SPRINGFIELD, Ill. (Capitol News Illinois) – Gov. JB Pritzker celebrated a partial legislative victory Thursday night when the House passed his initiative to end some practices health insurance companies use to control the amount and cost of health care services individual patients receive.

The “Healthcare Protection Act,” House Bill 5395, cleared the House on a bipartisan vote of 81-25. It next moves to the Senate where Pritzker predicted it will pass easily.

“This bill will save lives and lower health care costs for millions of Illinoisans,” he said at a news conference Thursday night celebrating the House vote. “Together, we will get this bill through the Senate and land it on my desk where I’ll proudly sign it, because the people of Illinois deserve reliable and safe access to the quality care that they deserve.”

Pritzker first outlined the initiative during his State of the State address in February. It targets many of the “utilization management” practices insurance companies use to hold down costs by either denying claims or steering patients toward lower-cost options.

For example, the bill would require health insurers to use “generally accepted standards of care” when deciding whether to cover treatments recommended by a doctor.

It also bans a practice known as step therapy that is used in some prescription drug plans. That, practice, sometimes referred to as “fail first” therapy, requires patients to demonstrate that a lower-cost drug that is part of an insurance company’s preferred drug list is ineffective before the company will approve paying for a different drug prescribed by the patient’s doctor.

It also prohibits insurance companies from requiring prior authorization before covering the cost of in-patient psychiatric treatment. In circumstances where prior authorization is necessary, companies would be required to publicly post it on their websites. 

In addition to those restrictions, the bill would require insurance companies to conduct internal audits of their own provider networks every 90 days. Those audits would ensure that the providers listed still participate in the network and that the network has enough providers in various practice areas to meet the needs of patients.

The bill also calls for banning the sale in Illinois of short-term, limited duration insurance policies that do not meet the minimum standards of the federal Affordable Care Act. 

And it would give the Illinois Department of Insurance authority to review and either approve or disapprove rate hikes in large-group insurance plans, similar to the rate review authority the agency was given last year over small-group plans.

“For far too long, insurance companies, and not doctors, have been free to determine what treatment options patients should have and how quickly they can receive it,” Pritzker said. “With this bill, we’re putting power back in the hands of doctors and patients.”

The bill would apply to traditional types of employer-based health plans, known as “fully insured” plans, in which the employer contracts with a third-party insurance company to provide coverage. It would also apply to insurance provided under the state’s Medicaid program as well as plans that cover state and local government employees and local school districts.

The rules would not, however, apply to self-insured plans typically offered by large businesses and labor unions because those are regulated under the federal Employee Retirement Income and Security Act of 1974, or ERISA.

“We are not allowed to regulate ERISA plans, the self-funded plans that are regulated by the federal government,” Rep. Anna Moeller, D-Elgin, the bill’s lead House sponsor, said during floor debate.

The bill also would not apply to the state-funded health care programs for noncitizens – Health Benefits for Immigrant Adults and Health Benefits for Immigrant Seniors – which provide benefits similar to those under Medicaid but which are not strictly part of the Medicaid program.

Emily Miller, a senior advisor in Pritzker’s office, said during a committee hearing earlier Thursday that details of the bill were the subject of intense negotiations leading up to the vote in the House. She conceded, though, that passage of the bill would cost the state roughly $40 million to $50 million in the form of higher Medicaid and state employee health plan costs, money that was not included in Pritzker’s budget proposal.

Rep. C.D. Davidsmeyer, R-Jacksonville, noted that those costs will be in addition to the substantial cost increases the state is already facing in its state employee health plan. 

He pointed to a recent report presented to the Commission on Government Forecasting and Accountability – an oversight panel that he cochairs – projecting a 16.5 percent increase in state employee health care costs next year, or roughly $533 million in additional liabilities to the plan.

“Ultimately, I think this is going to be a large increase to the state of Illinois,” he said of the insurance reform bill. “I think it’s going to be increased costs to taxpayers because the majority of our of our taxpayers will not be covered by this.”

Thursday’s vote came as the House worked to meet a Friday deadline for most of its bills to be sent to the Senate. The Senate’s deadline for passing its bills to the House was a week earlier, April 12.

Both chambers are scheduled to be in recess next week, April 22-26, and return Tuesday, April 30, for the final stretch of the spring session.

Pritzker said during his news conference Thursday that he will spend next week traveling the state to promote the health insurance reform plan.

“I’ll be talking with doctors and patients and consumers with one message,” he said. “This bill will save lives and lower health care costs for millions of Illinoisans.”

