Health care initiative to save state government more than half a million dollars         

Innovative program pays qualified retirees to opt out of state health insurance

[AUG. 26, 2006]  SPRINGFIELD -- As a result of an innovative program designed to help the state of Illinois manage the growing cost of health care for its employees and retirees, state government will save at least $650,000 this fiscal year alone. Eighty retired state employees have opted into an incentive program that compensates them $150 each month for transitioning to non-state health insurance coverage when they have access to health insurance from another source. Although this practice is becoming increasingly common in the private sector, it is very rare in government and will save the state more than $900,000 between Jan. 1, 2006, and June 30, 2007.

"Many retirees from state government have access to health insurance from their spouse or a new employer because of a second career. By transitioning their insurance to an alternate provider, these retirees can put some extra money in their pocket while helping the state to rein in health care costs," said Paul Campbell, director of the Illinois Department of Central Management Services, the agency that administers the group insurance health plan for the state's employees and retirees.

To be eligible for the $150 monthly payment, former employees enrolled in the State Employee Retirement System -- and not eligible for Medicare -- must submit proof of comprehensive health coverage from a source other than the state of Illinois. The decision to participate is entirely voluntary, and the program does not affect state group life insurance coverage.

Interested retirees can learn more about the incentive program and determine eligibility by contacting their group insurance representative at the State Employees Retirement System at 1-217-785-7150. They should also consult with a financial adviser before transitioning to the program. Retirees can opt into this incentive program during the benefits choice period each May.

To help manage escalating costs during difficult fiscal times, Gov. Rod R. Blagojevich encouraged Central Management Services and the Office of Management and Budget to find creative solutions to manage the state's health care costs without affecting overall benefits. This program is similar to an efficiency initiative increasingly common in the private sector. In 2005, a Salary.com survey found that 14 percent of small businesses in the United States offer incentives to workers who opt out of company health insurance.

The administration worked with legislative leaders to pass the program in the General Assembly last year, and Blagojevich signed the proposal into law on July 1, 2005. Since the program became effective Jan. 1, dozens of eligible retirees have enrolled, helping the state save $250,000 in fiscal 2006, which ended June 30, and enabling the state to save more than $600,000 in fiscal 2007.

The monthly cost for an employee or retiree on the state's health insurance plan is approximately $790, so each qualified retiree who opts out of the plan saves the state approximately $640 each month. The monthly incentive payment remains until the retiree opts back into the state health plan or becomes eligible for Medicare. The retiree may opt back into the health plan during the benefit choice period each year or within 60 days of experiencing a qualifying change in status, such as marriage or loss of other coverage.

About Central Management Services

In 2003, Blagojevich instructed Central Management Services to streamline the state's operations, share resources and save taxpayer money while improving the business services of state government. By bringing private-sector discipline to its public-sector mission, the department leads the cost-effective administration of purchasing, property management, information technology, telecommunications, internal audit and outside legal services for the state's executive agencies; personnel and benefits for all state employees and retirees; and the state's employee and vendor diversity programs.

Deloitte Consulting recently validated that CMS achieved $529 million in savings -- through its efforts in fiscal 2004 and fiscal 2005 alone -- as it implemented new technologies, reduced waste and rethought many of the administrative operations of the state.

[Illinois Department of Central Management Services news release]