Subsidy phaseout forces city retirees to pay up to $4,440 extra
BY FRAN SPIELMAN City Hall Reporter October 10, 2013 3:54PM
Updated: November 12, 2013 6:27AM
Mayor Rahm Emanuel’s decision to forge ahead with a three-year phaseout of the city’s 55 percent subsidy for retiree health care will force individual retirees to pay as much as $4,440 more in 2014, City Hall acknowledged Thursday.
Two days after City Hall disclosed the mayor’s decision to count on $23.7 million in savings from a subsidy cut next year, the Emanuel administration talked turkey about the financial impact on individual retirees.
Out-of-pocket increases will depend on when employees retired, whether or not they are Medicare-eligible, are married and have children.
But the increases will range from $37 more-a-month for the 7,018 non-married employees who are Medicare-eligible and retired between 1989 and 2005 to $370 more-a-month for the 95 non-Medicare families with children.
Increases that fall between those highs and lows include: $151 more for 1,717 non-Medicare singles who retired after 2005 with 20 years of service; a $131 increase for a Medicare-eligible couple with kids that retired between 1989 and 2005 and a $353 increase for a non-Medicare family led by someone who retired after 2005 with 20 years of service.
One category of retirees will see their monthly premiums drop — by $9. They are Medicare-eligible singles who retired with less than 10 years of service.
As painful as those increases are, they’re not as bad as rates that a printer mistakenly sent to retirees earlier this week. Those increases were as high as $515 a month and $6,180 a year.
When the Chicago Sun-Times attempted to verify those rates, City Hall acknowledged the mistake and said the correct rates would be sent to retirees at the printer’s expense.
Clinton Krislov, an attorney representing retirees, was not appeased. He has criticized the mayor for forging ahead with the three-year phaseout before a federal judge rules on the retirees’ lawsuit against the city.
“Jaw-dropping rates will be a little less jaw-dropping, but not by much. . . . They’re not ripping off both their legs and both arms. They’re just ripping off both legs and one arm,” Krislov said. “Where are people on fixed incomes supposed to get the extra money? That’s why we’ve asked for an injunction — so people who depend on this program can rely on it not to change.”
Krislov said the pain caused by the 2014 increase in monthly premiums will be exacerbated by the fact that an “audit and reconciliation process” mandated by a now-expired settlement on retiree health care will no longer bring refunds to retirees.
“Every single year the audit and reconciliation process determined that retirees in virtually every category had been overcharged by anywhere from $6 to $194 per-month and, because of the settlement, they got a refund,” Krislov said.
“What the city is now doing is saying, ‘Here’s what we’re going to set as the rates. We’re not going to show you documentation supporting those rates. And there will be no reconciliation to ensure those rates are the right charges.’ ”
Earlier this week, Emanuel said he couldn’t afford to wait until a federal judge decides whether the city has a legal right to phase out the 55 percent subsidy for retiree health care.
“What costs the taxpayers today $110 million is, in short order, going to become $500 million [annually]. It’s a $110 million unfunded liability. I don’t think the taxpayers can afford that,” Emanuel said. “[For] your most vulnerable — about 5,000 seniors, about one-fifth of the [retiree] population — there’ll be no changes. We used to have assistance to up to 200 percent [of the national] poverty level. We’re going to 250 percent. But we are going to make changes over a three year period of time as the health care landscape is also changing and make sure that taxpayers . . . are not left with unfunded capacity.”
Krislov’s class-action lawsuit argues that the Illinois Constitution guarantees that municipal pension membership benefits are an “enforcible contractual relationship which may not be diminished or impaired.”
The lawsuit further contends 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.
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.