(Reporting by Peter Hancock, Capitol News Illinois)

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.

image/jpeg pritzker-moeller-jn-0437-e1713553695908.jpg

SPRINGFIELD, Ill. (Capitol News Illinois) – With a month-and-a-half left in the General Assembly’s spring session, Gov. JB Pritzker’s administration is readying its proposal to address Illinois’ chronically underfunded pension system.

But the governor this week also acknowledged in the strongest terms yet that any plans to finally get the state on track toward fully funding retirement plans for public school teachers, university employees and state workers could be derailed by a looming legal fight over a 14-year-old law.

Pritzker’s comments came as Illinois’ two influential statewide teachers unions were wrapping up a “week of action,” encouraging their members to call and email lawmakers and urge them to essentially “undo” a 2010 law that created a new less generous pension system for those who began their jobs after Jan. 1, 2011.

The General Assembly and then-Democratic Gov. Pat Quinn quickly approved that law in the wake of the Great Recession, which forced state leaders to grapple with decades of underfunding in Illinois’ pension systems. 

But in the years since, economists and labor leaders have repeatedly warned that the retirement benefits in the Tier 2 system are so low, they might violate federal “Safe Harbor” laws. Those laws dictate Social Security replacement plans, like pensions, can’t offer benefits that don’t at least match Social Security. 

Lawmakers – the majority of whom were not in the legislature when Tier 2 was passed – have picked up on those warning signs, and in the last few years have been studying the issue in occasional committee hearings. In February, Pritzker signaled his willingness to get ahead of the looming legal issue, and on Thursday he took a big step forward in his position.

“We need, obviously, to make some changes to Tier 2 to make sure that we’re meeting the Social Security Safe Harbor,” the governor said at an unrelated news conference late Thursday night in his Capitol office. “We don’t yet really know what that’s going to cost.”

Earlier in the day, Pritzker’s top budget advisor, Governor’s Office of Management and Budget Director Alexis Sturm, told a House committee that the governor was “open to that conversation” about increasing the cap on Tier 2 pension earnings to match Social Security.

Ahead of Pritzker’s annual budget address in February, Sturm and other top staffers laid out a larger plan to address Illinois’ underfunded pension systems, which included a nod to the Social Security issue.

Read more: With budget proposal and fiery address, Pritzker paints himself as progressive pragmatist

At the time, the plan merely encouraged the boards of the state’s retirement systems for teachers, university employees and state employees, along with the legislature, to “review and adjust, if necessary, the structure of the Tier 2 pensionable earnings cap.”

But in acknowledging the Tier 2 issue on Thursday, the governor also signaled to New York-based credit ratings agencies that he was still committed to fiscal moves that would earn the state further credit upgrades. Pritzker said state leaders “just need to be exceedingly careful” about pension “sweeteners” – including any fix made to Tier 2 pensions.

“So that, in a way, is a sweetener in the sense that it’s going to cost taxpayers something,” Pritzker said. “But we have to do it because the alternative would cost the taxpayers much more.”

There is no official price tag on tweaking the law to comply with Social Security rules, but one analysis run for the state’s Commission on Government Forecasting and Accountability last year estimated it could cost the state $5.6 billion through 2045, or about $255 million annually.

Path to 2048

Sturm’s appearance in a House committee Thursday was intended to sell lawmakers on the governor’s plan to fully fund Illinois’ pensions by 2048. Pritzker’s team had laid out the proposal ahead of his budget address in February, and one credit rating agency immediately signaled its approval.

Read more: Pritzker proposes over $2B in spending growth, backed by tax increases for corporations, sportsbooks

The plan would alter a 1995 law signed by then-Republican Gov. Jim Edgar that put the state on a 50-year ramp to get Illinois’ pension systems to a 90 percent funded level by 2045.

Pritzker wants to extend that deadline three more years, but up the funding goal to 100 percent. He’s also pushing to keep spending half of the amount of money Illinois is currently spending on debt repayment for old bonds taken out in 2003 and 2017 when they’re retired in the early 2030s and put that money toward the pension systems.

The 2003 bonds were taken out to pay for pensions during Democratic Gov. Rod Blagojevich’s administration, and the 2017 bonds were sold in the aftermath of the state’s two-year budget impasse under Republican Gov. Bruce Rauner to help pay down Illinois’ record near-$17 billion backlog of unpaid bills accumulated during the political struggle.

Sturm called the plan a “balanced” way to address Illinois’ longstanding practice of not paying enough into its pension systems, creating an ever-growing sum of unfunded liabilities.

“It was there in the ‘90s, it was there in the ‘70s and the ‘40s,” Sturm said of the pension debt.

