STUMP » Articles » Chicago Retiree Healthcare: Some Are Out of Luck (for now) » 12 December 2016, 18:05

This one will be short, because I got home at 1:30am this morning (and got up at 5:30am); I’m giving the final exam for a class I teach; and because I really only have a little bit for this topic.

CLOCK STRIKES FOR RETIREE HEALTHCARE

Witching hour fast approaching for 10,000 city retirees

The witching hour is fast approaching for thousands of Chicago’s oldest retired city employees, barring an 11-hour legal rescue.

On Dec. 31, Mayor Rahm Emanuel will complete a 3-year phaseout of the city’s retiree health care program, including a 55 percent subsidy.

The controversial move is aimed at saving Chicago taxpayers $107 million in annual costs that would have ballooned to $307 million by 2018 and $541 million by 2023 if left unchecked, a mayoral commission had warned.

But it means that roughly 10,000 city employees who started working for the city before April 1, 1986, and do not qualify for Medicare will be on their own to search for coverage that will be difficult or too expensive to find.

They will be forced to choose between exorbitant premiums that, in some cases, are double their retirement checks or go without health insurance coverage at a time when they need it the most because of their age and declining health.

“We have people who are 75 years old who worked for the city for 30 years and more and none of them qualified for Medicare coverage. They’re being dumped into an abyss,” said Clint Krislov, lawyer for the retirees.

Krislov noted that the city is referring non-Medicare-eligible retirees to a Blue Cross-Blue Shield program at a monthly cost of either $1,295 or $1,466 for single coverage; $2,305 or $2,610 for a couple; and $3,138 or $3,622 for family coverage.

“The city has managed to drag this out and run out the clock. We have petitions, briefs and motions at all three levels of Illinois courts asking them to block the city and pension funds from turning off this coverage at the end of the year,” Krislov.

The mayor’s office had no immediate comment.

…..
Last summer, Circuit Judge Neil Cohen issued a mixed-bag ruling that threatened to prevent Emanuel from completing the 3-year phaseout.

Cohen ruled that the lifetime health care coverage of 22,000 people who started working for the city before Aug. 23, 1989, is protected by the Illinois Constitution’s pension protection clause. It states that those benefits “shall not be diminished or impaired.”

Cohen subsequently ruled that the pension funds have primary responsibility to provide a health care plan for their participants. The city was merely on the hook to subsidize at some level.

The judge dismissed the lifetime benefits claim made by retirees who started working for the city after Aug. 23, 1989. He argued that they began working under a statute that provided benefits only for limited periods of time and that those periods have expired.

But Cohen subsequently refused to enjoin the city from ending the coverage on Dec. 31.

That leaves the ultimate decision in the hands of an Illinois Supreme Court that decided a similar case in favor of state retirees, citing that same protection clause in the state Constitution.

I’m missing some stuff here, which could just be sloppiness on the part of the reporter.

There are some issues with the dates above, and if you look at other stories, there’s a confusion between when people started working for Chicago, and when they retired.

CLARIFICATION VIA A STORY LAST YEAR

Same reporter, by the way. Must have been rushed.

Emanuel completes three-year phaseout of retiree health care subsidy:

“These participants will see an additional reduction in the city subsidy by approximately 25 percent commensurate to the subsidy reductions in 2014 and 2015. The reduction in the subsidy marks the third year of a phaseout for those who retired after August 23, 1989. The reduction will save the city approximately $30 million in 2016,” the mayor’s office said in a statement.

And when did Chicago workers become Medicare eligible?

April 1, 1986.

Except for workers specifically excluded by law, employees hired after March 31, 1986, also have Medicare protection. States also may obtain Medicare coverage for workers not covered for Social Security who have been continuously employed by the same state or local governmental employer since before April 1, 1986.

So these are people who retired after 1989, but before becoming Medicare-eligible.

It’s a tough thing.

And the problem is, of course, that covering old people is really really expensive.

QUICK GRAPH: MEDICAL EXPENDITURES BY AGE GROUP

These data are a little old, but it will give you an idea. Health expenditures by Age and Gender

I will give per capita total healthcare spending, which is Table 7 from this data set.

