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Cross walks back Madigan health insurance plan

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Illinois

* The SJ-R has a report on a bill which passed the House Executive Committee yesterday that ostensibly ends government subsidies for state retiree health insurance, but does still allow CMS to set premium levels…

House Minority Leader Tom Cross, R-Oswego, a co-sponsor of the bill, said the state spends $876 million on retiree health insurance. He said 78,000 state retirees pay no premiums for their health insurance, something that costs nearly $7,400 per person.

“The goal is not to eliminate health-care coverage, but to make it sustainable,” Cross said. “If you want to have health-care coverage, I think the reality is people are going to have to pay something for it. You can’t provide it at no cost.” […]

Under the bill, the Department of Central Management Services would determine the level of premium payments retirees need to make. Cross plans to add an amendment stipulating that the payments be equal for all retirees, whether state workers or lawmakers, although he also said premiums could be indexed to a retiree’s pension.

“If someone is making $20,000, they should pay a different amount than someone making $100,000,” he said.

This will almost undoubtedly have to be a bipartisan roll call, so if Cross wants changes, he’ll probably get them.

* Madigan also tipped his hand a bit about how this won’t be the final piece of legislation…

Madigan said that he does not consider the bill to be linked with negotiations about pension reform. Gov. Pat Quinn has proposed that employees be given the choice of keeping their subsidized health care benefits while seeing a reduction in their pension benefits or footing the bill for their health care while keeping their current benefits.

“[SB1313 is] a significant step, and a step we clearly ought to take if, for no other reason, for no other reason, to set the tone for the budget making for the next 30 days,” Madigan said. He said he is backing the bill, in part, because of a request from Quinn’s office. Quinn ducked the news media after a public appearance in Springfield today, and as of press time, his office had not replied to questions about the legislation.

* React…

The American Federation of State, County, and Municipal Employees Council 31, the public union that represents most of the state state’s workforce, said the legislation interferes with the collective bargaining process now under way. AFSCME Council 31 and Quinn are negotiating a new contract; the current one expires this summer.

The AFSCME Council 31 Legislative Director Joanna Webb-Gauvin said retiree health benefits have been viewed as compensation.

“This has always been a part of the collective bargaining process and we’re in opposition because we feel that process is being violated,” Webb-Gauvin said.

Beyond having an unfunded pension liability of $83 million, the state also has $54 billion in unfunded retiree health care liabilities, according to the Illinois Policy Institute, a right-of-center think tank.

posted by Rich Miller
Thursday, May 3, 12 @ 9:48 am

Comments

The really big question is how CMS will determine what premiums retirees will pay for health insurance.

Comment by retired Thursday, May 3, 12 @ 9:54 am
Madigan said same premium for all. Which is crap - should be percentage based on your pension. Let those who are getting 6 digit pensions pay their fair share.

Comment by Former Merit Comp Slave Thursday, May 3, 12 @ 9:57 am
It should also be based on how many years you worked for the State, why should someone who worked 35 years pay same as a employee who only worked 20 years.

Comment by Stevie Thursday, May 3, 12 @ 10:00 am
My proposal:

If your pension salary is $10K annually you pay 10% of the premium, if your pension pays 30K you pay 30%, if your pension pays 100K you pay 100%. So for every $1K increase in pension income, you contribute an extra &74 per year to your insurance.

Seems pretty fair to me.

Comment by TCB Thursday, May 3, 12 @ 10:01 am
Good for Cross! (NO Snark ..)

This is how you get to be relevent when you can put some heat on the majority, because they need you.

Would like to see Cross parlay his votes on the changes into something else he wants … horse trading on bill for another is fair game.

Work some magic, Tom Cross … you have some leverage, see how far the lever can take you.

Comment by Oswego Willy Thursday, May 3, 12 @ 10:04 am
When I read the bill and it’s 8 amendments it is unclear whether the GA, Judges, elected officials like the Governor etc. are also included in this as are all state and university employees.
There are sections that refer to that idea but the are not worded the same nor are they mentioned in the first part of the bill where it is very plain that it will be a cut for state employees.

