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Emanuel completes three-year phaseout of retiree health care subsidy

Mayor Rahm Emanuel is hoping a legal challenge will fail to stop his phase-out of health-care premium subsidies for some retirees. | Sun-Times file photo

Mayor Rahm Emanuel has already ordered sharply higher health care contributions from 313 City Hall bureaucrats, including himself.

He’s also cut a deal with organized labor to wring $20 million in savings out of their health care costs, using tele-medicine, expert second opinions before surgery, diabetes management and higher co-payments.

On Friday, the mayor lowered the boom on retirees — by completing a three-year phaseout of the city’s 55 percent subsidy for retiree health care and assuming that a lawsuit that seeks to reinstate the subsidy of $108.7 million a year falls flat.

“These participants will see an additional reduction in the city subsidy by approximately 25 percent commensurate to the subsidy reductions in 2014 and 2015. The reduction in the subsidy marks the third year of a phaseout for those who retired after August 23, 1989. The reduction will save the city approximately $30 million in 2016,” the mayor’s office said in a statement.

“After 2016, the city’s health care plan will no longer be offered for those retirees. Retirees who are not eligible for Medicare will continue to have a broad range of health care plan options available to them at the Illinois Health Insurance Exchange if they choose to seek other plan options in 2016 and future years. The city will continue to subsidize health care plans for those who retired prior to Aug. 23, 1989.”

The largest group of retirees — 13,680 — retired after 1989 and before 2005.

Those retirees will see their subsidy drop from 27.5 percent in 2015 to 13.75 percent next year. That means their out-of-pocket rates should double.

For those who retired on or after July 1, 2005, the subsidy will also be cut in half and vary with longevity. It’ll go from 20-to-25 percent to 10-to-12.5 percent.

Precise rates have not yet been forwarded to individual retirees.

Clint Krislov, an attorney representing the retirees, warned that Emanuel is rolling the dice, just as he did by authorizing a school budget that assumes $480 million in pension help from Springfield that may never come.

On Oct. 26, Cook County Circuit Judge Neil Cohen is expected to rule on the city’s motion to dismiss the retiree lawsuit.

The retirees’ legal argument was strengthened immeasurably when the Illinois Supreme Court ruled that health care benefits are guaranteed by the state constitution.

“That $30 million [savings] may not be there when the court decides that retirees are entitled to the lifetime health care benefits they had been receiving,” Krislov said.

“It’s our position that the retirees, similar to state retirees, are entitled to their retiree health care benefits for life. The city seems to want to fight this to the end. But if we’re successful, participants will have their lifetime benefits and they would probably be due a refund from the last half of 2013 forward.”

Chicago taxpayers will spend $470 million this year to provide health care for active employees, their dependents and retirees. The tab for retiree health care is now down to $32.7 million.

Last year, Krislov tried and failed to get an injunction blocking the second year of increases from taking effect until the merits of the case were decided.

Those increases ranged from $37 more a month for the 7,018 non-married employees who are Medicare-eligible and retired between 1989 and 2005 to $370 more a month for the 95 non-Medicare families with children.

Increases that fell between those highs and lows included $151 more for 1,717 non-Medicare singles who retired after 2005 with 20 years of service; a $131 increase for a Medicare-eligible couple with kids who retired between 1989 and 2005, and a $353 hike for a non-Medicare family led by someone who retired after 2005 with 20 years of service.

One category of retirees actually saw their monthly premiums drop — by $9. They are Medicare-eligible singles who retired with less than 10 years of service.