state of illinois illinois labor relations board state … · divided by a factor of 2.023 to...
TRANSCRIPT
STATE OF ILLINOIS ILLINOIS LABOR RELATIONS BOARD
STATE PANEL State of Illinois, Department of Central ) Management Services, ) ) Petitioner ) ) and ) Case No. S-CB-16-023 ) Troopers Lodge #41, Fraternal Order of Police, )
) Respondent )
DECISION AND ORDER OF THE ILLINOIS LABOR RELATIONS BOARD STATE PANEL
On March 11, 2016, the State of Illinois, Department of Central Management Services
(State Police) (Charging Party or State) filed a charge with the Illinois Labor Relations Board’s
State Panel (Board) alleging that the Troopers Lodge #41, Fraternal Order of Police, (Respondent
or Union) engaged in unfair labor practices within the meaning of Sections 10(b)(4) of the Illinois
Public Labor Relations Act (Labor Act) 5 ILCS 315 (2014), as amended. The charge was
investigated in accordance with Section 11 of the Act.
On June 6, 2016, the Board’s Executive Director determined that there were no issues of
fact or law for hearing and dismissed the charge. The Employer appealed the Executive Director’s
dismissal. On August 5, 2016, the Board reversed the Executive Director’s dismissal. On August
11, 2016, at the Board’s direction, the Board’s Executive Director issued a Complaint for Hearing.
A hearing was conducted on October 18, 25, 28, and 31, 2016, November 6 and 7, 2016, and
January 4, 5, and 6, 2017, in Chicago, Illinois. Administrative Law Judge (ALJ) Anna Hamburg-
Gal issued a Recommended Decision and Order (RDO) in this case on March 31, 2017. Both
parties subsequently filed timely exceptions and responses to exceptions. The Board considered
this case at its June 13, 2017, meeting at Springfield, Illinois. After reviewing the record, briefs,
exceptions, responses, and cross-exceptions, we hereby issue the following order.
I. Findings of Fact
The Board accepts and adopts the findings of fact of the ALJ as set forth in the RDO.
II. Conclusions of Law
A. The Union did not commit an unfair labor practice when it submitted the issue of health insurance to the interest arbitrator and refused to withdraw it.
The RDO analyzes whether the Union committed an unfair labor practice in this case. As
an initial matter, the ALJ found that health insurance is a mandatory subject of bargaining and,
therefore, the Union could not have committed an unfair labor practice by insisting on the issue at
interest arbitration. However, the ALJ also found that, even if health insurance is a permissive
subject of bargaining, the circumstances reflect that the Union did not commit an unfair labor
practice given the bargaining and procedural history between the parties. Specifically, the ALJ
considered, in detail, the procedural events that led to interest arbitration, including the fact that
both parties exchanged proposals regarding and negotiated over the issue of health insurance.
Moreover, the parties stipulated to the jurisdiction of the arbitrator over the issue of health
insurance.
The ALJ found that the State never clearly and formally objected to the interest arbitration
panel considering the issue of health insurance. Rather, the State filed this charge in March 2016
and made statements in its June 2016 arbitration brief and in filings before the Board beginning in
August 2016 that it believed that health insurance was a permissive subject of bargaining.
However, the arbitration panel proceeded as contemplated by the Board’s administrative rules after
the Declaratory Ruling of the Board’s General Counsel in March 2016, which opined that health
insurance is a mandatory subject of bargaining. The ALJ found that the State’s objections, if they
are to be characterized as such, were not made in good faith because they were raised too late, after
the parties had stipulated to health insurance as an issue before the arbitrator, had engaged in
bargaining regarding health insurance, and had exchanged proposals on health insurance. The ALJ
further found that the Union did not have a clear indication that it should withdraw or amend its
proposal on health insurance given the State’s conduct. Therefore, the ALJ notes that it is not
strictly necessary in this case to reach the issue of whether health insurance is a mandatory subject
of bargaining because, even if it is permissive, the Union did not commit an unfair labor practice.
