State Budget Woes Hit Employee Health Plan

October 27, 2009

The State of Illinois’ fiscal crisis has had a major impact on the State’s employee health insurance plan, delaying payments on employee medical bills paid by the State for roughly seven months and causing the State to delay paying premiums to managed care companies for three and a half months.

It is taking an average of 209 days for the State’s self-insured health plan to pay its bills, according to an October 23, 2009 letter from the Illinois Department of Healthcare and Family Services (HFS) to the General Assembly’s Commission on Government Forecasting and Accountability (COGFA). The self-insured plan is the State’s traditional health plan, under which patients have their choice of doctors. CIGNA, which processes claims for the State under the traditional plan, was holding $335 million in claims as of the week of October 19, HFS said in the letter.

In its managed care plans, the State is delaying making premium payments to HMOs and other healthcare providers for three and a half months “in order to manage the limited resources” appropriated to the group health plan under the FY2010 budget, according to the HFS letter. This is reportedly the first time the State has ever delayed premium payments. The State currently owes approximately $103.6 million to managed care companies, HFS said.

The health insurance problems stem from a $600 million shortfall in the FY2010 budget for group health insurance. Governor Pat Quinn allocated $700 million for employee health insurance but said that that General Assembly’s overall budget appropriation for FY2010 did not allow him to provide the total $1.3 billion that he had originally proposed.

HFS said in the letter that it does not know of any doctor or hospital that is refusing to see state employees as a result of not being paid. However, a spokesman for Council 31 of the American Federation of State, County, and Municipal Employees, which represents state workers, has said that some employees and retirees have been contacted by debt collection agencies and have decided to pay medical bills out of their own pockets.

The Illinois Department of Central Management Services (CMS), which administers the State’s health plan, has told employees that the State is facing a “difficult and unprecedented funding situation.” CMS said that “funding availability is based on State revenue, which fluctuates from month to month. At this time funds remain insufficient to pay claims on a normal schedule and we cannot estimate when a regular payment schedule will resume.” CIGNA is processing claims, CMS said, but the claims are not being released until revenue becomes available. CMS has advised workers who decide to pay their own healthcare bills that they should arrange to get reimbursed by their doctors after CIGNA pays claims.

Approximately 346,500 employees, retirees and dependents are covered by the state health plan. Of that total, roughly 225,200 or 65% are in managed care plans and the rest are covered by the traditional plan. Employees and retirees with less than 20 years of service are required to pay healthcare premiums.

The State will have to pay approximately $28.6 million in interest charges on delayed payments to healthcare providers this year. In the letter to COGFA, HFS said interest on delayed managed care premiums is estimated to total $10.5 million in FY2010, while interest on delayed claims under the traditional plan is expected to amount to $18.1 million.