Generous benefits from health insurance helped push Illinois to the brink

The health care needs of state workers and retirees are pushing Illinois toward financial ruin, and policymakers are just now realizing the dimensions of the problem.

The state's unfunded liability for worker health care -- active and retired workers -- stands at $48 billion, said a report by the Civic Committee of the Commercial Club of Chicago. But don't look for that amount in state budget documents.

It is "off the books," completely unaccounted for. That will change in mid-2008, however, when new standards for government accounting take effect.

This year, the state will pay about $1.7 billion for employee and retiree health care. The Civic Committee report said that cost has been growing 14 percent per year since 2000, while revenues have grown only 4 percent annually.

The problem, the group said, is Illinois insurance plans that are uncommonly generous. Some examples:

• Retirees pay nothing for their health insurance if they have 20 years of service.

• Many state workers and a majority of retirees are enrolled in high-cost "quality care'' plans. These basically cover any visit to any doctor for any reason. The rest belong to managed care plans that operate more like health-maintenance organizations or preferred-provider organizations.

• The state subsidizes 80 to 100 percent of the insurance premium. That compares with an average in the private sector of 60 percent.

• Retirees become eligible for benefits at age 55.

The Civic Committee, which includes chief executives of Chicago's major corporations and institutions, said new hires on the state payroll should be enrolled in managed-care programs, such as an HMO, saving about $200 million annually now, and more in future years.

W. James Farrell, retired chairman of Illinois Tool Works Inc. and a member of the committee that drew up the report, said the rich insurance benefits are a legacy of a long-ago tradeoff in which the state told workers, "We can't pay you what you can make in the private sector, but we'll take care of you for the rest of your life."

Farrell said that with unions wielding a strong influence in the state work force, the lower salary part of the deal doesn't apply any more.

"State plans are also more generous in terms of co-pays, annual deductibles, out of pocket max and prescription drug co-pay" than private-sector insurance, the committee's report said.

Its comments on health care were part of a broader assessment of the state's unpaid liabilities. Including worker pensions and Medicaid bills, the report estimated the total liability at $106 billion.

-- Sun-Times News Group

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