Now, those are annual costs. On a monthly basis, it leads to about $1400/month per capita for those age 64-85; $2700/month per capita. The cost for the very old is almost twice that of younger seniors (which includes many very sick people, too.)

But you see, that’s over everybody. That’s people covered by Medicaid, Medicare, private insurance, and then even charity payors. As well as those who pay out of pocket.

This is partly why Medicare was created in the first place: the costs climb rapidly the closer you get to death. And there’s a very long tail on those costs.

It’s one thing to cover a very rare childhood disease, when you can average that over tens of thousands of healthy kids who cost almost nothing.

It’s another thing to cover heart treatment when almost everybody that age has heart ailments of some sort. And that some will need very expensive surgery.

RESCUE BY THE COURTS?

The thing is, there is an ongoing lawsuit in this case. Let’s look at how the other retiree healthcare cases shook out for Chicago and Illinois (in chrono order)

July 2014: Public Pensions Watch: Illinois Law v. Reality

What caused this particular famous Dickensian line to come to mind was an unfortunate ruling of the Illinois Supreme Court last week. The upshot of the ruling was that retiree health benefits could not be cut back, and what they meant by that was that a specific percentage of health insurance premiums would be covered by the particular pension system.

October 2014: Don’t Get Your Hopes Up, Chicago

Recently, Mayor Rahm decided to cut the retiree liability by cutting the health benefits. If you might remember, the Illinois Supreme Court ruled that retiree benefits for those in a state pension plan couldn’t be cut, so Chicago retirees thought they had a slam dunk case.

Not so fast:

“The city of Chicago has won a federal appeals court decision allowing it to proceed for now with plans to reduce subsidies for retiree health care premiums, a ruling that affects about 28,000 former city workers.

The Emanuel administration’s victory comes despite an Illinois Supreme Court ruling in July in a separate case that state retiree health care benefits are protected by the Illinois Constitution.”

…..
The argument has been that the Chicago employees and retirees are not under the state plan, and thus the guarantees in the state constitution don’t hold.

What was the benefit cut, by the way?

“The court’s denial Tuesday means some retired city workers will see their insurance premiums climb significantly when rate increases take effect Jan. 1.

Chicago is phasing out the city’s 55 percent subsidy for retiree health insurance by 2017. Retirees have sued to preserve the city’s contribution. Former workers who retired before Aug. 23, 1989, aren’t affected by the phase-out and are continuing to get subsidies of up to 55 percent.”

Two items: they’re getting rid of the city subsidy for retiree health insurance, meaning the retirees have to go on Obamacare (if under 65) or Medicare (if over), I suppose. If Chicago is successful in pushing its retirees… and then employees… on federal healthcare subsidies, it does fix the acuteness of Chicago’s problem.

Second item: people who retired before August 1989 retired over 25 years ago. Shouldn’t most of them be on Medicare already, even if they retired at an insanely early age? Kind of curious what kind of coverage is being subsidized for those over 65. I’ll have to find out later.

Obviously, I was wrong about that at the time. I didn’t realize that many of those people weren’t covered by Medicare.

What had been going on was these people were covered by a Blue Cross/Blue Shield policy that was subsidized by the city. The court ruled that the city wasn’t responsible to subsidizing… the pension funds were.

And it looks like the pension funds aren’t stepping up.

I know I don’t have all these details right (heck, the reporter getting paid to cover this had inconsistencies in the text) as to which people are and aren’t covered by Medicare, and which are and aren’t getting the city subsidy cut. Somebody please draw me a diagram so I can figure out who is getting screwed how.

I do know there’s still a lawsuit ongoing, and perhaps Chicago will lose it. But it’s not like the city can really afford this on top of everything else.

And that some people are definitely getting a huge $$ hit.

Retiree health benefits have often been overlooked in the pension squeeze, as it had always been assumed that the local governments, at a pinch, could dump their retirees onto Obamacare or Medicare or whatever. It’s been a mixed bag in the courts so far, but it looks like Chicago may be making this one stick.

And now I’ve got miles to go before sleep now… (about 100, actually)

Compilation of Chicago posts.