“Rising healthcare costs and the
expense of existing public pension obligations are two of the greatest
challenges facing the American economy. In Kanerva v. Weems, 2014 IL
115811, 13 N.E.3d 1228, 383 Ill.Dec. 107, the Illinois Supreme Court brought
these two issues together in a way that may have significant implications for
the fiscal health of Illinois for years to come.
“The State of Illinois has subsidized
the health insurance premiums of its retired employees for decades. The state
has repeatedly modified the statutes governing these payments, creating a
variety of subsidy entitlements ranging from 5 percent to 100 percent.
Crucially, each of these modifications applied only prospectively — i.e.,
they affected only newly qualifying retirees, annuitants, and survivors and
left existing subsidy rights untouched.
“In 2012, however, the state enacted a
sweeping revision of its health insurance subsidy practices. P.A. 97-695,
effective July 1, 2012, eliminated all existing state health insurance premium
subsidy structures for annuitants, retirees, and survivors and replaced them
with a program under which the state would contribute toward a basic program of
healthcare benefits in an amount that would be determined anew each year by the
Director of the Department of Central Management Services.
“Soon after the Act took effect,
various retired state employees filed lawsuits contesting its legality. These
lawsuits, consolidated in Kanerva, asserted a variety of different
challenges to the Act but were united in contending that it violated the
Illinois Constitution of 1970. The circuit court rejected the plaintiffs’
constitutional argument and granted the Kanerva defendants’ motion to
dismiss it for legal insufficiency under §2-615 of the Illinois Code of Civil
Procedure, 735 ILCS 5/2-615. The Illinois Supreme Court’s de novo
reconsideration of this finding forms the heart of its Kanerva
decision.
“The Kanerva plaintiffs’
constitutional argument rests on Article XIII, Section 5, of the Illinois Constitution,
which provides: ‘Membership in any pension or retirement system of the State .
. . shall be an enforceable contractual relationship, the benefits of which
shall not be diminished or impaired.’ The Kanerva plaintiffs contend
that health insurance premium subsidy rights are a ‘benefit’ under this
provision and, accordingly, may not be reduced except prospectively.
“The Kanerva defendants, on the
other hand, argue that health insurance premium subsidy rights clearly fall
outside the scope of Article XIII, Section 5’s protected ‘benefits’ in view of
the fact that they are neither codified in the Illinois Pension Code nor paid
from the assets of the retirement funds established in that Code.
“The Kanerva court was unable to
reach a unanimous decision on these competing arguments. A majority found that
the plaintiffs had the better analysis, stating:
“[E]ligibility for all of the
[disputed] benefits is limited to, conditioned on, and flows directly
from membership in one of the State’s various public pension systems. Giving
the language of article XIII, section 5, 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. 2014 IL 115811 at
¶40.
“The majority noted that this reading
of the constitutional text was further supported, inter alia, by the fact that
the state had had a health insurance premium subsidy program in place when the
1970 Constitution was proposed and adopted, yet the drafters chose the broad
wording of Article XIII, Section 5, even though they could have expressly
limited the covered benefits to annuities or benefits directly conferred by the
Pension Code. 2014 IL 115811 at ¶41.
“Significantly, the majority’s decision
did not reach the question of whether the specific modifications to existing
health insurance premium subsidy rights imposed by the Act were a diminishment
or impairment of those rights. Its ruling was limited to its findings that
those rights were pension benefits under Article XIII, Section 5, and the
plaintiffs’ related claims were accordingly legally sufficient to survive a
motion to dismiss.
“The dissent, by Justice Burke, noted
that the Illinois Supreme Court had previously ruled that the Illinois
Constitution’s pension protection clause created a contractual relationship
that ‘is governed by the actual terms of the Pension Code at the time the
employee becomes a member of the pension system’ (2014 IL 115811 at ¶68) — a
holding that, in Justice Burke’s view, directly supported the defendants’
argument that health insurance premium subsidies are not pension benefits.
“Justice Burke further observed that
health insurance premium subsidies have dramatic practical differences from a
standard pension benefit since they ‘are not within the control of the
legislature and are subject to change depending on advancements in medical
technology, increases in the costs of treatments, and the availability of
insurance plans’ (2014 IL 115811 at ¶70) and argued that the majority’s
adoption of ‘flow[ing] directly from’ and ‘attendant to’ as the measure of what
qualifies something as an Article XIII, Section 5, benefit conferred a
potentially absurd scope on that provision’s guarantee of non-impairment. 2014
IL 115811 at ¶71.
“Justice Burke also contended that the
absence of an express exclusion of health insurance premium subsidy rights from
Article XIII, Section 5, was entirely reasonable given that when that provision
was drafted, ‘no such benefits were provided for in any [existing] pension or
retirement system.’ 2014 IL 115811 at ¶75.
“Although Kanerva’s holding is
limited to the §2-615 issue, the defendants will face an uphill battle on
remand in attempting to convince the circuit court that the Act’s changes do
not diminish or impair the constitutionally protected benefit of retiree health
insurance premium subsidies.
“By contrast, Kanerva’s holding
will provide the plaintiffs with a strong argument that if the State wishes to
effect any change in its program of health insurance premium subsidies for
existing retirees, it will have to amend the Constitution first. Justice
Burke’s dissent fleshes out some of the potential results of these implications
of Kanerva: not only will the State be on the hook for its proportional
share of any future increases in the cost of health insurance premiums for
existing retirees, but the constitutional guarantee of non-impairment may later
be found to extend to any other beneficial consequence of membership in the
state’s public pension systems whose enacting legislation does not expressly
exclude it from Article XIII, Section 5’s scope.
“Given these potentially significant
consequences, Illinois legislators would do well to read Kanerva
carefully before undertaking any further amendment of the state’s systems for
providing for retired public employees.”
Remember the IEA, IFT, et al. were willing to impair this guaranteed constitutional right and benefit when they agreed to Senate Bill 2404 with the liars and thieves of the Illinois General Assembly months ago. The choice between having either health care or a COLA was not a moral and legal consideration for retirees!
ReplyDeleteWe can expect the Illinois General Assembly will continue their assaults on our constitutional contract. Thus, we need a dynamic leadership with determination to “build the rank-and-file’s collective capacity to resist”: an association that will mobilize its membership against those among us who insist upon debasing our constitutional rights and benefits and public school teachers.
We need union leaders who are not willing to bargain away our rights and benefits!