State’s FY2013 Budget Skimps on Group Health Insurance
July 11, 2012 - 4:00pm
The State of Illinois budget for fiscal year 2013 underfunds the expected cost of State group health insurance by at least $550 million, paving the way for a significant increase in unpaid bills unless more spending is authorized later this year.
Governor Pat Quinn signed the $33.7 billion budget on June 30, 2012, one day before the start of the current fiscal year. The Governor had recommended a General Funds budget for FY2013 of $33.8 billion based on a somewhat higher revenue projection.
The Governor’s proposed budget included $1.17 billion in General Funds for group health insurance. Public Act 97-0685, one of several FY2013 appropriation bills passed by the General Assembly and signed by the Governor, only includes about half as much for group insurance—$550 million.
The reason for the reduced appropriation is not clear. In Senate debate on a similar bill, legislators said that authorizing only enough health insurance spending for half a year would increase the Quinn administration’s bargaining power with labor unions and that additional spending could be approved later.
Both the Governor’s recommendation and the enacted appropriation were also based on the assumption that the State’s FY2013 health insurance costs would be reduced by approximately $250 million from $1.4 billion in FY2012. The issue of reducing State health insurance costs is on the table in the State’s negotiations with its largest union over a new contract to replace one that expired on June 30, 2012. Terms of the existing contract were temporarily extended and an independent mediator was brought in to assist with the talks.
As discussed here, the General Assembly in May 2012 passed legislation that eliminates provisions of State law under which approximately 90% of the more than 80,000 retirees covered by the State’s group insurance program do not pay any healthcare premiums.Public Act 97-0695 gives the Illinois Department of Central Management Services the authority to determine how much retirees will pay in premiums, subject to collective bargaining and review by the General Assembly’s Joint Committee on Administrative Rules. Premium rates are not expected to be established for several months.
If group health costs exceed appropriated amounts, the bills can be deferred to the next fiscal year and paid out of the next year’s appropriation. This exception to Section 25 of the State Finance Act has also applied to Medicaid bills. Public Act 97-0961 restricts the amount of deferred Medicaid bills to $700 million at the end of FY2013 and $100 million thereafter but does not address employee health insurance bills. The State has repeatedly used Section 25 exceptions to mask operating deficits by appropriating an insufficient amount to cover costs in one year and deferring bills to the next year.
Unpaid group health insurance bills increased significantly in FY2011 due to underfunding and are expected to remain relatively flat in FY2012. When the Governor made his latest budget recommendation, State officials expected unpaid group health bills on hand at the end of FY2013 to total $1.1 billion. That estimate assumed roughly $250 million in cost reductions. Given the underfunding in the enacted FY2013 budget, the actual amount of unpaid bills at the end of FY2013 will depend on both cost reductions and supplemental appropriations.
The FY2013 budget also underfunds the State’s contributions to health insurance programs for retired teachers and retired community college employees. However, State law mandates continuing appropriations for the Teachers’ Retirement Insurance Program (TRIP) and the College Insurance Program (CIP) in the amounts certified by the relevant retirement systems, regardless of the actual amounts appropriated by the General Assembly.
The FY2013 budget appropriates $62.6 million to TRIP, compared with a certified amount of $86.7 million. The General Assembly did not appropriate anything to cover CIP’s $4.2 million certified contribution. Without a change in the law, however, the full contributions will continue to be made, adding to FY2013 budgeted expenditures.
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