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Thousands of city retirees to see health care premium increase

Updated: July 7, 2011 2:17PM

More than 21,000 retired city employees under age 65 will pay 15 percent more for their health insurance — an increase a union official called “alarming” and an expert said spotlitghts a $1.3 billion unfunded liability for Chicago taxpayers.

Paul Geiger, general counsel for the Fraternal Order of Police, said the first double-digit increase since 2004 will create an “enormous hardship” for retired couples on fixed incomes who are not yet eligible for Medicare.

Beginning July 1, their health insurance premiums will rise by $89-a-month — from $626 to $715. The monthly cost for Medicare-eligible couples will decline by $20 — from $217 to $197.

Of the 34,012 city retirees and dependents, 21,674 or nearly 64 percent are not yet eligible for Medicare.

“You’re being socked with nearly $100-a-month more. That’s a lot of money for a fixed payer in an era when property taxes are skyrocketing and personal income taxes have jumped 50 percent. These people are being nickel-and-dimed to death,” Geiger said.

Geiger said he’s “suspicious” about the need for a 15 percent increase, pointing to the $20 million refund paid by Chicago taxpayers in 2006.

It happened after an FOP audit discovered a $1 million-a-month gap between projected medical expenses on which retiree contributions were based and the city’s actual costs.

“This is the next giant increase, and we’re gonna watch it like a hawk. A little more than a year from now, we’ll know what the city really spent,” he said.

Law Department spokeswoman Jennifer Hoyle would only say that the 15 percent increase is “based on our projected costs.”

As for what happens in 2013, Hoyle said the city is awaiting recommendations from a so-called “Retiree Health and Benefits Commission.”

Civic Federation Laurence Msall said the latest increase underscores the need for the city to follow the CTA’s lead — by creating a separate retiree health care trust fund when an agreement that covers the issue expires in 2013.

The trust fund would have to be “seeded,” either by issuing debt, selling a city asset, privatizing a government service or by drawing on a dedicated portion of existing city tax revenues, he said.

“There is no other way beside the current pay-as-you-go, which is enormously expensive. … This is a $1.3 billion liability with no money currently set aside to cover these costs,” he said.

Geiger said a trust fund is fine with the FOP, provided the city puts “enough money into the system. That’s the $64,000 question. It’s all about the money.” He argued that any trust should be run by the unions — not the city.

“Unions don’t have allegiances to companies that donate money to politicians. Our allegiance is to getting our members the best deal,” he said.

The 15 percent increase that takes effect July 1 is the latest twist in a long-running legal dispute over retiree health care.

In 1990, then-Mayor Richard M. Daley proposed a health care “safety net” after an Illinois Appellate Court ruling curbed the city’s required contribution to retiree health care. Under the agreement, retirees in a financial bind over soaring health care premiums contributed no more than 15 percent of their monthly pension checks to medical care.

The guarantee continued until April, 2003, when the two sides crafted a settlement designed to save taxpayers $8 million-a-year.

It nearly doubled monthly health insurance premiums for 22,000 retirees and deprived those who retire after 2013 of any guaranteed coverage at all. At the time, City Hall agreed to cover 55 percent of the cost of retiree health care, but only for current retirees and those who left the payroll before July, 2005.

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