She also clarified that Pritzker is “not interested” in issuing any bonds to put an infusion of cash into the state’s pension systems, a move made under Quinn in 2010 and 2011 several years after the state borrowed $10 billion in the 2003 bond sale under Blagojevich.

Thursday’s discussion on the pension plan was subject matter only, meaning it did not receive a vote from the committee. It’s unclear if the measure will pass before lawmakers adjourn their spring session in May.

Just as in the past, public employee unions will likely have tremendous influence over whether the legislature approves the governor’s pension plan.

Pat Devaney, the secretary-treasurer of the Illinois AFL-CIO organized labor umbrella organization, told the panel Thursday that the We Are One Illinois coalition – a group of unions that formed after the Tier 2 pension system law passed – was not yet taking a stance on Pritzker’s plan.

“It is difficult to provide comprehensive comments on the governor’s proposal without having specific legislative language and funding projections to review,” he said. “That said, the problematic nature of the current funding ramp is well-documented.”

The coalition, Devaney said, “generally” supports making larger-than-necessary contributions to the state’s retirement systems.

“The state has always set forward with a plan to underfund the pension systems,” he said. “We’re encouraged that the governor has a plan to actually fund it to 100 percent and come out with a deliberate, responsible way to provide that funding.”

Tier 2 history

But Devaney had a much more strident position to share with House members about Tier 2 pensions.

“We can do that,” he said of Pritzker’s plan to shore up Illinois’ pension systems. “But we can also address the illegal, immoral, and, frankly, things that are hurting the operations of government at every level with the Tier 2 benefit level.”

After a long pause, state Rep. Steve Reick, R-Woodstock, signaled his agreement – with a big caveat.

“Yeah, but how?” Reick said. “That’s the thing that we need to get people together in a room and talk about because this isn’t gonna get any better for the next 20 years. I’m not going to be here 20 years from now but…I’d like to leave knowing that we started something that would get us to where we want to be.”

Reick said his email inbox has been inundated with messages about the Tier 2 pension system. The Illinois Federation of Teachers and Illinois Education Association – the state’s two largest teachers unions – have encouraged their members to flood their local lawmakers with requests to address the Tier 2 pension system.

As of Thursday evening, union members had sent more than 55,000 letters this week to lawmakers urging them to “fix” Tier 2 pensions, according to the Illinois AFL-CIO.

“I mean, I get a lot of emails from people who demand that we do away with Tier 2 altogether and go back to Tier 1,” Reick said later on during the hearing. “Um, that’s not going to work.”

As Illinois began its slow recovery from the Great Recession, lawmakers were facing a sudden jump in unfunded pension liabilities, due in part to poor investment returns as the stock market hobbled its way to recovery. But the General Assembly also felt the squeeze from decades of decisions from their predecessors shorting the state’s pension systems. 

Beginning in 2009, credit rating agencies began a series of downgrades to Illinois’ ratings of creditworthiness, making it more expensive for the state to borrow money via bond sales. In explaining their reasoning at the time, the influential agencies repeatedly noted the state’s pension systems were underfunded. 

The financial downturn came not long after the state skipped out on paying half of its pension obligation for two years under Blagojevich, which came on the heels of more than 11,000 state workers taking early retirement under Republican Gov. George Ryan. Both moves increased the liability to the state’s pension systems by billions of dollars.

So in 2010, the Democratic-controlled General Assembly created the new Tier 2 system, which nixed the Tier 1 practice of 3 percent compounded annual cost of living adjustments for retirees, raised the age for retirees to get full benefits from 62 to 67 and changed eligibility for full benefits from five years of service to 10 years. 

Tier 2 also caps the maximum salary a pension can be based on and changes the calculation of the base salary to discourage a practice known as pension “spiking,” wherein those close to retirement age would seek raises to substantially increase their pension under the Tier 1 system.

Because it takes a decade to “vest” in the Tier 2 pension system, those who made late-career switches to government employment have begun to be eligible for retirement only in the last few years. 

(Reporting by Hannah Meisel, Capitol News Illinois)

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.

image/jpeg pritzker-jn-0384-e1713562658137.jpg

The current principal at Pocahontas School has been approved as the new athletic director at Greenville High School. Wednesday night, the Bond County Unit 2 School Board approved the hiring […]

Measure heads to Senate after bipartisan vote

By PETER HANCOCK
Capitol News Illinois
phancock@capitolnewsillinois.com

     SPRINGFIELD – Gov. JB Pritzker celebrated a partial legislative victory Thursday night, April 18, when the House passed his initiative to end some practices health insurance companies use to control the amount and cost of health care services individual patients receive.