We agree that, whether the issue of health insurance is a permissive or mandatory subject,
the Union did not commit an unfair labor practice in this case. Based on the conduct of both parties
and their bargaining history, the Union did not have a clear indication that health insurance was a
permissive subject of bargaining, nor did the State timely and clearly object to consideration of
this issue by the interest arbitration panel. Therefore, we find that the Union did not commit an
unfair labor practice when it insisted that health insurance proposals be submitted to and
considered by the interest arbitrator and panel.
B. Health insurance premiums, co-payments, deductibles, and out-of-pocket maximums (OPMs) are mandatory subjects of bargaining; procurement and choice of vendor are permissive subjects of bargaining.
The ALJ found that health insurance is a mandatory subject of bargaining, considering
health insurance as a whole in completing her analysis. We make a narrower holding on the issue
of health insurance, finding that certain aspects of health insurance, including co-payments,
deductibles, and OPMs are mandatory subjects of bargaining, while certain aspects of what the
State terms “plan design,” such as choice of vendor and procurement, are permissive subjects of
bargaining.
The State argues that the State Employees Group Insurance Act (5 ILCS 375) (Group
Insurance Act) and the Labor Act, when read together, render health insurance a permissive subject
of bargaining because the Labor Act is “subject to” the Group Insurance Act and because health
insurance is “specifically provided for” in another law. In terms of legislative history, the language
of Section 15(a) of the Labor Act that is in question here – “subject to Section 5 of the State
Employees Group Insurance Act” – was placed in the Labor Act in 2004 by way of SB 2206, later
adopted as Public Act 93-839. PA 93-839 was the FY2005 Budget Implementation (Finance) Act;
as such, it made changes to numerous statutes, including the Labor Act and the Group Insurance
Act. PA 93-839 amended the Labor Act at Section 15(a), including the language “other than
Section 5 of the State Employees Group Insurance Act of 1971” and the following: “The provisions
of this Act are subject to Section 5 of the State Employees Group Insurance Act of 1971.”
At the same time, Section 5 of the Group Insurance Act was amended to include a
declaration of State policy, add new sections (i)-(vi), and to include a statement indicating that
contracts entered into under the Group Insurance Act are subject to appropriations and Section 20-
60(b) of the Illinois Procurement Code (30 ILCS 500). New Sections 5(i)-(vi) of the Group
Insurance Act added by PA 93-839 require the Director of Central Management Services (CMS)
to report to the Commission on Government Forecasting and Accountability (COGFA) on a variety
of issues related to health insurance plans and procurement.
Reading the two changes together, the General Assembly intended collective bargaining
agreements to be subject to the reporting requirements outlined in Section 5 of the Group Insurance
Act. Indeed, the portions of Section 5 describing the Director of CMS’ authority and duty to make
employee benefit plans available to State employees existed prior to the changes made by PA 93-
839. Notably, in PA 93-839, the General Assembly only included “Section 5” of the Group
Insurance Act in the language it added to Section 15(a) of the Labor Act. If the General Assembly
intended to preempt the entire collective bargaining process over employee benefits from the duty
to bargain described in the Labor Act, it could have amended the Labor Act to affirmatively
remove employee benefits from the sphere of collective bargaining.1 Moreover, the General
Assembly did not amend the Labor Act to indicate that it was “subject to” the entire Group
Insurance Act; the changes to the Labor Act merely reference the same section of the Group
Insurance Act to which the General Assembly was concurrently adding reporting requirements.
The legislative history of PA 93-839 indicates that the changes to the Labor Act and Group
Insurance Act were intended as transparency and quality measures to ensure that subsequent
employee benefit contracts were reviewed and vetted more extensively. The legislative history
does not bear out the suggestion that the additions made by PA 83-839 were intended to entirely
exempt health insurance from the duty to bargain collectively. Indeed, the specific language
included in Section 5 of the Group Insurance Act contemplates that collective bargaining of
employee benefits, including health insurance, would continue – it would simply be subject to the
reporting requirements in Section 5(i)-(vi) after PA 93-839 became effective. Indeed, the record
in this case reflects that health insurance was bargained by the State for many years prior to the
negotiations giving rise to this interest arbitration, including during this most recent set of
negotiations. Therefore, we find that Section 5 of the Group Insurance Act only takes precedence
over the Labor Act to the extent provided by PA 93-839 and the reporting requirements specified
therein and does not take precedence over the duty to bargain collectively as described in the Labor
Act.
