CHICAGO - Illinois could face an additional $128 million tab for retiree health insurance due to the recent Illinois Supreme Court decision assigning constitutional protections to the benefits.

The state could be required to cover an additional $42 million in fiscal 2014, which ended June 30, and an additional $86 million in the current fiscal year, according to a new report from the local government research group Civic Federation of Chicago. The federation cited information provided by the state's Department of Central Management Services.

The court ruled only that constitutional protections of pension benefits apply to retiree healthcare premium subsidies and not whether the state changes to the subsidies under a 2012 law violated the constitution's pension clause against impairing benefits. The case was sent back to the lower court to decide whether violations occurred.

The 2012 law ended automatic premium subsidies for retirees instead making the subsidy level subject to negotiation with unions. The changes took effect in fiscal 2014 with the adoption of a new employee union contract.

As a result of the new law, retiree premium contributions in fiscal 2014 increased by roughly $42 million, a portion of which is being held in escrow by the Illinois Comptroller's Office, and an additional $86 million in retiree contributions was expected to be collected in fiscal 2015 which began July 1. No refund is expected while the issue is being litigated.

The state expects savings from other changes to retiree health insurance unrelated to the 2012 under question. One change involved shifting Medicare-covered employees to Medicare Advantage plans being offered by private companies that contract with the federal government.

"It remains unclear whether the Supreme Court's interpretation of the pension clause could lead to successful legal challenges of any changes in retiree health insurance benefits," the federation wrote.

The state estimated savings of $864 million in the new three-year union contract when taking into account all of the changes to employee and retiree health insurance.

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