SAN FRANCISCO (CN) - As local governments across the nation grapple with rising health care costs, one Bay Area county has vowed to provide its previously retired employees with lifetime health benefits under a newly approved settlement.
The Retiree Support Group of Contra Costa County sued in 2012, claiming the county reneged on its promise to cover 80 percent of health insurance premiums for retirees and their dependents for the rest of their lives.
Contra Costa County started capping contributions at a flat dollar amount in 2010, resulting in increased costs for retirees, according to the lawsuit.
On Tuesday, U.S. District Judge Jon Tigar granted final approval to a settlement in which the county agrees to cover 71.9 percent of premiums for more than 4,200 former employees that retired on or before Dec. 31, 2015.
"This settlement will enable people to go to bed at night knowing they have county-covered health insurance for the rest of their lives," said Douglas Pipes, vice chair of the Retirees Support Group and a former Contra Costa County prosecutor.
The county's board of supervisors unanimously approved the settlement in March.
Board of Supervisors chair Candace Anderson said the county had to make hard budget decisions during the recession a few years ago, and one of those decisions was to cut retiree health benefits.
"The reality is we simply can't afford to keep providing that benefit," Anderson said. "With the Affordable Care Act and other benefits that are out there, we believe people will be able to afford health care after they retire."
The county no longer offers health benefits to employees that retired after 2015, she said, adding that this settlement avoids litigating the issue of whether previously retired county employees were entitled to that benefit.
"We believe it was not a vested benefit," Anderson said. "That was a legal issue that could have been answered, but we moved forward with the settlement that was very much embraced by both sides."
The deal will cost the county an extra $676,000 per year and increase its liability for paying out health benefits in the future by $8.59 million, according to the county administrator's estimates provided to the board.
Jeffery Lewis, an attorney with Keller Rohrback in Oakland who represents the plaintiff class, said many people that work in the public sector agree to take lower salaries due to promises of lifetime benefits. He said this agreement ensures the county will keep its promises.
Only 57 retirees, or 1.33 percent of the settlement class, chose to opt out of the deal, according to the motion for final settlement approval.
U.S. District Judge Jeffery White had dismissed the original complaint without prejudice in July 2012, finding the plaintiffs failed to submit adequate evidence of the county's alleged pledge to cover 80 percent of retirees' health insurance premiums for the rest of their lives.
In May 2013, Tigar refused to dismiss a second amended complaint, which cited specific memorandums and resolutions in which the county "agreed to provide retiree health benefits to eligible retirees."
The parties started negotiating a settlement in August 2015 and finalized the deal in October 2015, according to Mary Ann Mason, chief assistant counsel for Contra Costa County.
"This settlement agreement provides certainty for both parties and ensures the retirees continue to receive the same dollar amounts they've been receiving from the county," Mason said in a phone interview. "It also fixes the county costs at an anticipated level and gives us certainty so we avoid future cost increases."
Pipes, also a retiree covered under the agreement, said he believes Contra Costa is the only county in the state that has guaranteed health benefits for the lifetime of its retirees.
"Five years from now if there's a change in the county Board of Supervisors or financial challenges, there's a legal guarantee to provide healthcare for retirees," Pipes said.