The State further argues that health insurance is “specifically provided for” under the
Group Insurance Act such that it is exempt from the duty to bargain imposed by the Labor Act.
Specifically, Section 7 of the Labor Act provides that employers and bargaining representatives
1 Indeed, the General Assembly amended Section 4 of the Labor Act and added Section 7.5 of the Labor Act after PA 98-599 regarding pensions was passed (later found unconstitutional on other grounds in Heaton v. Quinn (In re Pension Reform Litigation), 2015 IL 118585 (May 8, 2015)). The changes to Section 4 and the addition of Section 7.5 specifically exempted pension changes made by PA 98-599 from collective bargaining. Conversely, the General Assembly did not do the same with regard to the changes made in PA 93-839 and did not amend Section 4 or Section 7 of the Labor Act in PA 93-839.
have a duty to bargain in good faith over “any matter with respect to wages, hours and other
conditions of employment, not specifically provided for in any other law or not specifically in
violation of the provisions of any law. If any other law pertains, in part, to a matter affecting the
wages, hours and other conditions of employment, such other law shall not be construed as limiting
the duty ‘to bargain collectively’ and to enter into collective bargaining agreements containing
clauses which either supplement, implement, or relate to the effect of such provisions in other
laws.” (5 ILCS 315/7).
Case law on this issue is not directly analogous to the present situation, but certain cases
provide a framework under which to consider the issue. The case law on this issue establishes
factors to consider when analyzing whether another law specifically provides for a subject,
including: 1) whether the other law is mandatory or permissive; 2) whether a public employer
subject to the other law has unilateral ability to alter the other law; and 3) the legislature’s
preference as demonstrated by legislative history. See Nall v. Int’l Ass’n of Machinists and
Aerospace Workers, AFL-CIO, Local Lodge 822, Dist. 123, 307 Ill. App. 3d 1005, 1009 (4th Dist.
1999); City of Decatur v. AFSCME, Local 268, 122 Ill. 2d 353, 365 (1998). No single factor is
determinative of the issue. Nall, 307 Ill. App. 3d at 1009. In this case, the second and third factors
are easily addressed. Under the second factor, the Employer is not able to unilaterally alter the
Group Insurance Act; this requires legislative action by the General Assembly. On the other hand,
under the third factor, legislative history does not demonstrate that the General Assembly intended
to exempt health insurance from the duty to bargain under the Labor Act.
The issues in this case bear most heavily on the first factor. The State argues that the Group
Insurance Act is mandatory and that submitting the issue of health insurance to an interest
arbitrator would require the state to violate the express mandates of the law. The Group Insurance
Act presents a hybrid of requirements imposed upon and options available to the Director of CMS.
In terms of requirements, the Director of CMS is required to design health benefit plans consistent
with the Group Insurance Act, enter into contracts with health insurance carriers, and implement
the employee benefits program in such a way that takes into consideration the existing terms and
conditions of employee benefits. In terms of options available to the Director, the Director is
authorized to exercise renewal options, which may include increases in costs to members, but only
when justified as set forth in the Group Insurance Act. The Group Insurance Act does not set
premiums, deductibles, co-payments, or OPMs, nor does it specify a particular actuarial value for
any plan. The Group Insurance Act also does not provide a comprehensive list of all items that
may be included in employee health plans. On the contrary, it provides a minimum level of
services that must be provided by the State to its employees, which includes certain basic services
as outlined in the law. Similarly, the Group Insurance Act does not prohibit collectively bargaining
health insurance or employee benefits generally, and it does not foreclose or prohibit the Director
from engaging in the collective bargaining process while exercising statutory authority to design
and enter into contracts for health benefits. Therefore, while the Group Insurance Act may
“specifically provide” for certain aspects of employee health benefits, it does not do so for other
aspects. Therefore, we find that the general outlines and requirements of the Group Insurance Act
do not foreclose or prohibit collective bargaining over health insurance, nor do they obviate the
duty to bargain collectively.
