Judge hears arguments in state retiree health insurance suit; Lawyers argue pizza and beer analogy

SPRINGFIELD -- A Sangamon County judge on Wednesday heard arguments over a motion to dismiss a lawsuit that challenges a new law requiring state retirees to start paying premiums for their health insurance.

Near the end of the two-and-a-half-hour hearing, Sangamon County Judge Steven Nardulli asked attorneys representing both parties to submit a list of questions that they would like to see certified if he ruled against them.

Nardulli’s request, which he said would help him organize his opinion, made it clear that the battle over the constitutionality of Public Act 97-695 would not end in his courtroom as his yet-to-be-released ruling will likely be appealed.

The issue over the new law came to Nardulli in the form of four separate lawsuits filed this summer in Madison, Sangamon and Randolph counties. They were consolidated in September in Sangamon County.

Gordon Maag, a former Fifth District Appellate Court justice, brought the first suit over P.A. 97-695, also known as Senate Bill 1313, in June in Sangamon County.

He attended Wednesday’s hearing and sat in the first row behind the table of plaintiffs’ attorneys that included his son, Wood River attorney Tom Maag.

Maag, as well as the plaintiffs in the other suits, have the same basic argument: the new law is unconstitutional. Some of the plaintiffs made additional arguments over contracts, collective bargaining agreements and promissory estoppel.

The law, which took effect July 1, requires retired state employees, as well as former judges, lawmakers and university workers, to pay premiums for their health insurance, something the state previously paid for after four to 20 years of service depending on position.

The plaintiffs claim that the new law violates the Constitution’s Pension and Benefits Protection Clause, which refers to membership in the state’s pension and retirement systems as an “enforceable, contractual relationship, the benefits of which shall not be diminished or impaired.”

Illinois Attorney General Lisa Madigan’s office, which represents the defendants in the suits, asked Nardulli in November to dismiss the consolidated suit for failure to state a claim, among other reasons.

In its motion to dismiss, Madigan’s office argued that the Protection Clause “protects only pension benefits and does not prevent the government from raising the cost of other employment benefits, including health insurance.”

Attorneys representing both sides expanded upon their arguments during the hearing, which garnered a nearly full courtroom of attendants.

Assistant Attorney General Richard Huszagh argued on behalf of the defendants and attorneys for the plaintiffs split the 60 minutes each side was allocated for arguments.

The plaintiffs’ attorneys who spoke at Wednesday’s hearing included Tom Maag, Springfield attorney John Myers, Indianapolis attorney Rod Taylor, and Chicago attorney Steve Yokich.

Huszagh told Nardulli that “the plaintiffs fundamentally misinterpreted the Pension Protection Clause of the Constitution” by asserting that health insurance benefits are the same as pension benefits, the latter of which he said the state Constitution protects from being diminished or impaired.

The plaintiffs’ interpretation of this clause, Huszagh contends, would require Nardulli to “disregard Supreme Court precedent.” It also would “open the floodgates” for retirees to argue that any benefit they received as part of their employment could be protected by this clause.

In an attempt to bolster the state’s position, Huszagh offered the court an analogy that included a pizzeria providing members of a fraternity a deal on slices and beer.

While the deal might be a benefit to frat members, he said it is not a benefit of their membership in the frat, but simply an added bonus. This, he said, is similar to the situations of state retirees.

The state’s payment of premiums for retirees’ health insurance plans was not a feature of their membership in the state’s retirement system, like their pensions are, but rather an incidental bonus.

Tom Maag, who represents the plaintiffs in his father's suit, said Huszagh’s analogy doesn’t really work. He said the pizza and beer deal was not a benefit provided by the frat, but rather a third-party.

In order for the analogy to fit the situation before the court, Maag said the frat would have had to offer the deal since the state, not a third-party insurance company for instance, has been paying the premiums for retirees’ health insurance.

“There will be no reference to pizza or frats in any opinion I write,” Nardulli said, before Huszagh acknowledged his analogy was “imperfect.”

During the plaintiffs’ argument, Myers told Nardulli it was important to note that he can only grant a motion to dismiss if he determines no facts in the case state a claim, a situation he asserts “is not present here.”

Myers further argued that contrary to the state’s position, retirees have a vested right in getting their health insurance premiums paid by the state as members of the state retirement system under  the State Employees’ Group Insurance Act.

“It’s really as simple as that,” said Myers, who represents the plaintiffs in the other Sangamon County suit.

To bolster the plaintiffs’ position, Myers pointed to the case against former Gov. George Ryan.

Ryan’s state pension and medical benefits were terminated as a result of his federal conviction, which Myers said clearly shows that medical and pension benefits are “joined at the hip” in Illinois under membership in the state retirement system.

Myers further argued that retirees were promised these health insurance benefits as a trade-off for working for the state because they could have probably made more in the private sector.

Tens of thousands of now-retired state employees went to work for Illinois based on the promise of receiving “a good benefits package,” Myers said, asking Nardulli “not to let the state welch on the deal.”

On behalf of the plaintiffs in the Madison County suit, Taylor said if the attorney general's position is upheld by the court, benefits for state retirees “will die a death of a thousand cuts.”

Like the other plaintiffs’ attorneys, Taylor used his portion of the argument to try to boil the case down to its simplest form.

“This is a simple case of promises being made,” he said, adding that the plaintiffs made a choice to be members in the state’s retirement systems for a reason. “It has to mean something.”

Nardulli did not indicate when he would issue a ruling on the state’s motion to dismiss, but did give attorneys a 21-day deadline to submit questions for possible certification.