Cook County Record

Saturday, January 25, 2020

Appeals court: No 'abstract right' to city retiree health insurance if no such contract guarantee

By Scott Holland | Jul 7, 2017

Chicago el

Expressing doubt its opinion will end legal hostilities, a state appeals court weighed in yet again on a lawsuit Chicago retirees have lodged against the city in hopes of preserving an absolute “abstract right” to subsidized health insurance under the Illinois state constitution.

On June 29, a three-justice panel of the Illinois First District Appellate Court took up the appeal of retired city workers who have pressed a class action lawsuit in Cook County Circuit Court alleging City Hall violated the Illinois constitution, which prohibits governments from taking actions that could cause retirement benefits for pensioned government workers to be “diminished or impaired.”

The case originated in 2013, and landed back in the appeals court after the most recent round of circuit court rulings. The root issue is the city’s plan to save money by phasing out health insurance coverage by 2017 for city workers who retired after 1989. The city’s Retiree Health Care Benefits Commission determined in 2013 that “continuing the existing health care arrangements for the retirees was not viable given the City's financial circumstances, industry trends and market conditions.”

Justice John B. Simon authored the appellate court’s latest opinion on the case; Justices Maureen E. Connors and Sheldon A. Harris concurred.

The city and its union employees, with regular involvement of the state General Assembly, negotiated and amended agreements concerning retiree health insurance repeatedly throughout the 1980s and into the 1990s. But it was not until a 2003 settlement, Simon wrote, “that the parties agreed that the city would have the unilateral authority to end the program entirely, meaning that all persons that participated in the retirement system before that agreement was executed still maintained a vested right to the unconditional 1983 and 1985 amendments.”

The retirees argued the pension protection clause entitles them to “their abstract right to ‘health care coverage,’ ” Simon wrote. “But that is not what the Illinois Constitution provides.” It only “protects a specific tangible benefit that cannot be diminished or impaired.” What is protected, then, is the city’s contribution to retiree health care.

As determined in 1983, the police and firefighter pension funds provide a subsidy to the city of $55 per month for retirees who are not eligible for Medicare and $21 per month for those who are eligible. In 1985, other city workers were brought under a similar structure at $25 per month.

The justices said that although the appeal focused on contracts and amendments from the 1980s, none of the claims under the retirees’ third amended complaint are barred under limitation statutes, “because there was never a permanent solution and because the City did not end its health care coverage until Jan. 1, 2017.”

Ultimately the panel’s opinion establishes retirees are entitled to a fixed-rate subsidy based on when they entered the retirement system, not when they left employment. That precludes retirees from arguing the city violates the federal constitution’s equal protection clause by discriminating based on retirement date.

The justices agreed with the bulk of the circuit court’s most recent rulings, but said it still needs to address how subsidies will be funded for retirees who started their jobs before the 2003 settlement.

“The result here will predictably leave both sides unhappy,” Simon wrote. “The retirees have intimated that the 1983 and 1985 fixed-rate subsidies are insufficient because the amount of the benefit covers little of their ever-rising healthcare premiums.

“On the other hand, the city has been boastful of its heretofore success in eliminating the retiree healthcare plan altogether, and its interest in the badly-needed financial savings from eliminating the program is legitimate. However, after 30 years of litigation and millions of dollars spent, the result compelled by the application of our constitution, statutes and precedent is that the retirees are entitled to lifetime health care coverage, albeit at modest levels — a result that should, but unlikely will, put an end to hostilities.”

Prior to this decision, the same three-justice panel had weighed in on retiree claims in September 2016, finding then, as now, that retirees did not have an absolute right to certain levels of funding for health insurance.

In that ruling, the justices backed Cook County Judge Neil Cohen, who found the city could modify benefits provided to post-1989 retirees because the agreement under which those benefits were provided included a defined end date. And that end date, the justices and Judge Cohen found, was not undone by the Illinois Supreme Court’s decision that health insurance premium subsidies for retirees is a benefit of membership in a pension system that the legislature cannot diminish or impair.

“The relevant constitutional provision and case law do not create benefits – they protect them,” the appellate justices wrote in the 2016 decision. “… Here, the benefit always came with an expiration date.”

The plaintiffs are represented in the action by attorney Clinton Krislov, of Chicago.

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Krislov & Associates, LTDIllinois First District Appellate CourtCity of Chicago