And yes it should also be based on the pension received. If you are getting over 100,000.00 in pension you should pay more.

I still feel this is very unfair to the rank and file workers who stayed with the state when they were making extremely low salaries, sometimres putting in a full week and making below the poverty level. They satyed because there was the promise of having a secure future. And now their health insurance is being cut and placed in the hands of the most inept agancy in the state.

Comment by Irish Thursday, May 3, 12 @ 10:14 am
I want to know why state employees, especially retired state employees, are the ones who always take the “punches” from the legislators? Why is Illinois such a deadbeat state? It has nothing to do with state employees and has everything to do with a legislature that can’t be fiscally responsible. Afterall, we are currently paying out of our pockets doctors’ and dentists’ bills because the state isn’t. It is time for these legislators who keep doing the same damage to be removed.

Comment by seebee Thursday, May 3, 12 @ 10:14 am
this should be indexed to income, not pension. Keep in mind that pension may only be part of a retiree’s income. If someone has a small pension, but a large total income that reflects a spouse’s income, that person should pay more than someone with a larger pension that represents total retirement income.

Comment by soccermom Thursday, May 3, 12 @ 10:14 am
It is strange to me that so many of the comments offer “tweaks” to the overall proposal rather than reject it wholesale. I agree completely with commenter “seebee” (above). Retired state workers stayed in their jobs factoring pension and health benefits as structured during their employment against opportunities elsewhere. They also managed their finances accordingly. To change the rules now is dishonest and probably also unconstitutional. Oh yeah, I forgot, it’s Illinois.

Comment by JustaJoe Thursday, May 3, 12 @ 10:38 am
Cross and Madigan still working roughly together, on a lot of tough issues, as they did with setting the initial spending limits. I hope this continues. The Senate should take notice.

Comment by mark walker Thursday, May 3, 12 @ 10:41 am
We got into this mess over a long period of time. We shouldn’t try to fix it in a short period of time. That is, it should be fixed going forward with new hires. Kneejerk legislation is what we do best in IL and it usually ends up getting thrown out by the courts. Also, indexing the % retirees pay to total income is unenforceable and would also cheat those who sacrificed, and saved and invested well.

Comment by Soccertease Thursday, May 3, 12 @ 11:05 am
If anything, it should only apply to current employees, and then, on a sliding scale to allow them to adjust to the newly imposed, increased costs of retirement. It’s unconsionable to hit current, or those with over a certain threshhold of state service (ie close to retirement) fixed-income retirees with these costs.

And since we’re making retirement more and more untenable for retirees, how about considering the removal of the limits on state employment post-retirement. The people for whom they worked, some for 30-35 years, are the only ones who know how valuable they are in this low-employment environment.

Since all these new plans are designed to hit retirees in the pocketbook, let them at least work for the state in a job that would otherwise need to be filled by someone else, and the state might even save money with a retiree.

Comment by PublicServant Thursday, May 3, 12 @ 11:19 am
Why is Madigan so willing to give authority to CMS all of a sudden? He wants COFGA to be involved in just about all CMS decisions like union negotiations and facility closures. How can CMS determine the appropriate amount to be covered if the legislature 1st has to allocate the money? This move seems to defy the pattern he has been establishing over the last few years. I don’t get it.

Comment by Casual observer Thursday, May 3, 12 @ 11:20 am
CMS sets the premiums. After 28 years I thought I was free of those people.

http://www.youtube.com/watch?v=UPw-3e_pzqU

Comment by Leave a Light on George Thursday, May 3, 12 @ 11:24 am
Free health care was never guaranteed to retirees, indeed not all systems provide it. I do not question that expectations will not be met, but fair is not really a relevant concept here.

Comment by Anonymous Thursday, May 3, 12 @ 12:11 pm
“Free health was never guaranteed…” Agreed, however, the state said if I completed 20 yrs it would pay my health costs. I completed over 20 and retired. Now THE SUPREME SPEAKER says “never mind”?? He should be removed.

Comment by wizard Thursday, May 3, 12 @ 12:29 pm
Sorry, I meant COGFA.

