Quinn Administration Retools Proposal to Increase State Retirees’ Health Premiums

May 4, 2010 - 2:34pm

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In response to opposition from state lawmakers, Governor Pat Quinn’s administration has scrapped a proposal to reduce state costs by $254.5 million in FY2011 by requiring all retirees to contribute to their health insurance premiums. Instead, state officials are considering alternatives that call for less drastic increases in retiree payments.

As previously discussed in this blog, the State currently pays the entire bill for health insurance premiums for 90% of retired state workers. Under Illinois law, retirees with at least 20 years of government service and their survivors do not have to pay any portion of their health insurance premiums.

Governor Quinn proposed in his FY2011 budget that the State limit its share of retiree health insurance premiums to $300 per month. The change would mean that Medicare-eligible retirees, for whom state insurance serves as supplemental coverage, would pay between $4 per month and $50 per month, depending on which insurance offering they chose. For retirees not on Medicare, the cost would be between $290 per month and $500 per month, according to the Department of Healthcare and Family Services (HFS).

Julie Hamos, newly appointed Acting Director of HFS, told members of the House Committee on Appropriations-Human Services at a hearing on April 22, 2010 that her staff is considering the possibility of phasing in premium increases more gradually over time. “I don’t intend to go ahead with that original plan,” Ms. Hamos said. “It’s too much.”

State law would have to be changed to require all retirees to contribute to their healthcare premiums. At the hearing on April 22, several lawmakers and a representative of the American Federation of State, County and Municipal Employees said the Governor’s proposed health insurance change would place a huge burden on retirees, some of whom had taken early retirement partly because of the State’s health benefits.

The proposal also came under fire on April 20 at a hearing of the legislature’s Commission on Government Forecasting and Accountability [click here to listen to audio of the proceedings]. Some lawmakers criticized the idea of requiring retirees who now are paying no premiums to pay more than $6,000 a year. Ms. Hamos defended the idea of cost-sharing in general, described the State’s current retiree health coverage as “a very generous benefit” and said that many state employees who take early retirement go on to work at other jobs. Ms. Hamos is expected to be confirmed as HFS director by the Illinois Senate later this week.

Besides changes to the Governor’s retiree health proposal, state officials are also considering applying for federal funds to subsidize health insurance for early retirees, according to Ms. Hamos’ testimony at the April 22 hearing. Federal healthcare reform legislation includes an early retirement reinsurance program that provides $5 billion to temporarily help employers cover the health cost of early retirees.

The program becomes effective June 23, 2010 and will end on January 1, 2014. Both public and private employers may apply for the program, and Ms. Hamos said she expects that many states will seek a share of the federal money for early retirees.

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