     The “Healthcare Protection Act,” House Bill 5395, cleared the House on a bipartisan vote of 81-25. It next moves to the Senate where Pritzker predicted it will pass easily. “This bill will save lives and lower health care costs for millions of Illinoisans,” he said at a news conference celebrating the House vote. “Together, we will get this bill through the Senate and land it on my desk where I’ll proudly sign it, because the people of Illinois deserve reliable and safe access to the quality care that they deserve.”

     Pritzker first outlined the initiative during his State of the State address in February. It targets many of the “utilization management” practices insurance companies use to hold down costs by either denying claims or steering patients toward lower-cost options. For example, the bill would require health insurers to use “generally accepted standards of care” when deciding whether to cover treatments recommended by a doctor.

     It also bans a practice known as step therapy that is used in some prescription drug plans. That practice, sometimes referred to as “fail first” therapy, requires patients to demonstrate that a lower-cost drug that is part of an insurance company’s preferred drug list is ineffective before the company will approve paying for a different drug prescribed by the patient’s doctor.

Gov. JB Pritzker talks with members of the Illinois House prior to a vote on his initiative to reform the state’s insurance industry. (Capitol News Illinois photo by Jerry Nowicki)

     It also prohibits insurance companies from requiring prior authorization before covering the cost of in-patient psychiatric treatment. In circumstances where prior authorization is necessary, companies would be required to publicly post it on their websites.

     In addition to those restrictions, the bill would require insurance companies to conduct internal audits of their own provider networks every 90 days. Those audits would ensure that the providers listed still participate in the network and that the network has enough providers in various practice areas to meet the needs of patients. The bill also calls for banning the sale in Illinois of short-term, limited duration insurance policies that do not meet the minimum standards of the federal Affordable Care Act.

     Also, it would give the Illinois Department of Insurance authority to review and either approve or disapprove rate hikes in large-group insurance plans, similar to the rate review authority the agency was given last year over small-group plans. “For far too long, insurance companies, and not doctors, have been free to determine what treatment options patients should have and how quickly they can receive it,” Pritzker said. “With this bill, we’re putting power back in the hands of doctors and patients.”

     The bill would apply to traditional types of employer-based health plans, known as “fully insured” plans, in which the employer contracts with a third-party insurance company to provide coverage. It would also apply to insurance provided under the state’s Medicaid program as well as plans that cover state and local government employees and local school districts. The rules would not, however, apply to self-insured plans typically offered by large businesses and labor unions because those are regulated under the federal Employee Retirement Income and Security Act of 1974, or ERISA. “We are not allowed to regulate ERISA plans, the self-funded plans that are regulated by the federal government,” Rep. Anna Moeller, D-Elgin, the bill’s lead House sponsor, said during floor debate.

State Rep. Anna Moeller, D-Elgin, is pictured on the floor of the Illinois House. (Capitol News Illinois photo by Peter Hancock)

     The bill also would not apply to the state-funded health care programs for non-citizens, Health Benefits for Immigrant Adults and Health Benefits for Immigrant Seniors, which provide benefits similar to those under Medicaid but which are not strictly part of the Medicaid program.

     Emily Miller, a senior advisor in Pritzker’s office, said during a committee hearing earlier Thursday that details of the bill were the subject of intense negotiations leading up to the vote in the House. She conceded, though, that passage of the bill would cost the state roughly $40 million to $50 million in the form of higher Medicaid and state employee health plan costs, money that was not included in Pritzker’s budget proposal. Rep. C.D. Davidsmeyer, R-Jacksonville, noted that those costs will be in addition to the substantial cost increases the state is already facing in its state employee health plan. He pointed to a recent report presented to the Commission on Government Forecasting and Accountability, an oversight panel that he cochairs, projecting a 16.5 percent increase in state employee health care costs next year, or roughly $533 million in additional liabilities to the plan. “Ultimately, I think this is going to be a large increase to the state of Illinois,” he said of the insurance reform bill. “I think it’s going to be increased costs to taxpayers because the majority of our taxpayers will not be covered by this.”

     Thursday’s vote came as the House worked to meet a Friday deadline for most of its bills to be sent to the Senate. The Senate’s deadline for passing its bills to the House was a week earlier, April 12. Both chambers are scheduled to be in recess next week, April 22-26, and return Tuesday, April 30, for the final stretch of the spring session.

Pritzker said during his news conference Thursday that he will spend next week traveling the state to promote the health insurance reform plan. “I’ll be talking with doctors and patients and consumers with one message,” he said. “This bill will save lives and lower health care costs for millions of Illinoisans.”

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.

