted from REMIF trying to keep costs down.
Tom Engstrom, who retired from the city's police chief post in May of 2005, said he's appeared every summer since his retirement to ask the council not to make retirees pay the surcharge.
On June 17 he and the other 16 retirees received a letter from the city that referred to the MOU's language, dubbed them “early retirees” and informed them that they'll now be responsible for paying the surcharge out of pocket.
Engstrom said he and his fellow retirees were recruited, hired, retained and retired with the understanding that they had that full health coverage in retirement.
He quoted a Lake County News story from June 5, 2008, which explained how the council last year had concluded that they should continue paying the surcharge (See the story here: http://bit.ly/RxFJ3E ).
Engstrom appealed to council members, some of whom are themselves retirees, and reminded them of how difficult it is to find another $200 a month to make ends meet.
“We are put in a separate category because of our age, and that to me is age discrimination,” he said, asking the council to honors its promise to the retirees, which earned him applause.
Mayor Ron Bertsch asked Brookes if they've looked at any other health programs.
Brookes said REMIF does have some other options, including a high deductible plan. There may be some less expensive options, he said, adding the caution that they may not turn out to be as good as the current plan. Rural areas typically struggle to get the kind of good health plan at a good price that Lakeport currently has.
One reason why it's more expensive to take care of retirees is because “they got busted up working for you,” Pat Haas, a former city of Department of Public Works employee who retired after 33 years and nine months on the job, told the council.
Cindy Engstrom, quoting the June 2008 Lake County News article, referred to the council's vote to add language “to update the retiree health rules to settle the issue for current retirees.” She pressed Brookes on whether that had been done. He said it was not.
“The bottom line is whether or not you are people of integrity who keep your promises” – even if it hurts, said Engstrom.
Councilman Roy Parmentier pulled out a copy of the MOU and reread the part about the city not being required to pay more for premiums on retirees than active employees.
“You knew it when you signed it,” he said, waving it at the retirees.
Cindy Engstrom said a surcharge is different than a premium.
Council members suggest working with retirees
Bertsch asked Brookes to meet with the retirees and look at their options, which Brookes said he would do. Councilman Jim Irwin asked if they already were locked into the current health plan for this year, and Brookes agreed that they probably are.
Council member Suzanne Lyons said her husband should have been able to retire three years ago but his retirement benefits were changed. She pointed out that only three council members currently accept health insurance benefits, and questioned if that would benefit premium prices. It wouldn't, said Brookes.
Lyons and Bertsch are the only members that don't accept the city's full benefits – health, vision and dental – for council members. It's estimated to cost the city $45,209 for the 2009-10 fiscal year to insure the other three members.
In contrast, if each of the early retirees had at least one spouse or dependent in addition to themselves on the health plan, it would cost the city just under $40,000 to pay the surcharge for a year.
“It's no secret what we're trying to do,” said Irwin, explaining that the council needed to adjust to lower general fund revenue.
The question they're struggling with, Irwin added, is whether everyone rather would have a bad health plan that's completely paid for or a “Cadillac” plan for which they had to pay a portion.
Bertsch said they needed to look into it. “We probably should have looked at that last year.”
“We did look at it,” Brookes replied. He said other plans are more expensive, although they hadn't considered the high deductible options.
He said the city has relied on REMIF for its purchasing powers. “They've done a good job for us.”
“I would like to see us try to work with them,” Bertsch said of the retirees. “There's got to be an option out there.”
Wells, who said he also called REMIF to ask questions, told the council that the the surcharge “is not something that's industry standard.”
He said they know from experience that not everything REMIF offers is a good deal. “REMIF doesn't have all the answers.”
Noting, “We'll be fighting this thing until we're all dead and buried,” Parmentier suggested taking time to research alternative health plans.
“This month we pick up the surcharge – after that, no guarantees,” he said.
Irwin asked for clarification on Parmentier's suggestion. At the same time, some retirees complained loudly from the audience.
“I'm talking to Roy,” said Irwin.
“We're talking to you,” one man shot back.
Parmentier said he worked for Frito Lay for years, and he had to pay for his health plan.
He and Haas, sitting in the audience, began arguing back in forth. Haas' sentiments were that the city should keep its promises.
Parmentier made the motion to pay the surcharge for July and bring the issue back for further discussion in August, at which time early retirees may have to start paying the surcharge.
Bertsch said he was concerned that taking only 30 days to look for options was “asking too much.”
“It has to be settled,” Parmentier replied before the 5-0 vote.
Bob Barthel, who just took early retirement from the city's Department of Public Works after 29 and a half years, reminded the council that retirees like him took an early exit to save the city money and prevent layoffs. He said his early retirement will save the city $86,000 over the next three years.
“We have saved and we are going to save the city an incredible amount of money, and I would just like the city to remember that,” said the 54-year-old Barthel, who just got his first pension check.
He told Lake County News after the meeting that a few weeks before he accepted early retirement he was told that he would receive the full health coverage. Then, before he received his first retirement check, he got the city's letter warning early retirees would have to pay the surcharge.
Barthel said he also had been on the city employee union's negotiating team, and that city employees often agreed to cost of living increases of 1 or 1.5 percent – rather than the more common 3 percent – in an effort to help save the city money.
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