The southern California city of San Bernardino has proposed virtually eliminating retiree health insurance costs under a bankruptcy exit plan it must produce by May 31, Reuters reported yesterday. Steven Katzman, who represents a committee of retirees in talks with the bankrupt city, says a tentative deal has been struck under which retirees would sacrifice the city subsidies they currently receive for health care coverage in exchange for a guarantee that San Bernardino continues to fund and not cut current pension benefits. The deal would follow an approach taken in the recent bankruptcies of Detroit and Stockton, Calif., where retiree health care was slashed or eliminated, while pensions emerged relatively unscathed. San Bernardino recently said that it intends to pay its biggest creditor — CalPERS, the state's powerful public employee pension fund, with assets of $300 billion — in full. Under the proposed San Bernardino deal, retirees would agree to permanently accept drastic cuts to health care coverage that have taken effect in recent months, Katzman said. Under those changes, retirees' were moved from an insurance pool that includes current, younger workers to an "unblended" pool of only retired workers, hiking their premiums significantly. A monthly subsidy of $112 that the city provided retirees to help with premiums was also scrapped, though a small number of older employees who are ineligible for Medicare will still receive a small stipend, Katzman said.