Ban would take effect for manufacturers in 2027, retailers in 2028

By COLE LONGCOR
Capitol News Illinois
clongcor@capitolnewsillinois.com

     The Illinois Senate passed a bill Thursday, April 18, that would ban four food additives that are found in common products including candy, soda, and baked goods. Senate Bill 2637, known as the Illinois Food Safety Act, passed on a 37-15 bipartisan vote and will head to the House for consideration. The banned chemicals would include brominated vegetable oil, red dye No. 3, propylparaben, and potassium bromate.

     Those additives are used in a wide variety of food products. Brominated vegetable oil is a stabilizer used to keep citrus flavoring in sodas from separating from the solution and floating to the top. Propylparaben and potassium bromate are used in baked goods as a preservative. Red dye 3 is a common food dye used in candy and other products.  “This legislation does not seek to ban any product or take away any of our favorite foods,” bill sponsor Sen. Willie Preston, D-Chicago, said at a news conference Wednesday, April 17. “This measure sets a precedent for consumer health and safety to encourage food manufacturers to update their recipes to use safer alternatives.”

     Last year, the U.S. Food and Drug Administration proposed to revoke the authorization of brominated vegetable oil after a study found that the chemical affects the thyroid, creating negative health impacts.  According to a study from the Center for Science in the Public Interest, a nonprofit advocacy organization, red dye 3 may cause cancer in animals. The International Agency for Research on Cancer, a part of the World Health Organization, found potassium bromate to be possibly carcinogenic. The bill had bipartisan support in the Senate with both Sen. Seth Lewis, R-Bartlett, and Sen. Steve McClure, R-Springfield, voting for it.

     “(Red dye 3) was banned by the FDA for use in makeup over 30 years ago. So, the FDA doesn’t allow you to put it on your face for makeup. But yet kids are eating this in candy,” McClure said in the Senate Thursday. “That to me is outrageous. So, for that reason I am voting for this bill.”

     Preston previously said he was considering adding titanium dioxide to the ban, but that plan was scrapped during negotiations. He said if additional research becomes available “we’ll explore that option at that time.” In 2021, the European Food Safety Authority said it was concerned that titanium dioxide could alter people’s DNA.

     Industry groups such as the Illinois Manufacturers’ Association have pushed back against the bill throughout the legislative process. In January, the IMA issued a statement in opposition of “this well-intentioned legislation,” claiming it would undermine the FDA and negatively impact Illinois’ economy as it would “create a confusing and costly patchwork of regulations.”

     The National Confectioners Association issued a similar statement, saying the bill would “increase food costs, undermine consumer confidence, and create confusion around food safety.” The group also argued food regulation should “rely on the scientific rigor of the FDA.”

     California passed a similar bill last year that will take effect in 2027, and the New York Senate is currently debating a similar bill. The food additives are already regulated or banned in parts of the European Union. The Illinois bill was amended from an earlier version to grant retailers additional time to comply. The additives would be banned from manufacturing beginning January 1, 2027, with the sale, delivery, distribution, and holding of products containing the additives being banned beginning in 2028.

     “We have given an extension to retailers, an extension for an extra year, for them to get in compliance,” Preston said. “We don’t intend to fine people out of business at all. Violators are subject to fines up to $5,000 for their first offense and up to $10,000 for each subsequent offense.

Both Lewis and McClure, while voting for the bill, said they would like to see future legislation clarify how fines accrue and what constitutes a single violation of the law. Sen. Rachel Ventura, D-Joliet, said that as Illinois faces issues of food insecurity and food deserts, this bill is needed to ensure people’s safety. “So, we know that lots of families who live in poor areas tend to go to convenience stores for their grocery stores,” she said at a news conference Wednesday. “We need those foods to be safe to consume, especially if they’re eating them on a daily basis, or multiple times a day.”

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.

SPRINGFIELD, Ill. -- The Illinois Senate recently passed Senate Bill 2637, aimed at banning certain additives and chemicals in food products. The bill, which Senator Willie Preston introduced, targets additives such as titanium dioxide, brominated vegetable oil, potassium bromate, propylparaben, and red dye No. 3 that are present in commonplace items like candies, sodas, and snack foods.

Consumer advocacy groups highlight the presence of these chemicals in popular products like Mountain Dew, packaged breads, and some candies like Skittles. The bill also proposes further studies on the health impacts of other common additives such as BHA and BHT.

The legislation mandates that food manufacturers and distributors phase out these chemicals and find safer alternatives by January 1, 2028. It sets penalties for non-compliance and has sparked significant opposition from the Illinois Manufacturers Association and the National Confectioners Association. These groups argue that such state-level regulations contradict federal oversight by the FDA, leading to inconsistent standards that could confuse consumers and increase food costs.

