Ruling backs Illinois retirees on health benefits

July 3, 2014

The Associated Press and Alex Keefe

The Illinois Supreme Court on Thursday sided with retired state employees who argue that health insurance premiums are a protected retirement benefit, in a case that could have implications for how justices might rule on several high-profile challenges to recent overhauls of state worker pensions.

The court's 6-to-1 ruling reverses a lower court decision allowing the state government to force retirees to pay for a portion of their own health care.

The justices sent the case back to the lower court, where retirees can proceed with their challenge.

At issue is a law passed in 2012 that allows the state to collect premiums from retirees for their state-subsidized health care. Prior to that, state workers who retired with 20 or more years of service were entitled to premium-free health insurance. Under the new law, retirees had to cover part of the cost.

Writing for the majority, Justice Charles Freeman said the plain language of the constitution supports the conclusion that health insurance premium subsidies are part of a contractual relationship with retirees that can't be diminished.

"Giving the language ... its plain and ordinary meaning, all of these benefits, including subsidized health care, must be considered to be benefits of membership in a pension or retirement system of the State and, therefore, within that provision's protections," Freeman wrote. 

Retirees filed several lawsuits after the 2012 law was passed. A Sangamon County judge dismissed the cases, saying health insurance benefits aren't protected by the constitution. Retirees and the state then agreed to appeal directly to the Supreme Court.

The case is seen as a possible indicator of how the court will rule on a wider challenge to a statewide pension overhaul approved last year. That law aims to shore up the state's under-funded pensions by cutting annual automatic benefit increases received by retirees. A coalition of powerful state workers' unions argued those cuts violate a clause in the Illinois Constitution that says pension benefits can not be "diminished or impaired." Backers of the bill say it passes constitutional muster because cutting the amount by which benefits increase each year is different than cutting the benefits themselves.

While the court's Thursday ruling did not directly address the pension bill, Freeman did write that the clause "must be liberally construed in favor of the rights of the pensioner."

That bodes well for retirees who are suing to overturn the state's new pension law, said Gino DiVito, a lawyer for the plaintiffs in the retiree health care case.

"Without question, that implicitly signals that [cost-of-living adjustments] are certainly a protected benefit," DiVito said. "It may signal a favorable decision in the ongoing litigation concerning pension benefits."

The ruling prompted quick praise from the American Federation of State, County and Municipal Employees, a state worker union that has been fighting against the health care and pension changes.

"The Supreme Court ruled today that men and women who work to provide essential public services -- protecting children from abuse, keeping criminals locked up, caring for the most vulnerable and more -- can count on the Illinois Constitution to mean what it says," AFSCME Council 31 executive director Henry Bayer was quoted as saying in an emailed statement. "Retirement security, including affordable health care and a modest pension, cannot be revoked by politicians."

Illinois Senate President John Cullerton, a Chicago Democrat who pushed an alternative pension overhaul bill on the grounds that it would survive a legal challenge, quickly released his own statement suggesting Illinois lawmakers may have to return to the drawing board to solve the state's massive pension problem, which had been estimated to be at least $100 billion deep.

"If the Court’s decision is predictive, the challenge of reforming our pension systems will remain," Cullerton was quoted as saying. "As I have said from the beginning, I am committed to identifying solutions that adhere to the plain language of the constitution.”