WARNING
RETIREE HEALTH INSURANCE
PASSES GENERAL ASSEMBLY
HOUSE BILL 3406

By THOMAS G. FITZSIMMONS, Executive Director

The League accurately forecasted in the February issue of the Municipal Review that organized labor was going to make retiree health insurance their top priority. Now in July, just such a bill is heading to the Governor's desk for his signature. Your only option is to stop this bill by writing immediately to Governor Thompson and requesting his total veto. Send a copy of the correspondence to your legislator.

What effect will a mandated health insurance continuance privilege for all municipal (I.M.R.F. covered) employees that are either eligible or will be retiring have on municipal finances? Devastating! That one word, devastating, sums up the long term effect of mandating an option that retirees will be able to elect to stay in the municipal health insurance plan.

House Bill 3406 was amended by Senate Amendment #3 to include House Bill 3624 — (I.M.R.F. RETIREE HEALTH INSURANCE CONTINUANCE). New language is added to the Insurance Code to permit I.M.R.F. retirees or persons on I.M.R.F. disability to continue participation in the municipal health insurance plan when they leave city employment. The employee would only be required to pay the normal average cost of employees and not the retiree's true cost to the municipal health insurance plan. Obviously the older an individual is, the more expensive health care insurance is.

The continuance privilege only compounds municipal health insurance problems. The problems are not only cost but finding coverage for active, healthy employees. If it becomes a statewide policy as proposed in this amendment to allow all retirees the option to stay in the municipal health plan, availability and affordability will become the question for active employees.

The General Assembly and citizens of municipalities are concerned about property tax increases. Mandated programs provided in this amendment will certainly increase property taxes. The bill provides that the retiree must only be charged the average cost associated with every employee's health insurance benefit. In the real world, actuaries determine cost based on all enrolled employees. If you currently have an average age of 40 the benefit cost reflects that. By enrolling retirees, that average age will increase and so will the cost. This legislation will force municipalities to either reduce active employee health insurance benefits or use increased property taxes to compensate for the cost attributable to including retirees . . . thus availability and affordability are dramatically decreased.

House Bill 3406 was further amended by Senate Amendment #2 to include House Bill 4032 and provides that firefighters choosing continued coverage under a municipal health plan may not be required to take a reduced benefit level when they become eligible for medicare benefits. Most municipalities reduce health benefits when participants become eligible for medicare. Approval of House Bill 4032 will accelerate the move toward older, less healthy municipal health care groups. It will increase the problem of adverse selection for these plans (healthy retired persons choosing cheaper alternatives while persons in poor health never move out of the municipal plan).

July 1990 / Illinois Municipal Review / Page 7

The provisions of Senate Amendments #2 to House Bill 3406 will raise the per person cost of municipal health care costs, the person choosing the expanded continuation rights can only be required to pay the "average" cost so the taxpayer gets stuck with the additional cost mandated by the General Assembly if House Bill 3406 becomes law. The mandated costs imposed by House Bill 3406 are exempted from the reimbursement requirements of the State Mandates Act so the added cost will be borne by the property tax in most municipalities.

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.

It is essential that you write the Governor (207 State House, Springfield, IL 62706) and explain your understanding of the employee's dilemma, but also detail your municipality's inability to finance a solution. Tell the Governor about the tax levy for pension purposes that is already being imposed. Make your contact early so the Governor understands the municipal viewpoint on retiree health insurance and why you must oppose any legislation mandating such benefits. Please send a copy of your correspondence to the League office.

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

Page 8 / Illinois Municipal Review / July 1990