Similar legislation was recently enacted in California. There are also laws banning many of these additives in Europe. The bill now moves to the Illinois House for further consideration.

Synopsis of the bill:

"Amends the Illinois Food, Drug and Cosmetic Act. Provides that, beginning January 1, 2027, a person or entity shall not manufacture, sell, deliver, distribute, hold, or offer for sale a food product for human consumption that contains brominated vegetable oil, potassium bromate, propylparaben, or red dye 3. Provides that a person or entity that violates the prohibition shall be liable for a civil penalty not to exceed $5,000 for a first violation and not to exceed $10,000 for each subsequent violation. Makes a conforming change."

image/jpeg 140226160405-skittles-live-video.jpg?w=576

SPRINGFIELD – Gov. JB Pritzker celebrated a partial legislative victory Thursday night when the House passed his initiative to end some practices health insurance companies use to control the amount and cost of health care services individual patients receive.

The “Healthcare Protection Act,” House Bill 5395, cleared the House on a bipartisan vote of 81-25. It next moves to the Senate where Pritzker predicted it will pass easily.

“This bill will save lives and lower health care costs for millions of Illinoisans,” he said at a news conference Thursday night celebrating the House vote. “Together, we will get this bill through the Senate and land it on my desk where I’ll proudly sign it, because the people of Illinois deserve reliable and safe access to the quality care that they deserve.”

Pritzker first outlined the initiative during his State of the State address in February. It targets many of the “utilization management” practices insurance companies use to hold down costs by either denying claims or steering patients toward lower-cost options.

For example, the bill would require health insurers to use “generally accepted standards of care” when deciding whether to cover treatments recommended by a doctor.

It also bans a practice known as step therapy that is used in some prescription drug plans. That, practice, sometimes referred to as “fail first” therapy, requires patients to demonstrate that a lower-cost drug that is part of an insurance company’s preferred drug list is ineffective before the company will approve paying for a different drug prescribed by the patient’s doctor.

It also prohibits insurance companies from requiring prior authorization before covering the cost of in-patient psychiatric treatment. In circumstances where prior authorization is necessary, companies would be required to publicly post it on their websites.

In addition to those restrictions, the bill would require insurance companies to conduct internal audits of their own provider networks every 90 days. Those audits would ensure that the providers listed still participate in the network and that the network has enough providers in various practice areas to meet the needs of patients.

The bill also calls for banning the sale in Illinois of short-term, limited duration insurance policies that do not meet the minimum standards of the federal Affordable Care Act.

And it would give the Illinois Department of Insurance authority to review and either approve or disapprove rate hikes in large-group insurance plans, similar to the rate review authority the agency was given last year over small-group plans.

“For far too long, insurance companies, and not doctors, have been free to determine what treatment options patients should have and how quickly they can receive it,” Pritzker said. “With this bill, we’re putting power back in the hands of doctors and patients.”

The bill would apply to traditional types of employer-based health plans, known as “fully insured” plans, in which the employer contracts with a third-party insurance company to provide coverage. It would also apply to insurance provided under the state’s Medicaid program as well as plans that cover state and local government employees and local school districts.

The rules would not, however, apply to self-insured plans typically offered by large businesses and labor unions because those are regulated under the federal Employee Retirement Income and Security Act of 1974, or ERISA.

“We are not allowed to regulate ERISA plans, the self-funded plans that are regulated by the federal government,” Rep. Anna Moeller, D-Elgin, the bill’s lead House sponsor, said during floor debate.

The bill also would not apply to the state-funded health care programs for noncitizens – Health Benefits for Immigrant Adults and Health Benefits for Immigrant Seniors – which provide benefits similar to those under Medicaid but which are not strictly part of the Medicaid program.

Emily Miller, a senior advisor in Pritzker’s office, said during a committee hearing earlier Thursday that details of the bill were the subject of intense negotiations leading up to the vote in the House. She conceded, though, that passage of the bill would cost the state roughly $40 million to $50 million in the form of higher Medicaid and state employee health plan costs, money that was not included in Pritzker’s budget proposal.

Rep. C.D. Davidsmeyer, R-Jacksonville, noted that those costs will be in addition to the substantial cost increases the state is already facing in its state employee health plan.

He pointed to a recent report presented to the Commission on Government Forecasting and Accountability – an oversight panel that he cochairs – projecting a 16.5 percent increase in state employee health care costs next year, or roughly $533 million in additional liabilities to the plan.

