Court tosses out lawsuit over public retirees' health care

 Jamey Dunn

A judge today sided with the state in a disputed over the cost of public retiree health insurance.

Last year, lawmakers approved and Gov. Pat Quinn signed a measure to allow the state to begin charging retired workers premiums for their health care. Many retired state workers and university employees do not pay premiums if they worked for more than 20 years. Those retirees are required to pay for coverage for family members, along with co-pays and other out-of-pocket costs.

State workers sued, arguing that their retiree health benefits were protected, much like pension benefits, by the Illinois Constitution. But Sangamon County Circuit Court Associate Judge Steven Nardulli dismissed their complaints today. “The Pension Code and the [The State Employee Group Insurance Act] are structurally separate and substantially different. They are separately administered and separately funded. They provide benefits that are fundamentally different,” said the ruling. (link via Capitol Fax) “The cost of health insurance premiums are not fixed at the time of retirement and are paid from the General Revenue Fund, as opposed to fixed benefits paid from a protected fund. The fact that there is an indirect or incidental impact on pensions because of the enactment and amendment of the SEIGA does not make the benefits under the SEIGA pensions in nature.”

Gov. Pat Quinn’s administration said retirees should expect to start paying premiums after July 1. “I am pleased with the court’s action today to uphold this important law. This is good news for the taxpayers and another step forward in our effort to restore fiscal stability to Illinois,” Quinn said in a prepared statement.

Senate President John Cullerton said the ruling makes his proposal to change the state’s pension systems seem like a legal possibility. Cullerton supports a proposal that would force employees to choose between their compounded-interest cost-of-living adjustments (COLAs) or access to a retiree health care plan. Employees who opted to keep their COLAs would have their pensionable salaries frozen, so no future raises could be considered for benefits. He argues that employees must be given something in exchange for a reduction in pension benefits, and access to the health care plan would be the trade. “The real impact of this ruling is that it reinforces my position that a guarantee of health care access can be negotiated as part of a contractual change to protected pension benefits. Only the benefits found in the Illinois Pension Code are protected by the Pension Clause,” Cullerton said in a prepared statement. “Pension reform is my top priority. While I acknowledge that there are a number of ways to structure a bill, I believe that a reform based on contractual principles of offer, consideration and acceptance is the best way to ensure that the legislation is upheld in court. I will continue to advocate that giving state employees and retirees a choice between cost-of-living allowances and access to health care is the best way forward.”

Union officials say Cullerton’s plan presents a coercive choice and does not offer employees something of value in exchange for benefit cuts.

The American Federation of State, County and Municipal Employees Council 31 backed a class action suit in Randolph County that was rolled into today's ruling. “We are greatly disappointed by today’s decision,” AFSCME Executive Director Henry Bayer said in a prepared statement. “We continue to believe this law impairs the rights of men and women who retired after careers with state government or state universities to obtain health insurance coverage according to the terms in place when they retired. It also violates the constitutional clause that prevents the diminishment of retirement benefits earned by public employees. We intend to consult with the plaintiffs and our union partners about our options going forward.”

AFSCME also announced today that its members ratified a new three-year contract with the state. A tentative agreement was reached last month, after more than a year of negotiations. Under the deal, employees will receive back pay from raises that Quinn previously froze. They will take a pay freeze for the current fiscal year but would see 2 percent increases in the last two years of the contract. Workers also agreed to pay higher premiums, co-pays and deductibles for their health care. Quinn estimates that the move will save the state about $900 million in employee health care costs over the life of the contract. “This new contract takes into account the state’s fiscal challenges, while also recognizing the vitally important work state employees do,” Bayer said.