Should State Retirees Pay For Health Insurance?

Sep 19, 2013

Credit Brian Mackey / WUIS

Retired state workers who collect pensions in Illinois started paying health insurance premiums this summer. That's because of a change in the law last year — previously health insurance was free for anyone who retired with at least 20 years of service.

A number of retirees sued over the change. The case was argued Wednesday before the Illinois Supreme Court.

A few months ago, Illinois began collecting one percent of pension income from retirees who are eligible for Medicare, two percent from those who aren't.

The people suing over it are retired state employees. Some are union members, some are not, one is a former appellate judge.

Now that retirees have to use some of their pension income to pay health insurance premiums, they argue their pensions are being "diminished." And that's a no-no under Illinois' Constitution.

A judge in Springfield, however, rejected their case and upheld the law. The Illinois Supreme Court granted a special request to hear the case directly, bypassing the usual appeal process.

That brings us to oral arguments in Chicago.

Edward Kionka represents the retirees. He focuses on the way the "pension-protection clause" of the Constitution is phrased — it actually says it's the "benefits" of being in a pension system that are protected. Kionka argues those benefits include health insurance.

"By choosing the term benefits, the drafters chose to protect not just pensions, but all benefits of membership in a pension or retirement system," Kionka says. "There would be no reason to use the term benefits if only pensions were to be protected."

Kionka argues the meaning of the word "benefits"— and the idea that it includes health insurance — is a matter of common sense.

"Drive down the highway, as we've done, and you'll see signs saying, Now hiring, job with benefits. Everyone knows that means such things as health insurance," Kionka says.

Stephen Yokich represents union members; he says the change has created uncertainty in the lives of retirees.

"When you think about retirement … you think about two things: you think about what money is going to come in, and what am I going to do if I get sick."

Yokich argues Illinois put health insurance into its employment contracts, hooked it up to pensions, and let workers slowly accrue the benefits over many years. But now, he says, "The state's position is: forget about it, we don't have to pay attention to that anymore."

If that seems like an overly dramatic description of a one percent fee for an expensive benefit like health insurance — it's worth noting that the state argues it can go a lot further than that.

This comes up later in the arguments, when Assistant Attorney General Richard Huszagh is defending the law.

Justice Robert Thomas — who, like the other members of the court, might have to pay this health insurance fee after he retires — presses the point.

"A decision in your favor, by this court, would mean that retirees could be required to pay substantially more at a later point in time," Thomas says. "Or the retiree health care could be abolished entirely, right? There's nothing saying that that could not be done."

"Correct," Huszagh replies. "As a Constitutional matter, that is true."

Huszagh however, says that's politically unlikely. He compared it to a U.S. Supreme Court decision from the 1950s, saying Social Security benefits are not a contractual right. That doesn't mean Congress is rushing to eliminate the program.

Huszagh emphasizes that while the state could have done whatever it wanted with retiree health insurance — up to and including elimination — it's only charging a relatively small fee.

"If you get a $50,000 a year pension and you're Medicare eligible, you're paying about $41 a month now," Huszagh says. "And that's going to go up next year, July 1, to like $82 a month, for a benefit for the individual that costs the state approximately $5,000.

"So, you know, there's sort of fairness both ways, and I think the legislature has addressed that in a constitutional way," he says.

Illinois has been deducting health insurance fees from pensions since July 1. The money is sitting untouched in a special account until the case is resolved.

The case is Kanerva v. Weems, No. 115811. Audio and video of the arguments are on the Illinois Supreme Court website.