“Ultimately, I think this is going to be a large increase to the state of Illinois,” he said of the insurance reform bill. “I think it’s going to be increased costs to taxpayers because the majority of our of our taxpayers will not be covered by this.”

Thursday’s vote came as the House worked to meet a Friday deadline for most of its bills to be sent to the Senate. The Senate’s deadline for passing its bills to the House was a week earlier, April 12.

Both chambers are scheduled to be in recess next week, April 22-26, and return Tuesday, April 30, for the final stretch of the spring session.

Pritzker said during his news conference Thursday that he will spend next week traveling the state to promote the health insurance reform plan.

“I’ll be talking with doctors and patients and consumers with one message,” he said. “This bill will save lives and lower health care costs for millions of Illinoisans.”

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.

image/jpeg HVPGPTK7LRFS7PNUGBXEXNOTJ4.jpeg

With a month-and-a-half left in the General Assembly’s spring session, Gov. JB Pritzker’s administration is readying its proposal to address Illinois’ chronically underfunded pension system.

But the governor this week also acknowledged in the strongest terms yet that any plans to finally get the state on track toward fully funding retirement plans for public school teachers, university employees and state workers could be derailed by a looming legal fight over a 14-year-old law.

Pritzker’s comments came as Illinois’ two influential statewide teachers unions were wrapping up a “week of action,” encouraging their members to call and email lawmakers and urge them to essentially “undo” a 2010 law that created a new less generous pension system for those who began their jobs after Jan. 1, 2011.

The General Assembly and then-Democratic Gov. Pat Quinn quickly approved that law in the wake of the Great Recession, which forced state leaders to grapple with decades of underfunding in Illinois’ pension systems.

But in the years since, economists and labor leaders have repeatedly warned that the retirement benefits in the Tier 2 system are so low, they might violate federal “Safe Harbor” laws. Those laws dictate Social Security replacement plans, like pensions, can’t offer benefits that don’t at least match Social Security.

Lawmakers – the majority of whom were not in the legislature when Tier 2 was passed – have picked up on those warning signs, and in the last few years have been studying the issue in occasional committee hearings. In February, Pritzker signaled his willingness to get ahead of the looming legal issue, and on Thursday he took a big step forward in his position.

“We need, obviously, to make some changes to Tier 2 to make sure that we’re meeting the Social Security Safe Harbor,” the governor said at an unrelated news conference late Thursday night in his Capitol office. “We don’t yet really know what that’s going to cost.”

Earlier in the day, Pritzker’s top budget advisor, Governor’s Office of Management and Budget Director Alexis Sturm, told a House committee that the governor was “open to that conversation” about increasing the cap on Tier 2 pension earnings to match Social Security.

Ahead of Pritzker’s annual budget address in February, Sturm and other top staffers laid out a larger plan to address Illinois’ underfunded pension systems, which included a nod to the Social Security issue.

Read more: With budget proposal and fiery address, Pritzker paints himself as progressive pragmatist

At the time, the plan merely encouraged the boards of the state’s retirement systems for teachers, university employees and state employees, along with the legislature, to “review and adjust, if necessary, the structure of the Tier 2 pensionable earnings cap.”

But in acknowledging the Tier 2 issue on Thursday, the governor also signaled to New York-based credit ratings agencies that he was still committed to fiscal moves that would earn the state further credit upgrades. Pritzker said state leaders “just need to be exceedingly careful” about pension “sweeteners” – including any fix made to Tier 2 pensions.

“So that, in a way, is a sweetener in the sense that it’s going to cost taxpayers something,” Pritzker said. “But we have to do it because the alternative would cost the taxpayers much more.”

There is no official price tag on tweaking the law to comply with Social Security rules, but one analysis run for the state’s Commission on Government Forecasting and Accountability last year estimated it could cost the state $5.6 billion through 2045, or about $255 million annually.

Path to 2048

Sturm’s appearance in a House committee Thursday was intended to sell lawmakers on the governor’s plan to fully fund Illinois’ pensions by 2048. Pritzker’s team had laid out the proposal ahead of his budget address in February, and one credit rating agency immediately signaled its approval.

Read more: Pritzker proposes over $2B in spending growth, backed by tax increases for corporations, sportsbooks

The plan would alter a 1995 law signed by then-Republican Gov. Jim Edgar that put the state on a 50-year ramp to get Illinois’ pension systems to a 90% funded level by 2045.

Pritzker wants to extend that deadline three more years, but up the funding goal to 100%. He’s also pushing to keep spending half of the amount of money Illinois is currently spending on debt repayment for old bonds taken out in 2003 and 2017 when they’re retired in the early 2030s and put that money toward the pension systems.

