City retirees to get health insurance rebate

From Chicago Sun Times

More than 24,000 retired city employees are in line for a $15 million to $20 million refund -- on the backs of Chicago taxpayers -- after being charged more for health insurance for the last 2-1/2 years than a court settlement allows.

On Tuesday, the Fraternal Order of Police filed a lawsuit demanding the rebate with interest for overcharges dating back to Aug. 1, 2003. That's when City Hall agreed to cover 55 percent of the cost of retiree health care for those who left the payroll before July 2005, with retirees and their pension funds making up the difference.

During contract talks that raised health-care contributions for active employees, the FOP discovered a substantial gap between projected medical expenses on which retiree contributions were based and the city's actual costs. In 2004 alone, the disparity was 9 percent, a $10 million overcharge.

'City is on the hook for $20 mil.'



"Some retirees have been overpaying to the tune of $90 or $100 a month. That's quite a bit of money for someone on a fixed income. Our projection is that the city is on the hook for $20 million," said Fraternal Order of Police President Mark Donahue.

Unknown to the FOP, a refund "in the ballpark" of $20 million was already in the works, said Clinton Krislov, counsel for retirees engaged in a legal battle over health care that dates back to 1987.

"The FOP didn't need to do this. We were already working on it. We have been negotiating with the city for a long time and expect to be announcing a refund within the next few months. . . . It could well be hundreds of dollars" for the average retiree, he said.

"Health-care costs for these retirees were projected to increase faster than they did. As a result, premiums were set in amounts that resulted in the city paying less than the 55 percent minimum. I don't have any indication that they intentionally overcharged retirees. But that's why we contacted them many months ago and said we wanted a full reconciliation."

And just where is the city supposed to get the money?

"That will be the city's problem," Krislov said. "Is the money spent? I suppose it is."

Law Department spokeswoman Jennifer Hoyle acknowledged that retirees were overcharged, but she pegged the gap at "closer to $15 million."

"Our contributions are based on projections. These numbers will periodically have to be reconciled.

"We've been aware of it for about a year. We're just trying to come up with the exact dollar amount and a means of ensuring that we make up whatever the difference is," Hoyle said.

The rebate is the latest twist in a long-running legal dispute over retiree health care.

In 1990, Mayor Daley proposed a health care "safety net" after an Illinois Appellate Court ruling curbed the city's required contribution to retiree health care. Under the agreement, retirees in a financial bind over soaring health- care premiums contributed no more than 15 percent of their monthly pension checks to medical care.

Health insurance to fall 20%



The guarantee continued until April 2003, when the two sides crafted a settlement designed to save taxpayers $8 million a year.

It nearly doubled monthly health insurance premiums for 22,000 retirees and deprived those who retire after 2013 of any guaranteed coverage at all. At the time, City Hall agreed to cover 55 percent of the cost of retiree health care, but only for current retirees and those who left the payroll before July 2005.

Now, government retirees who have endured a series of health- care bombshells are getting some good news for a change. Not only are rebate checks in the works: On March 1, retiree contributions are going down as much as 20 percent.