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Labor secretary objects to Mission Coal's bankruptcy plan, citing health claims

The U.S. Labor Department secretary's office filed a limited objection to Mission Coal Co. LLC's Chapter 11 bankruptcy reorganization plan, calling on the company to include a provision to pay for claims incurred but not yet reported under its self-funded health plans.

The coal producer's wind-down plan does not contain funds to cover health claims incurred but not reported for its employees under its self-funded medical, dental and vision health plans once it stops operations, according to a March 11 filing with the U.S Bankruptcy Court for the Northern District of Alabama, southern division.

"As recognized by the Debtors, the confirmation and consummation of the Chapter 11 Plan requires all administrative claims to be paid in full unless the holder of such a claim agrees to a different treatment," the objection states. "... This is an objection based upon an apparent failure by the Debtors in their Chapter 11 Plan to make provision for payment of the health claims that they have already agreed to cover."

Mission operates a self-funded medical plan that costs $2.5 million monthly, a dental plan that costs $75,000 a month and a vision plan costing $25,000 a month, according to the filing. The debtors estimated that those plans' cost totaled approximately $2.7 million a month and that about $1.9 million "was owing at the commencement of these Chapter 11 cases."

Mission's employees would not be in danger of their insurer not paying "their rightful claims for necessary medical treatment" had the company used a traditional insurer to pay for claims rather than seeking to save money by self-funding its health plans, according to the department.

The coal company received court approval in February for its Chapter 11 disclosure statement to creditors, who had until March 11 to vote on or object to its reorganization plan. The court will hold hearings to discuss potentially confirming the plan and approving the sale of considerably all of Mission's assets on March 20.