The ALJ also considered whether health insurance is a mandatory subject of bargaining
pursuant to the Central City test as set forth in Cent. City Educ. Ass’n, IEA-NEA v. Ill. Educ.
Labor Rel. Bd., 149 Ill. 2d 496 (1992). Under the first prong of the test, the ALJ found that health
insurance unequivocally affects wages, hours, and terms and conditions of employment. Under
the second prong of the test, the ALJ found that health insurance is not an issue of inherent
managerial authority. Specifically, the ALJ found that the State did not directly link the impact of
health insurance to the budget of the agency at hand (State Police). Moreover, she found that
providing health insurance is not a core function of the State; rather, the State is primarily
responsible for providing public services, whereas providing benefits to its employees is in the
nature of the employment relationship. The ALJ also dismissed the State’s contention that the
Union sought to name specific vendors, noting that the Union’s proposal named the current health
insurance plan vendors for the purpose of demonstrating premium costs for particular plans.
Under the third prong of the test, the ALJ found that the benefits of bargaining over health
insurance outweigh the burdens. Specifically, she noted that there is not an exemption from the
duty to bargain that is based in financial hardship. Moreover, she found that health insurance is
an economic issue, that the parties have a history of bargaining over this issue, and that members
have a significant stake in the outcome of the issue both in terms of monetary impact and because
health insurance relates to intimate matters of personal health. Conversely, while she noted that
the State did present evidence of some burdens related to bargaining, these were minimal compared
to the benefits. Specifically, the ALJ found that the State did not present evidence that bargaining
health insurance would change the nature or direction of the services provided by the State or by
the Illinois State Police, nor did the State demonstrate that this would alter the Director’s manner
of procuring and designing plans given the long history of bargaining health insurance. In addition,
the ALJ noted that the Group Insurance Act contemplates collective bargaining, and that the
procurement process has functioned alongside collective bargaining of health insurance.
Therefore, the ALJ found that health insurance is a mandatory subject of bargaining under the
Central City test.
We accept the ALJ’s analysis under the Central City test except that we clarify the finding
on the question of inherent managerial authority. On the issue of inherent managerial authority,
the State has set forth evidence that the provision of health insurance benefits does impact the
State’s overall budget. The State did not, as the ALJ notes, set forth compelling evidence that the
provision of health insurance directly impacts the budget or services of the State Police as an
agency. However, the State did demonstrate that health insurance benefits and associated costs do
impact its budget in a significant way and, by extension, that the State may be able to provide less
in terms of services to the public when its budget is decreased by other spending. We acknowledge
that the provision of health insurance to 450,000 individuals does carry an extensive cost and is
statutorily mandated in certain cases. Moreover, providing health insurance does relate to the
State’s business in that the State must maintain a workforce (and provide its employees with
attendant benefits) in order to provide public services. However, we also find that, on balance,
the third prong of the Central City test favors collective bargaining.
We do, however, narrow our holding more than the RDO suggests. Specifically, the RDO
considers health insurance as a broad topic, whereas we focus on the specific items outlined by the
parties in their submissions to the Board. Specifically, the State focuses on premiums, deductibles,
co-payments, and OPMs, along with concerns regarding procurement and choice of vendor. The
State also urges the Board to consider what it has termed “plan design” and asks the Board to find
that “plan design” lies within the sole authority of the Director of CMS. However, we do not
wholly agree with the State’s characterization of certain items as part of “plan design” that are
exempt from collective bargaining. With regard to those items that directly impact the
compensation of covered employees – namely, premiums, deductibles, co-payments, and OPMs–
we find that these items are mandatory subjects of bargaining pursuant to the Central City analysis
and the Labor Act. With regard to the items raised that do not bear on wages or terms and
conditions of employment, including choice of vendor and procurement of health care, we find
that these items are permissive subjects of bargaining. We do not make findings in this context
regarding other aspects of health insurance or plan design that have not been fully discussed and
analyzed herein because those issues are not currently before us in such a way that would allow us
to make further determinations.
