Emanuel forging ahead on subsidy phaseout plan for retiree health care
BY FRAN SPIELMAN City Hall Reporter October 8, 2013 1:48PM
Updated: November 10, 2013 6:26AM
Mayor Rahm Emanuel is counting on saving $23.7 million in 2014 by reducing the city’s 55 percent subsidy for retiree health care that 30,000 retired city employees and dependents are fighting to keep.
Emanuel’s decision to forge ahead with the three-year phaseout is aimed at reducing the annual city tab for retiree health care — from a projected $108.7 million in 2014 to $85 million.
It will force higher monthly premiums for 21,160 retired city employees and their 9,108 dependents, but City Hall isn’t saying how much higher. Monthly premiums now range from $73 for a single, Medicare-eligible retiree to as much as $1,819 for two non-Medicare-eligible retirees with children.
“In light of the evolving national health care landscape, as well as pressures faced by our taxpayers, we are adjusting the current retiree healthcare plan while continuing to provide a substantial city subsidy in 2014,” the mayor was quoted as saying in a news release. “Importantly, the 2014 plan for affected retirees will include no increases in co-pays, deductibles or out-of-pocket costs other than the same small percentage increases that already occurred annually in the previous plan.”
The Chicago Sun-Times reported in May that Emanuel had decided to extend the retiree health care subsidy until Jan. 1, then phase it out by 2017 to relieve Chicago taxpayers of a $108.7 million-a-year burden they could no longer afford.
But 4,638 of the oldest and most vulnerable retirees will be guaranteed a 55 percent subsidy as long as they live.
Union leaders and retirees blasted the mayor for forcing retirees to fend for themselves under the Affordable Care Act at the same time he’s using $125 million in public funds to build a new basketball arena near McCormick Place.
Retirees then flexed their legal muscle — by filing a class-action lawsuit that seeks to block the three-year phaseout.
It argued that the state constitution guarantees that municipal pension membership benefits are an “enforcible contractual relationship which may not be diminished or impaired.”
The lawsuit further contended that retirees “have a property right to a lifetime health care plan” from the city “unreduced from the best terms” during their participation. Anything less would be a “depreciation of property rights” guaranteed by the 14th Amendment to the U.S. Constitution,” the lawsuit states.
Mike Underwood, a retired Chicago Police officer with Parkinson’s disease who is the lead plaintiff in the lawsuit, said he is “shocked” that Emanuel would go ahead with the cuts while there’s litigation pending.
“It’s sad that the city would treat its retirees in such a callous manner. When we’re old and sick and most in need of health care coverage, the mayor seems determined to take it away from us,” said Underwood, who was shot, stabbed and suffered numerous broken bones while serving as a police officer in Austin.
Underwood noted that the $23 million in savings Emanuel is counting on in the first year of the three-year phaseout is “probably less than half a percent” of the city’s overall budget.
“The mayor seems to find money for his pet projects, but none to take care of the city’s obligation to provide health care to retirees and their families who were promised coverage for life. I’m retired living on a fixed income. My pension really isn’t very much,” he said. “Any increase in monthly premiums “will make it really difficult to make ends meet.”
Clinton Krislov, an attorney representing retirees, blasted the mayor for moving ahead with the phaseout before the court case is settled — without telling retirees on fixed incomes precisely how much the first-year cuts will cost them.
“This is neither fair nor sufficient content to enable anybody to make plans. And why are we waiting until the last minute to let retirees know what they’re facing, so they can make choices?” Krislov said Tuesday.
“It’s this type of last-minute treatment that’s one of the reasons why we’re asking the federal court to enjoin the city from making any changes,” he said. “I understand the city’s desire is to save money and reduce its expenditures for retirees. The open question is whether the city has a right to do that. Our view is that participants have a constitutional protection against reducing their benefits.”
Kelley Quinn, a spokeswoman for the city’s Office of Budget and Management, was asked why Emanuel was going ahead with the cuts at the risk of having a federal judge overturn the savings.
“We are proceeding with the adjustments in accordance with the May 2013 letter sent to retirees. The pending lawsuit does not preclude us from proceeding with these adjustments, and the city does not believe the lawsuit has merit,” Quinn said in an email to the Sun-Times.
Emanuel is struggling to erase a $338.7 million shortfall in his 2014 budget that will balloon to $1 billion next year without a solution to the city’s pension crisis.
Chicago’s pension and retiree health care crises are inextricably linked, because underfunded city pension funds now contribute 13 percent to retiree health care. Chicago taxpayers contribute 55 percent and retirees pay 32 percent.
If a federal judge sides with the retirees, the four pension funds would be compelled to continue their monthly subsidy at a rate of $65 for those eligible for Medicare and $95 for those who are not.
Despite those pressures, the city announced Tuesday that it would increase the premium subsidy available to low-income retirees at or below 200 percent of the federal poverty level to now include retirees at or below 250 percent of federal poverty line.