Legislators take aim at subsidy for retiree health insurance


SPRINGFIELD -- Legislation to do away with the health insurance premium subsidy available to state retirees opens a new front in the battle between legislators determined to cut the state’s retirement debt and unions representing state workers.

“It would wipe out retiree health care entirely for retired state employees,” said Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees, the largest public worker union.

The amendment to Senate Bill 1313 would eliminate subsidies for health insurance for retirees.  Instead, the Department of Central Management Services would determine how much the state would contribute to “the basic program of group health benefits on behalf of retired employees, annuitants and survivors.”

Initially, the amendment listed Rep. Frank Mautino, D-Spring Valley, as the sponsor.  That was later changed to House Speaker Michael Madigan, D-Chicago.

“This is another place where the state is spending money and it’s important as we go through the whole budget debate to look at each one of these situations and determine if that is the best way to go forward,” said Madigan spokesman Steve Brown.

20-year deal

State employees earn a subsidy toward their retiree health insurance premiums based on the number of years they worked for the state. Employees get a 5 percent reduction in premiums for each year of service. 

As a result, employees who work 20 or more years pay nothing for their own health insurance in retirement. However, they do have to pay if they want dependents to be covered by their insurance, and they also have to make co-payments for insurance services.

“The typical retiree already pays more than $3,000 out of pocket in health care costs,” Lindall said.  “They have modest incomes and retired on the promise of affordable health care.”

Moreover, Lindall said, the premium subsidy is written into state labor contracts.

“Any statutory changes to retiree health care would violate our collective bargaining agreement,” Lindall said.

The current AFSCME contract expires June 30.  The state and union are already in talks on a new contract.

Retired teachers and community college workers have their own insurance programs, to which they pay premiums regardless of how long they worked.  The state has subsidized that coverage as well. Next year’s subsidy for teachers was scheduled to be nearly $87 million and just over $4 million for community college retirees.

However, Gov. Pat Quinn wants to eliminate the subsidy in next year’s budget, and teachers’ unions fear that will lead to higher premium costs for retirees.

“We’re talking about just a small amount of money,” said Jim Reed, director of government relations for the Illinois Education Association.  “The state should be making good on its promise.”

Reed said the union had no warning that the Mautino/Madigan amendment was being filed and does not know what concessions lawmakers want to extract.

“This is a sort of a first salvo out for negotiations,” Reed said.  “They want to get the state out of health care.”

Wouldn’t affect retired lawmakers

Legislators also receive a subsidy for their retiree health insurance, based on their years in office. However, the Mautino/Madigan legislation would not affect the General Assembly Retirement System.

“If people want to bring that into the discussion, there’s nobody ruling anything in or out,” Brown said.

Quinn has linked the health insurance subsidy to changes in state pensions that he is pursuing.  Under Quinn’s plan, employees who move to a higher cost, lesser benefit pension plan would still receive a retiree health benefit, although he has not specified what that would be.

In announcing his pension proposal, Quinn referred to the health insurance subsidy as a “very significant amount of money.”

“Those are very, very generous benefits, far higher than other states pay that are comparable to ours,” Quinn said.

Quinn said 90 percent of retired state workers pay no premiums for their health care, including people who may have retired as young as 55 with 20 or more years of service and won’t be eligible for Medicare for up to 10 years.

“Those 10 years between 55 and 65 are very expensive years if you are buying private health insurance,” Quinn said.

Union opposition

Sen. Jeff Schoenberg, D-Evanston, tried to pass a bill last year to require retired state employees to pay part of their health insurance premiums.  Schoenberg dropped the effort at the time in the wake of enormous opposition from state employee unions.

“We succeeded in heightening the awareness among legislators on just how costly the retiree health insurance premiums have become,’ Schoenberg said. 

Schoenberg said he does not believe that all retirees should pay for their health insurance.  Those with smaller pensions, he said, should continue to get discounted or premium-free insurance if they worked long enough for the state.

However, Schoenberg’s plan from last year would have charged premiums to retirees with pensions less than $15,000 a year.  The plan was graduated, though, so people with higher pensions would have paid more.

“I think a former judge, lawmaker, head of cardiology at the University of Illinois, are the people who should be paying more for premiums,” Schoenberg said.  “My goal is to create a threshold where retirees with limited, fixed incomes would not be impacted.  I think that any reform effort needs to include lawmakers and judges.”

Doug Finke can be reached at (217) 788-1527.