Traverse City Record-Eagle

December 11, 2013

Kalkaska struggles to pay retiree health care

By MICHELLE MERLIN mmerlin@record-eagle.com
Traverse City Record-Eagle

---- — TRAVERSE CITY — Charlie Shafer recently fell from a ladder, a tumble that compressed three discs in his back and damaged several nerves.

He had to undergo back surgery and is recovering just fine in his Kalkaska home.

But Shafer, 64, who worked for the Village of Kalkaska for 20 years and gave up raises to put money into a health insurance account, worries that if his fall occurred just a few years in the future, he might not have had health insurance to pay for it.

“All those years I put into that fund, it’s not fair to me not to get that,” said Shafer.

Kalkaska Village officials are hoping to change how the village pays for retiree health care, and are reexamining a decades-old agreement between past employees and the village.

“More and more people were retiring and the cost of health insurance was going up and up and up,” said Penny Hill, Kalkaska’s village manager. “People started looking at it and said we should look at it in a different way, so in the future you don’t get into a situation where it’s overly burdensome for whoever is providing the benefit.”

The small village has an estimated $5.6 million in projected retiree health care costs, but the retiree health fund contains only about $240,000. Insurance premiums cost an average of $9,800 a month, Hill said, and any overrun is pulled from the village’s general fund.

Village administrators grappled with the problem for years, ever since it became apparent that the general fund was needed to underwrite portions of retiree health insurance costs.

In the past, village employees passed on raises in order to route money into an account that would guarantee their health benefits for life. But now, only three employees pool money into that account, and are unable to support the 14 who depend on it for health care.

“It ran out because they weren’t hiring full-time people to keep the fund going,” said Shafer, who worked for the Department of Public Works.

Rising insurance costs compound the problem.

“Nobody anticipated insurances costs going up so high over the past five to 10 years,” said Village President Jeff Sieting.

Village officials said they must re-examine the original agreement to determine if they can find wiggle room as they try to address health care costs.

“We’re trying to find out what our options are and what the legal status is of that fund,” Hill said. “They’re basically looking at everything about this, how it started, what the intent was, how many people are on it, examining it in detail.”

Village members also are looking into alternative health plans for their retirees, Hill said, and are trying to ascertain how the Affordable Care Act new national health care plans could factor in to their future.

But retirees contend village officials want to cut them off from health care entirely.

“What they say now is the contract we had drawn up years ago, it’s not fair the village has to support the fund because the fund has run out,” said Shafer. “They’re trying to say the contract we had years ago is null and void.”