By Hal Dardick, Chicago Tribune reporter
May 16, 2013
Mayor Rahm Emanuel plans to start reducing health insurance coverage next year for more than 30,000 retired city workers and begin shifting them to President Barack Obama's new federal system.
The move is aimed at saving the city money and comes as the Emanuel administration has been trying to wrangle significant pension cost concessions from employee unions.
The details are in a letter the city plans to send to retirees this week.
Still getting health insurance: Police officers and firefighters who retired between the ages of 55 and 64 and are not yet eligible for Medicare but whose coverage is guaranteed under union contracts, as well as workers who retired before August 1989 and are protected by a legal settlement.
Cut out as of Jan. 1 will be the rest. That's when the city will begin a three-year phaseout of the coverage, according to the letter signed by Comptroller Amer Ahmad. During that period, premiums, deductibles and benefits could change, the letter states.
Once the phaseout is complete, those retired workers would have to pay for their own health insurance or get subsidies under the Affordable Care Act. The city-subsidized coverage is particularly important to retired workers who aren't yet eligible for Medicare, as opposed to those 65 or older who use the subsidies for Medicare supplemental insurance.
The guaranteed city health coverage was good through June 30, but the administration will continue the full subsidy until Jan. 1 to protect workers who already have budgeted their health care for 2013, Ahmad wrote in the letter.
Last year, the city spent nearly $109 million on health care for nearly 37,000 retired workers and their spouses and children who are part of the legal settlement, according to a report issued earlier this year by an Emanuel-appointed panel. Enrollment was expected to grow to more than 47,000 in the next 10 years, which would balloon costs to $541 million, the report states.
"The retirement healthcare system as it stands today is fiscally unsustainable, and we have a responsibility to ensure a secure financial path for Chicago taxpayers," Emanuel spokeswoman Kathleen Strand said in a statement after being asked about Ahmad's letter. "But the mayor also wants to ensure that our retirees who served this city honorably have access to healthcare and the critical information they need to make informed decisions."
Emanuel's decision comes as the city continues to wrangle with unions over how best to alter the city's four pension systems to avoid major financial havoc as pension-funding bills come due in the next few years. Taking away health care could give Emanuel leverage in those talks.
The four pension systems have about $20 billion in unfunded liabilities. That tab does not include an $805 million shortage in retiree health care funds, which ends up putting the pension funds that also pay a portion of the insurance costs in an even more precarious financial position.
Chicago Fraternal Order of Police First Vice President Bill Dougherty said the city's projections for future cost of health care are too high.
Dougherty called the mayor's plan "a poor decision" and suggested that it should in no way be linked to negotiations over pension changes.
"The mayor has shown that he likes to play games on different levels, and we're not interested in doing that," Dougherty said.
It's not clear what the pension funds will do about their obligation for retiree health care, said Clint Krislov, the attorney who filed the lawsuit in 1987.
Krislov said he was pleased that the city will continue to protect those who retired before Aug. 23, 1989, but he continues to study the potential effect of the changes on other workers. "We needn't jump precipitously," he said.
The settlements in that long-ago legal matter, called the Korshak case, never resolved whether the city is required to subsidize retiree health care, and if so, for how long. Retired city workers could return to court to argue that any health care cutback impairs or diminishes their pension benefits in violation of the state constitution.
Henry Bayer, executive director of the American Federation of State, County and Municipal Employees Council 31, said the uncertainties of the Affordable Care Act and the state insurance exchanges they would create make the city's plan hard to assess.
"This uncertainty will cause anxiety and fear for tens of thousands of seniors who gave their working lives to public service — men and women whose retirement savings are already under attack in the name of 'pension reform.'" Bayer said. "Our union will be working to get answers to our many questions, to ensure the City Council closely oversees the administration's proposals, and to protect access to affordable health care for city retirees now and in the future."
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http://www.chicagotribune.com/news/local/ct-met-chicago-retiree-health-care-0516-20130516,0,5823277.story?goback=%2Egde_2889111_member_241794272
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