C. Sanctions
The Union sought sanctions for three specific alleged infractions: 1) the Union argued that
the State’s opening statement directly contradicted an earlier pleading and was false; 2) the Union
argued that the State advanced frivolous litigation in filing the charge; and 3) the Union argued
that the State’s witness gave false testimony regarding the bargaining history of the State with
unions over health insurance. The ALJ considered the Union’s requests for sanctions and
dismissed all but one of the requests. Specifically, the ALJ recommends sanctions in the form of
an admonishment based on the testimony of one of the State’s key witnesses, who testified that
the State had not bargained over health insurance with unions other than AFSCME in the past.
However, the facts and evidence in the case show that this is incorrect; indeed, the State has
bargained over health insurance with a variety of unions, including the Respondent-Union.
Therefore, the ALJ reasoned that sanctions in the form of an admonishment were appropriate
because the testimony concerned a key defense of the Union and was demonstrably false.
Given the extensive record of this case, the amount of time devoted to describing the
bargaining history, and the State’s legal arguments regarding the duty to bargain, the Board finds
that sanctions are not appropriate because the issues raised by the Union did not ultimately impact
the case in terms of factual disputes, and because the pursuit of certain issues by the State was not
clearly frivolous. Moreover, the testimony at issue involves a fact dispute about the collective
bargaining history. Therefore, contrary to the ALJ’s findings, we do not find that sanctions are
warranted in this case.
III. Order
Based on the foregoing, the unfair labor practice charge at issue in this case is dismissed.
BY THE STATE PANEL OF THE ILLINOIS LABOR RELATIONS BOARD
/s/ John J. Hartnett John J. Hartnett, Chairman /s/ Michael G. Coli Michael G. Coli, Member /s/ Kathryn Zeledon Nelson Kathryn Zeledon Nelson, Member /s/ John R. Samolis John R. Samolis, Member
Decision made at the State Panel’s public meeting in Chicago, Illinois on June 13, 2017, written decision approved at the State Panel’s public meeting in Chicago, Illinois on July 11, 2017, and issued on this date.
MEMBER SNYDER, CONCURRING IN PART AND DISSENTING IN PART:
I concur with and join in the majority’s decision as it relates to sections II.A and II.C. of
the Decision and Order, namely, that the Union did not commit an unfair labor practice and that
sanctions should not be imposed on the State.
I respectfully dissent from the majority’s findings regarding mandatory and permissive
subjects of bargaining in section II.B of the Decision and Order. In its exceptions, the State
advances an alternative argument that the Board find the State’s only obligation with regard to
health insurance design and contracts is to present fully developed plans to the union so that the
parties may bargain over premiums. I agree with the State's alternative argument as presented and
that the 2004 amendments to the Labor Act and the State Group Insurance Act exempt plan design
from the duty to bargain. The majority in this case argues that some aspects of plan design are
outside the duty to bargain, but that others are not. If the 2004 amendments do, in fact, exclude
some elements of plan design from bargaining, I believe they exclude all plan design elements
from bargaining. While the majority finds that deductibles, co-payments, and OPMs are mandatory
subjects of bargaining because they impact the compensation of employees, I do not read any such
distinction in the 2004 amendments. Elements such as deductibles, co-payments, and OPMs do
not impact employee compensation any more than the choice of benefits, the service delivery of
the carriers, or the actual carriers chosen. All plan elements are factors in an equation that
ultimately results in the premiums to be charged for the plans designed. The premiums for each
such plan so designed are, therefore, mandatory subjects of bargaining because those premiums
are matters “with respect to wages, hours[,] and other conditions of employment. According to the
2004 amendments, all other health insurance plan elements are, in my opinion, responsibilities of
the Director of CMS to design and to contract for.
