The insurance issue is of critical importance to early retirees.  Their premiums under the CCC plan will rise substantially after early retirement.  All retirees  need to consider the long-term  future of the CCC plan compared to the alternative CIP plan which covers all Illinois community college retirees except CCC’s.  The following is our response to the union’s  letter to the Chancellor of February 28, 2005, arguing against the CIP plan.  Summaries of the union’s arguments are found in italics below.
 

Union letter: The 0.5% contribution to the CIP plan would cost actives $400/year or $12,000 during their professional careers.

These are exaggerated numbers, based on a career  average  salary of $80,000.  The average salary for professionals/teachers is now $47,000/$65,000 so the 0.5% contribution would amount to an average of $235-$320/year, or  $7,000 - 9,800 over a 30 year career.  Currently, the subsidized CIP plan for single  PPO coverage would cost Medicare-eligible post-early retirees about $3400 per year LESS  than the CCC plan, so the contributions made during active years would be recovered in less than 3 years of post-early retirement.  It is important to note that with today’s high life expectancies, retirees can expect to spend 10-20 or more years in post-early retirement.

Also, the CIP law allows for an optional “pick-up” of the half percent active employee contribution by the employer.  The Board has of this writing not agreed to a full or partial “pick up” of this half percent contribution, but tough negotiation might perhaps bring it to that point.

Union letter: The CIP plan would cost  early retirees much more than the  CCC Program

CCC  indicated to us and also to the Union that they would continue to honor the subsidized rates set forth in the contract for early retirees if we switched to CIP. The Chancellor in his address to the Board of April 7, 2005 said: “This is how we would propose to implement CIP.  Immediately upon retirement, all City Colleges’ retirees would be eligible to elect CIP-provided medical coverage.  It is very important to note that we would continue the City Colleges’ insurance premium subsidy for the first 10 years following retirement." (Emphasis in original.)

Union letter: The CCC plan offers benefits and coverage which are similar to the CIP plan

The advantages of the CCC plan are listed by the union but not those of the CIP plan, for example:

· CIP includes dental and vision coverage and CCC does not
· CIP has  lower individual and family out-of-pocket maximums
· CIP provides higher coverage for preventative services
· CIP has lower drug co-pays
· CIP has a $300 deductible for non-Network providers against CCC’s $1,000
· CIP HMO is available state-wide, CCC HMO is only available in certain zip codes in Cook County and Indiana.

Union letter: The CCC plan cost is “somewhat higher” for post-early retirement Medicare-eligible retirees.  “The … higher ..cost ..during the later years of retirement will not offset the substantially higher CIP cost during the first 10 years of retirement”

The numbers given for the CCC plan in the Union’s “Eleven or More Years of Retirement Table” are for April-December 2004. CCC rates have increased again effective January, 2005.  Now the annual cost for Local 1600 Medicare-eligible single PPO coverage is $1055 for CIP compared to $4471 for CCC.  A difference of $3400 per year (more than 4 times higher) doesn’t fit our definition of “somewhat higher”.  Also, reiterating our previous point, there would be no increased cost during early retirement to be offset, since CCC will continue to honor its subsidized rates as set forth in the contract.

Union letter: “Because of the present budget crisis…,we can expect the state’s share of funding…to remain far below the 25% promised by the Illinois Community College Board…the burden of CIP funding is being shifted more and more to retirees…”

The Illinois Community College Board did not “promise” that the State would contribute 25% of the cost. In the CIP law, the funding from the State, the employer, and the actives are each set at  0.5% of payroll of eligible active employees. These three components may or may not add up to exactly 75% of the costs.  Slight differences (1-4%)  in the state’s funding compared to the employers and active employees  are due to the fact that the State’s contribution is estimated by SURS seven months in advance of the start of the fiscal year due to the needs of budgetary preparation.  There is no evidence that the State is not contributing its full share of funding based on the SURS projections.

One way to understand the funding is to look at how the premiums are calculated. The balance of the costs not covered by the CIP fund are paid by the enrollees.  Dependents pay the full cost for their coverage (for example, currently $318/month for single PPO coverage for those who are Medicare  eligible) while retirees themselves pay $88/month, or 27% of the cost.

It is misleading to just look at the State’s contribution compared to the participants’ contribution and assume that the burden of funding is being shifted to the participants just because the participants’ contributions are higher. The CIP fund does not subsidize the premiums for dependents.  Based on the 2005 percentages of 19% dependents and 81% benefit recipients, and the total costs of the program, we calculated that the actual percentage of  program costs that CIP participants are paying for their own coverage is 27%. (Copies of our financial analysis will be made available upon request.)  In contrast, under the CCC plan, both retirees and spouses pay 100% of the costs after early retirement.
 
 

Our conclusion:  THE CCC PLAN HAS NO FUTURE

Is there any secure, affordable future in the CCC plan?  The premiums after Early Retirement have more than doubled since April, 2004. Currently, the monthly rate for Local 1600 PPO singles is $373 (Medicare) and $578 (non-Medicare).  The comparable rates for Local 1708 are $422 and $522 or $654.  A large number of post-early retirees left the CCC program in 2004, either because they were young enough and healthy enough to buy cheaper coverage elsewhere, or because they could no longer afford it. Only 367 remain, little more than half of the group ‘s number at the start of 2004.  At most a net of 50-100 (and perhaps far fewer) additions to the group may be expected each year as other retirees reach the end of their early retirement period and members die.  The age and health characteristics and very small size of the CCC 10+ group virtually guarantee that rates will continue to greatly increase since CCC uses only the experience of this group (not that of the entire active and retiree population) as the basis for the premiums charged.  In contrast, CIP is a larger group (currently about 4,000 and 5,000+ if we join) and includes a wider age range of retirees.  CIP’s  coverage is guaranteed by law, is highly subsidized for    retirees, and its premiums do not increase  with age or length of retirement.

*NOTE:
This statement is adapted from an insert published in the Spring 2005 CCCAA Newsletter.  Since the publication of this piece, we have learned from some Local 1600 leaders that they no longer agree with all the statements in the February 28, 2005 letter.  Since all retirees received a copy of this letter, it is still important that its arguments receive adequate critical scrutiny.
 

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