Consultant: State retirees should pay more for health insurance
Thousands of retired state employees could see their health insurance premiums rise dramatically under a series of payment options being considered by state lawmakers.
One of the scenarios laid out to lawmakers could result in retirees with pensions of $125,000 or more paying nearly $8,300 a year in health insurance premiums.
Depending on the option selected, retirees with pensions in the $35,000 to $50,000 range could pay from $1,476 a year to more than $5,800 annually. If dependents also are covered, the price would be higher.
The various options were contained in a report prepared by Mercer Health and Benefits, a consultant hired by the state to analyze health insurance costs for state government retirees and recommend ways to save the state money.
All of the options are designed to have employees begin paying about 50 percent of the state's $686 million in retiree health insurance expenses. The Mercer study determined retiree and retiree dependent premiums in Illinois account for only about 9 percent of those costs now.
On fast track?
The various payment options would save the state between $260 million and $300 million annually. The figures are based on the cost of the state's fee-for-service plan, the costliest insurance option and also the plan most popular with retirees.
The premium payments would also cut into the state's retiree health insurance liability, now estimated at more than $30 billion. That liability is in addition to the state's pension fund debt.
"It (the report) underscores the need to do something on this issue immediately," said Sen. Jeff Schoenberg, D-Evanston. "We can significantly reduce our unfunded liability."
Schoenberg is a co-chair of the General Assembly's bipartisan Commission on Government Forecasting and Accountability that ordered the study. He said he wants to move forward with a payment plan during the final two weeks of the General Assembly's spring session.
"Now that we have hard data by which we can make sound decisions, I would expect that we will be considering legislation before we adjourn," he said.
His view wasn't shared by all COGFA members. Rep. Raymond Poe, R-Springfield, said the issue needs more study.
"They're rushing something through. I don't know if there is time," Poe said. "I'm not buying into a lot of it, because we more or less had a contract with these people when they retire. A lot of them are on fixed incomes. They wouldn't be able to afford it."
Schoenberg said a plan would have to be phased in, and union employees wouldn't be affected until after the current contract expires June 30, 2012. About 35 percent of retirees were union members.
Sen. Dave Syverson, R-Rockford, said it would be a "just horrendous idea" to impose premiums on non-union retirees and delay it for union retirees.
"We can't do something that patently unfair," he said. "We should do our homework and look for something to phase in the future. I wouldn't plan on something happening for a year."
Pretty good deal'
The report concluded that state retirees in Illinois have a very generous health-care benefit compared not only to the private sector, but to other state governments.
About 76 percent of retirees pay no health insurance premiums for themselves because they have worked more than 20 years for the state or started before 1998. Mercer examined health-care benefits in 30 other states and found that premiums averaged about 54 percent of costs.
"State workers (in Illinois) historically have had a pretty good deal," said Todd Swim, who prepared the Mercer study. "Hopefully state employees will recognize the very generous benefits the state has provided them and they need, to be able to preserve these benefits, to make some changes. It's a tough message, but one many other organizations have gone through."
The option getting the most attention now would base insurance premiums on a retiree's pension income, length of service and retirement age. Retirees with higher pensions would pay more. Premiums would be lower for those who work longer and retire later in life.
Schoenberg's concern has been state employees who retire before age 65, when they become eligible for Medicare coverage. State health insurance costs for pre-Medicare retirees are substantially higher than the cost for retirees who qualify for Medicare.
The Department of Healthcare and Family Services previously said the state's fee-for-service plan costs nearly $4,000 a year for a retiree on Medicare and more than $11,500 a year for someone not on Medicare.
Doug Finke can be reached at (217) 788-1527.
Sen. Jeff Schoenberg, D-Evanston, has said retirees with large pensions should pay more for their state health insurance. An executive summary of Mercer's retiree health care contributions study found 3,881 state retirees whose pensions amount to more than $125,000 a year.
System Members Average Annuity
Teachers Retirement System 453 $168,000
State University Retirement System 1,756 $173,000
State Employees Retirement System 797 $167,000
Judges Retirement System 800 $160,000
General Assembly Retirement System 75 $157,000
Health Alliance/Humana controversy
Lawmakers should know by the end of the week if they have the power to reject the state's controversial plans for employee health insurance for next year.
Sen. Jeff Schoenberg, D-Evanston, said he was told that Attorney General Lisa Madigan's office will issue its opinion on the matter by the end of the week. As co-chairman of the General Assembly's bi-partisan Commission on Government Forecasting and Accountability, Schoenberg sought Madigan's opinion on whether COGFA can veto the health options.
The state wants to drop two popular HMOs and replace them with plans offered by Blue Cross Blue Shield. Health Alliance and Humana, the two HMOs being dropped, are protesting the decision. They contend the switch will end up costing the state more money because employees will migrate into more costly insurance plans in order to keep their current physicians.
The protests are still being evaluated.
Schoenberg said the Department of Central Management Services has extended the open enrollment period for employees to select their health care options. Open enrollment began May 1 and is scheduled to end May 31.
CMS, though, said it has not decided how long the enrollment period will be extended. Spokeswoman Alka Nayyar said that will depend on when the protests are resolved.
She also said CMS has no plans to update employees on the insurance situation.
"At this time CMS does not plan to issue new letters due to concerns that the information may be outdated by the time it is received in case additional changes are made, as well as the cost of printing and mailing," Nayyar said.
She said employees should check the state's benefits web site, www.benefitschoice.il.gov, for updated information.