Illinois is already facing a shortfall of more than $56 billion in retiree health insurance debt.
But today, many state workers retire in their 50s with full health-insurance benefits and then supplemental coverage once they are eligible for Medicare. State retirees pay a small portion of that total cost, but taxpayers are footing the bill for the lion’s share.
For fiscal year 2014, the average state-retiree contribution for individual coverage was about 18 percent for both a quality care health plan, or QCHP, and a health maintenance organization plan, or HMO, and about 15 percent for an open access plan, or OAP. Retirees with 20 or more years of service do not pay premiums.
Not only is this completely out of line with the private sector, but it’s much more generous than state retiree health programs across the country, where the average retiree contribution is about 54 percent.
In response to ballooning retiree health-care costs, many employers have asked their retirees to shoulder a greater share of their health benefits in retirement.
For example, Illinois-based Sears Holdings Corp. recently announced that it would be ending a $37 per month retiree health subsidy to its Sears, Roebuck & Co. retirees beginning in 2015.
But a court ruling followed by a recent injunction means that Illinoisans can’t expect state government retirees to do the same. Illinois’ state retirees no longer have to pay 1-2 percent of their pension check toward their retirement health-insurance coverage.
These low contribution rates are also out of line with the reality of health-care costs over time. Health-care costs, particularly for older people, are subject to many factors – such as advances in medical technology and longer life expectancies. It has become increasingly difficult to predict how much they might be 20 or 30 years in the future. That is just one reason why promising health benefits decades into the future has become increasingly problematic for those who are funding those benefits.
Some protections for state retirees shouldn’t be unreasonable. But expecting Illinois taxpayers to continue to foot the bill for these overly generous benefits is.
Naomi Lopez-Bauman is Director of Health Policy for the Illinois Policy Institute.