Evans Rules City Health Insurance Cuts Can Proceed

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VOL. 129 | NO. 213 | Friday, October 31, 2014

Chancellor Walter Evans has denied a move by city government retirees to stop the city from enacting changes to health insurance coverage effective Jan. 1.

Evans ruled Friday, Oct. 31, in the lawsuit filed by the retirees in September.

He specifically denied a motion by attorney for the retirees to grant a temporary injunction, which would have barred the city from enacting the health insurance coverage changes the Memphis City Council approved in June.

The lawsuit challenges the city's decision to stop subsidizing 70 percent of the premiums for health insurance coverage of retirees under the age of 65, and the case continues before Evans.

But the city is not barred from enacting that change and others while the case is being decided.

Attorneys for the retirees claimed city employees long have been promised that the city will provide them with health care coverage for the rest of their lives after they retire.

Attorneys for the city contend city government has the ability to change the specific terms of that coverage and Evans agreed with them.

'Although the city may provide such health insurance subsidies for 50 years, plaintiffs did not reasonably rely on the oral promises of various persons ... because plaintiffs were charged with knowing the law, which did not unambiguously indicate that the city would continue to pay a permanent or lifetime 70 percent portion of the retirees' health insurance,' reads the written ruling from Evans that was released Friday afternoon.

Evans also ruled the retirees did not show they 'suffered a detriment' when they worked for the city such that a promise of a lifetime health insurance subsidy should be enforced 'because plaintiffs failed to present sufficient proof that they could have been paid more by another employer if they had not worked for the city.'

The retirees also cited a 1966 ordinance that bars the reduction of city employee pension or fringe benefits.

But Evans questioned whether the premium subsidy was a part of the benefits mentioned in the ordinance.

Even if that were the case, he ruled a 1985 ordinance gives the city the ability to change retirement benefits.

The retirees could appeal Evans' ruling.

The health insurance changes are the first of two sets of changes to city benefits proposed by Memphis Mayor A C Wharton Jr. to right the city's financial condition which is imperiled by the unfunded liability the city bears for health insurance coverage as well as pension plans.

Experts have told the city both obligations are unsustainable under their present terms.

The council is scheduled to vote on pension plan changes by the end of the year. Those changes, in whatever form, would not take effect until 2016.