“Mayor Emanuel’s decision to remove retirees and their spouses who are not yet eligible for Medicare from the city’s healthcare program and remove healthcare subsidies, without even considering providing an affordable alternative healthcare option, has been extremely harmful to many. This is especially true for widowed spouses and their dependents and other City employees with modest and often inadequate city pension income.
“The insensitivity to the financial hardships was fully demonstrated when the attorney for the retirees highlighted the mayor’s cavalier reply to an October 2015 email from venture capitalist Henry Feinberg in an Illinois Appellate Court brief that pushed for preliminary injunction that sought to compel the city to restore the benefit. ‘Since when did Rahm Emanuel let a judicial ruling get in his way and not find a creative work-around solution?’ Feinberg wrote then. Emanuel replied, ‘Never! Which is why I eliminated retiree health care. Only elected official to eliminate-not cut or reform-a benefit. Thank you very much. A $175 million saving!’ Emanuel later said he “wasn’t bragging” as much as he was “acknowledging how we stabilized” skyrocketing healthcare costs. Attorney Clint Krislov didn’t buy the mayor’s argument. His brief branded Emanuel’s email ‘boasting.’
“The flippant attitude has prompted continued litigation which might ultimately overturn the mayor and city council actions. Still, the mayor’s typically abrasive tactics will only harden the union’s position on other issues and complicate future attempts to forge working relationship that allow the city to deliver services that are both affordable and effective.
RESTORING RETIREE HEALTH CARE
Objective: Restore comprehensive and affordable” healthcare for City of Chicago retirees without imposing an undue financial burden on the city or our hard working retired city employees, nor subjecting the city to long term mandated costs.
Background Mayor Emanuel’s decision to remove retirees and their spouses who are not yet eligible for Medicare from the city’s healthcare program and remove the healthcare subsidies, without even considering providing an affordable alternative healthcare option, has been extremely harmful to many. This is especially true for widowed spouses and their dependents and other city employees with modest and often inadequate city pension income. This is no way to treat dedicated public employers who have worked diligently for decades for the city.
The City of Chicago Retiree Healthcare Program, modeled after the Chicago Teachers Retiree Health Care Program, would be created to provide comprehensive and affordable health care to retired city employees and their dependents.
- Provide access to a comprehensive, easily accessible and uncomplicated health plan.
- Negotiate rates and benefits that would reduce health care costs.
- Subsidize premiums to further reduce the costs with larger subsidies provided to surviving spouses and their children.
- Cap the city’s liability by establishing fixed maximum dollar amount for the aggregate subsidy which can be adjusted through negotiation with collective bargaining units.
- The Retiree Healthcare Program would “not reduce nor diminish” existing benefits to current or future retirees that has been agreed to by various unions, like the retirement plan available for Chicago police officers age 55-59, allowing them to pay 2% of their pension for medical coverage until they become Medicare eligible.
- The healthcare program benefits as well as the annual subsidy stays outside of the constitutional guarantee of pension benefits.
- The liability is capped at the amount of the annual subsidy and does not expose the city to an open ended ‘Other Post Employment Benefit’ (OPEB) liability that would adversely affect the credit rating.
- The annual subsidy is the decision made by the city based on available revenues and can determined through the collective bargaining process.
- City negotiated rates and benefits are better than market rates for most members over the long term.
- Smooth transition from the “Active” employee healthcare to “Retiree” healthcare.
- Bargaining units have the ability to secure larger subsidies through negotiation.
- Tiered subsidies can be established to allow larger subsidies for those with extreme financial burdens such as spouses of deceased retirees and their dependents.
- The program will make it easier for members in navigate the complexities of Medicare. Retirees often need a helping hand.
- Chicago Teachers Pension Fund healthcare benefit is limited to $65 million plus any unused amount from prior years. They currently provide a subsidy equal to 50% of the member’s premium.
- Since its inception, when the aggregate cap has increased its been based on state legislative action. Over the years the percentage of premium subsidy has dropped due to changes in membership and premiums.
- Negotiated rates and benefits are better than the market for most members over the long term.
- Considering and analyzing the impact of allowing existing employees to opt into the federal Social Security System and considering placing all Tier 2 employees in the system. This will ensure their eligibility for Social Security.
- Allowing spouses of deceased retirees and their dependents to remain in the regular active member health care system.
The subsidy amount would have to be the product of strategic bargaining so as to minimize the impact on City finances. The unions would be invited to become a full partner in this effort. It would not be a legislative mandate and thus would not impose long-term financial obligations on the city. There are a number of multiple pathways that could be considered for providing a subsidy that would not impose a permanent long-term funding mandate on the city. The objective, however, is to ensure that a high quality and affordable healthcare program is available to all retirees.
- Diverting a portion of the salary increase in the next contract to fund retiree healthcare.
- Requiring a small annual contribution from active employees which could be tied to income.
- Working with union leadership to identify and agree upon legitimate areas of expenditure reduction and using part of the savings to finance the city’s subsidy.
- Monetizing certain activities of individual city departments and sharing in the new income generation.
Allowing the Retiree Healthcare Program to share in the savings from expenditure reductions and the income from department monetizing efforts would incentivize the unions and city employees to become full partners in the city’s efforts to restore comprehensive and affordable retiree healthcare while minimizing impact on both short and long term city finances.