The 2003 bonds were taken out to pay for pensions during Democratic Gov. Rod Blagojevich’s administration, and the 2017 bonds were sold in the aftermath of the state’s two-year budget impasse under Republican Gov. Bruce Rauner to help pay down Illinois’ record near-$17 billion backlog of unpaid bills accumulated during the political struggle.

Sturm called the plan a “balanced” way to address Illinois’ longstanding practice of not paying enough into its pension systems, creating an ever-growing sum of unfunded liabilities.

“It was there in the ‘90s, it was there in the ‘70s and the ‘40s,” Sturm said of the pension debt.

She also clarified that Pritzker is “not interested” in issuing any bonds to put an infusion of cash into the state’s pension systems, a move made under Quinn in 2010 and 2011 several years after the state borrowed $10 billion in the 2003 bond sale under Blagojevich.

Thursday’s discussion on the pension plan was subject matter only, meaning it did not receive a vote from the committee. It’s unclear if the measure will pass before lawmakers adjourn their spring session in May.

Just as in the past, public employee unions will likely have tremendous influence over whether the legislature approves the governor’s pension plan.

Pat Devaney, the secretary-treasurer of the Illinois AFL-CIO organized labor umbrella organization, told the panel Thursday that the We Are One Illinois coalition – a group of unions that formed after the Tier 2 pension system law passed – was not yet taking a stance on Pritzker’s plan.

“It is difficult to provide comprehensive comments on the governor’s proposal without having specific legislative language and funding projections to review,” he said. “That said, the problematic nature of the current funding ramp is well-documented.”

The coalition, Devaney said, “generally” supports making larger-than-necessary contributions to the state’s retirement systems.

“The state has always set forward with a plan to underfund the pension systems,” he said. “We’re encouraged that the governor has a plan to actually fund it to 100% and come out with a deliberate, responsible way to provide that funding.”

Tier 2 history

But Devaney had a much more strident position to share with House members about Tier 2 pensions.

“We can do that,” he said of Pritzker’s plan to shore up Illinois’ pension systems. “But we can also address the illegal, immoral, and, frankly, things that are hurting the operations of government at every level with the Tier 2 benefit level.”

After a long pause, state Rep. Steve Reick, R-Woodstock, signaled his agreement – with a big caveat.

“Yeah, but how?” Reick said. “That’s the thing that we need to get people together in a room and talk about because this isn’t going to get any better for the next 20 years. I’m not going to be here 20 years from now but ... I’d like to leave knowing that we started something that would get us to where we want to be.”

Reick said his email inbox has been inundated with messages about the Tier 2 pension system. The Illinois Federation of Teachers and Illinois Education Association – the state’s two largest teachers unions – have encouraged their members to flood their local lawmakers with requests to address the Tier 2 pension system.

As of Thursday evening, union members had sent more than 55,000 letters this week to lawmakers urging them to “fix” Tier 2 pensions, according to the Illinois AFL-CIO.

“I mean, I get a lot of emails from people who demand that we do away with Tier 2 altogether and go back to Tier 1,” Reick said later on during the hearing. “Um, that’s not going to work.”

As Illinois began its slow recovery from the Great Recession, lawmakers were facing a sudden jump in unfunded pension liabilities, due in part to poor investment returns as the stock market hobbled its way to recovery. But the General Assembly also felt the squeeze from decades of decisions from their predecessors shorting the state’s pension systems.

Beginning in 2009, credit rating agencies began a series of downgrades to Illinois’ ratings of creditworthiness, making it more expensive for the state to borrow money via bond sales. In explaining their reasoning at the time, the influential agencies repeatedly noted the state’s pension systems were underfunded.

The financial downturn came not long after the state skipped out on paying half of its pension obligation for two years under Blagojevich, which came on the heels of more than 11,000 state workers taking early retirement under Republican Gov. George Ryan. Both moves increased the liability to the state’s pension systems by billions of dollars.

So in 2010, the Democratic-controlled General Assembly created the new Tier 2 system, which nixed the Tier 1 practice of 3 percent compounded annual cost of living adjustments for retirees, raised the age for retirees to get full benefits from 62 to 67 and changed eligibility for full benefits from five years of service to 10 years.

Tier 2 also caps the maximum salary a pension can be based on and changes the calculation of the base salary to discourage a practice known as pension “spiking,” wherein those close to retirement age would seek raises to substantially increase their pension under the Tier 1 system.

Because it takes a decade to “vest” in the Tier 2 pension system, those who made late-career switches to government employment have begun to be eligible for retirement only in the last few years.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.

image/jpeg LGA5VL57VNDZ7PMTY7JSEJHEVQ.jpg