RETIREE HEALTH INSURANCE

By THOMAS G. FITZSIMMONS
Executive Director

The General Assembly may well be confronted with the nationwide issue of retiree health insurance for public employees. The League is aware of several groups that will be lobbying the legislature to mandate municipalities to provide and probably pay for retiree health insurance. Leading the effort are the fire, police and other public employee representatives. What effect will a mandated health insurance program for retired public employees be on municipal finances? Devastating!

That one word, devastating, sums up the affect of mandatory retiree health insurance on municipal budgets. That cost is compounded by skyrocketing annual increases. The problem of elderly health care is a subject of much debate. The federal or state government has no solution to these escalating costs. One thing you as local governmental officials must stress to state officials is that your municipal revenue base does not provide the answer. At a time when the General Assembly is receptive to citizens complaints about property tax increases a mandated program of retiree health insurance for fire, police or other public employees is an absurd approach to lowering taxes.

The League realizes that some municipalities may offer retirees a health insurance benefit. Allowing municipalities to locally decide employee compensation, working conditions and benefits is why collective bargaining statutes were enacted. That point should be stressed when voicing your opposition to any state mandated program.

The current statutory framework allows firemen and police employees retiring under their respective pension funds to make a decision within 15 days to stay enrolled in the city health plan. The retiree is to pay the entire cost, however they can never really pay for the effect their enrollment has on the overall cost. In 1989 the General Assembly approved SB 732 allowing firemen to enroll any time after retirement. The Governor vetoed the bill which was a blessing to all municipalities. At the time of his veto, the Department of Insurance estimated increases as high as threefold in insurance costs for such a proposal.

Other legislation introduced uses a foot in the door approach to retiree health insurance. A proposal to allow a plan for retired police officers insurance with the active police officers paying the cost was introduced last year and received a favorable vote in the House Insurance Committee. The bill is currently tabled in the House and could easily be brought off the table. With retirement at early ages, like the police and firefighters, a proposal of this nature would cost a fortune. Employees will certainly argue the municipality should pay some of the cost, then eventually all the cost. That fortune of cost would then be forced into a municipality's budget and the taxpayer's property tax bill.

It is essential that you discuss the issue of retiree health insurance with your state legislators. Explain your understanding of the employee's dilemma, but also detail your municipality's inability to finance a solution. Tell your legislators about the tax levy for pension purpose that is already being imposed. Make your contracts early so the General Assembly understands the municipal viewpoint on retiree health insurance and why you must oppose any legislation mandating such benefits.

THIS IS NOT A WAY TO ACHIEVE PROPERTY TAX RELIEF, THIS WOULD INEVITABLY CAUSE A SUBSTANTIAL PROPERTY TAX INCREASE. •

Page 4 / Illinois Municipal Review / February 1990