Providence May Appeal Ruling on Retiree Medicare

Providence may appeal a Rhode Island Superior Court ruling Monday that for now stops it from switching police and fire retirees to Medicare after they turn 65.

Judge Sarah Taft-Carter, in a preliminary temporary injunction on Monday, upheld contracts that guaranteed them lifetime health coverage from the city. She ordered a full hearing on the matter and will likely rule around July 1.

Retirees sued last year over the Medicare switch.

“I told my clients, if we win, don’t get too excited, and if we lose, don’t get too disappointed,” said the retirees’ attorney, Joseph Penza, founding partner of Olenn & Penza LLP of Warwick, R.I.

Providence, the state’s capital, had wanted to switch employees to Medicare from Blue Cross and Blue Shield of Rhode Island to curb costs. The capital city is one of the few in the state that does not move worker coverage to Medicare at age 65.

Taft-Carter said the retirees stand to face greater hardship through an adverse ruling. “Failure to grant an injunction would impose weighty new health care costs on the police and fire retirees that could seriously impact their standard of living,” she said.

She also ruled that an economic purpose must address fiscal emergencies and not merely a city or town attempting to save money.

“It’s not the fault of the current administration, but obviously nor is it the fault of the retirees,” Penza said.

Providence has a $110 million budget deficit for fiscal 2012. According to a review panel, the city’s combined unfunded pension liability and other post-employment benefits, or OPEBs, stand at $2.3 billion.

Mayor Angel Taveras “is very concerned and disappointed with the decision,” said his spokesman, David Ortiz. “We are closely reviewing the decision and discussing our options, including an immediate appeal to the Rhode Island Supreme Court.”

The decision could affect the constitutionality of a state law that gave cities the choice of moving retired employees to Medicare to save costs. It could also affect other court challenges to public-employee benefit reductions in the aftermath of pension overhaul legislation the state passed last fall.

Taft-Carter, in another ruling that benefited labor, also ruled in September that an “implied contractual relationship” exists between the Employees Retirement System of Rhode Island and participating employees.

Moody’s Investors Service, Fitch Ratings and Standard & Poor’s lowered Providence’s general obligation bond ratings last March, all with negative outlooks. Their ratings are A3, A and BBB-plus, respectively.

The city was one of nine municipalities in the state to receive downgrades from Moody’s last year, with pension shortfalls an overriding issue.

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