Comment by Casual Observer Thursday, May 3, 12 @ 12:36 pm
Re: Retiree Health Care

See GASB 45. The link is http://www.gasb.org/st/summary/gstsm45.html

“..the state also has $54 billion in unfunded retiree health care liabilities…”

If the $54 bil comes out of GASB reporting, well, it had better be somewhat factual.

The problem here is that these costs were ‘off the books’ type costs up until the last few years, whereas now these costs have to be developed and included in all local governments (above a certain annual budget amount) and state governments financial reporting.

And the bond markets take this type of material into account.

Even if you want to address the issue over a period of time, Illinois is going to have to come up with a credible plan.

And right now, Madigan and Cross have a plan out there. You may not like it, but you better have something else as an alternative which is as good or better.

Comment by Judgment Day Thursday, May 3, 12 @ 12:39 pm
Dear Judgement Day: If your neighber cut your grass and you paid your neighbor on your credit card and you didn’t make your credit card payment, is this the fault of your neighbor? Should he be so unfairly obligated to give that money back? There are several ways to cut spending in this State. Just because someone came up with a sure way to make money doesn’t make it the right way or even yet, moral. The legislature all the way back put us into this situation and they need to find another way that makes sence to get us out of this trouble. There have been several suggestions that will never be considered because the democratic way is a quick fix without thinking. This will give them more places to spend more money on themselves.

Comment by I cant believe this Thursday, May 3, 12 @ 1:18 pm
.

Comment by . Thursday, May 3, 12 @ 1:18 pm
Judgment Day @ 12:39 pm:

The one point you made needs to be emphasized. The reporting rules changed. Nothing else really changed, just the rules. But now everyone is up in arms because the financial markets don’t like the numbers being reported.

You have the same situation at the Post Office, which is being forced to fully fund all their future health insurance liabilities in just a few years, and it looks like it will end up bankrupting them (remember, they aren’t really government). And this is just because the defintion of how this stuff gets reported and paid for was changed.

I’m not discounting the fact there is a real liability and a real cost (and always has been), but you have to wonder if the “immediate call to action” isn’t partially a made up crisis to force immediate action. I can think of two reason for that: (1) so the finance boys have another way to charge a higher price for he same risk as before and help recoup their losses from the last melt-down and/or (2) so the legislator running for re-election with have something to point to while campaigning … since they won’t be bringing much pork home this election cycle.

Comment by Retired Non-Union Guy Thursday, May 3, 12 @ 1:39 pm
SB1313HA9 is yet to seen. Whether or not it clarifies more than 6/7/8 does, I have no idea.

I had forgotten that it was Edgar that got workers to lengthening the premium fully paid benefit from 8 to 20 yrs.

I did not take Madigan’s statements yesterday morning to imply every retiree would pay the exact same premium. Only that premiums would be expected from all retirees this covers aka equally expected whether GA, judge, SERS member ect. I did not listen to the ’short’ House floor debate though.

As far as ‘begin against it’, I’m not against it, but I do have every big concerns that the change be affordable, based on abilty and various other factors taken into consideration. I would not expect to pay the same as some who uses QC, someone who makes 3 to 4 times the pension income I do ect.

Comment by Cindy Lou Thursday, May 3, 12 @ 1:51 pm
Stevie if that 20 year veteran’s pension is $69,000 and the 35 year veteran’s pension is $269,000 why should the 20 guy pay more? Cindy Lou I did listen to the debate and heard Madigan say same for all - it was also quoted in several news articles I read last night.

Comment by Former Merit Comp Slave Thursday, May 3, 12 @ 2:28 pm
Retired Non-Union Guy, I have to disagree with you to some extent on the retiree non-pension benefits.

The “Reporting Issue” didn’t create the crisis.

Basically, everybody who was a ‘player’ in this situation (legislators, governors, state employees, unions) were playing with the taxpayer’s money (to be collected going forward) without really clearly accounting to the taxpayer what their real fiscal obligations were going to be.

When you are playing with somebody else’s money, and then expect the other (outsider) party to come through and make all the payments that you have obligated them to, especially when those fiscal obligations were not made expressly clear, well don’t be too surprised if there is some resistance. In fact, overwhelming resistance.

Which is what you are seeing from the current political class, as they are having to wrestle with these ‘previously obscured’ (that’s being charitable) fiscal obligations.

As to the ‘risk element’ being the same, not quite. If most folks don’t know the numbers or have access to the numbers, then the marketplace hasn’t taken those numbers into account.

Reality check here: If the State of IL didn’t until fairly recently know or disclose the numbers for retiree non-pension benefit costs, who else on the outside would?

The simple fact is that the bond purchasers didn’t know the full extent of the retiree health care obligations. Will this likely lead to a higher price? Don’t know, but I wouldn’t bet against it.

What we (State of IL) are experiencing is a taste of what it is like when the bond vigilantes come to visit. They want (and demand) transparency, and when they see substantial off-the-books style fiscal obligations, they tend to both charge higher rates for the additional risk levels being priced in, and also demand higher levels of protection. In extreme cases, the money (investors) runs for the sidelines.

That’s what Madigan and Cross are dealing with.

Just remember what has been attributed to James Carville:

“At the beginning of the Clinton administration in the early 1990s, adviser James Carville was stunned at the power the bond market had over the government. If he came back, Carville said: I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”

http://en.wikiquote.org/wiki/James_Carville

Comment by Judgment Day Thursday, May 3, 12 @ 2:45 pm
Judgment Day, the state employees (especially those not in a union) were not “players” in the situation, but it appears that they may get “played”, and those who caused the troubles don’t care. Has anybody looked at cutting the myriad of give-away programs and pay-to-play deals that the pols have established to pander to special interests before jumping on the “pension-benefit cuts” bandwagon?….. I didn’t think so.

Comment by JustaJoe Thursday, May 3, 12 @ 3:05 pm
FMCS @ 2:28 I think that was during the question of ‘good for the goose good for the gander’ question. But of course, I suppose we could assume anything. As far as the reports. Unless I get an an exact quote, I don’t get too excited of what reporters state. It’s their take on what they heard and I believe partly summarizing and half quotes sometimes misplaces what is/was actually said. Amazes me, for example, to read how many papers are running with ‘free health care’. You know as well as do do that it is not ‘free’. There is no charge for a set group of retiree premiums but of course the health care nor any of the various portions of it is ‘free’.

I suppose if they really mean to charge same across the board no matter what pension/other status is that many of us will just stay and we’ll be flooded with 85 yr old workers. The state won’t have to worry about rising the age to 67, the retiree insurance rates would be solving that one for them.

Comment by Cindy Lou Thursday, May 3, 12 @ 3:41 pm
JustaJoe:

Do the folks who ’caused’ the problems ‘not care’?

Doesn’t matter. That’s past history, and we’re having to deal with it today - and it sucks. Big Time.

As to:

“..cutting the myriad of give-away programs and pay-to-play deals that the pols have established to pander to special interests…”

What do you think Rich highlights every single day here on his blog? - multiple different times, even?

We (as the State of IL) just don’t have sufficient revenues to meet our current needs, wants, and obligations. And it’s not likely to get better anytime soon.

We’ve already increased our revenues. Now we’ve got to restructure the expense side of the ledger.

As far as ’special interests’ go…

I would quote Pogo:

“We have met the enemy and he is us.”

Comment by Judgment Day Thursday, May 3, 12 @ 3:42 pm
I’m pleasantly surprised that the GOP Leader favors a progressive fee structure, instead of the flat fee espoused by The Speaker.

I think it’s fairer to expect those with six-figure pensions to pay a higher share of their health insurance costs than a widow scraping by on $22,000 a year.

Comment by reformer Thursday, May 3, 12 @ 3:42 pm
==I’m pleasantly surprised that the GOP Leader favors a progressive fee structure, instead of the flat fee espoused by The Speaker.==
Me too! Hopefully they’ll get this worked out.

Comment by Robert Thursday, May 3, 12 @ 4:14 pm