1
STATE OF ILLINOIS
ILLINOIS LABOR RELATIONS BOARD
STATE PANEL
State of Illinois, Department of Central )
Management Services (State Police), )
)
Charging Party, )
)
and ) Case No. S-CB-16-023
)
Troopers Lodge #41, )
Fraternal Order of Police, )
)
Respondent )
ADMINISTRATIVE LAW JUDGE’S RECOMMENDED DECISION AND ORDER
On March 11, 2016, the State of Illinois, Department of Central Management Services
(State Police) (Charging Party or State) filed a charge with the Illinois Labor Relations Board’s
State Panel (Board) alleging that the Troopers Lodge #41, Fraternal Order of Police,
(Respondent or Union) engaged in unfair labor practices within the meaning of Sections 10(b)(4)
of the Illinois Public Labor Relations Act (Act) 5 ILCS 315 (2014), as amended. The charge
was investigated in accordance with Section 11 of the Act.
On June 6, 2016, the Board’s Executive Director determined that there were no issues of
fact or law for hearing and dismissed the charge. The Employer appealed the Executive
Director’s dismissal. On August 5, 2016, the Board reversed the Executive Director’s dismissal.
On August 11, 2016, at the Board’s direction, the Board’s Executive Director issued a
Complaint for Hearing. A hearing was conducted on October 18, 25, 28, and 31, 2016,
November 6 and 7, 2016, and January 4, 5, and 6, 2017, in Chicago, Illinois, at which time the
Employer presented evidence in support of the allegations and all parties were given an
opportunity to participate, to adduce relevant evidence, to examine witnesses, to argue orally,
and to file written briefs. After full consideration of the parties’ stipulations, evidence,
arguments, and briefs, and upon the entire record of the case, I recommend the following:
2
I. PRELIMINARY FINDINGS
The parties stipulate and I find that:
1. At all times material, the Union was a labor organization within the meaning of
Section 3(i) of the Labor Act.
2. At all times material, the Union was the exclusive representative of a bargaining
unit (Unit) consisting of the State’s employees in the rank or title of trooper or special agent and
all sworn officers with the rank of sergeant or special agent sergeant.
3. At all times material, the State was a public employer within the meaning of
Section 3(o) of the Labor Act.
4. At all times material, the State was subject to the jurisdiction of the State Panel of
the Board, pursuant to Section 5(a-5) of the Labor Act.
5. In 2004, Public Act (PA) 93-839, amended the Labor Act, the State Employees
Group Insurance Act of 1971, 5 ILCS 375/1 et seq. and the Illinois Procurement Code, 30 ILCS
500/20-1 et seq.
6. The State and the Union were parties to a collective bargaining agreement
(“CBA”) for the Unit with a stated expiration date of June 30, 2015.
7. That CBA contained the following provision relating to health insurance benefits
for Unit employees:
Article 26
Insurance
During the term of this Agreement, the Department shall continue in effect for all
eligible employees and their dependents, the benefits, rights and obligations of
group health insurance, life and other insurance under terms and at such rates as
made available by the Director of Central Management Services pursuant to the
State Employee Group Insurance Act except as modified during the term hereof
by agreement of the parties. Employer shall provide employees an opportunity to
be given a hearing examination when hearing exams are being given to
telecommunicators.
8. On or about May 11, 2015, the State and the Union commenced negotiations for a
successor CBA.
9. On at least May 11, June 9, July 10, and October 14, 2015, the Union submitted
proposals to the State on the subject of employee health insurance.
3
10. On at least September 18, October 21 and November 17, 2015, the State
submitted proposals to the Union on the subject of employee health insurance.
11. The Parties bargained to the point of impasse in their negotiations for a successor
CBA.
12. On or about August 20, 2015, the Union filed a Demand for Compulsory Interest
Arbitration for the Unit.
13. The Parties subsequently selected Arbitrator Daniel Nielsen to serve as the
Neutral Chair of a three-member interest arbitration panel. The Union appointed Bruce
Bialorucki as the union delegate to the panel and the State appointed Joe Hartzler as the
employer delegate to the panel.
14. On or about January 8, 2016, the Union submitted to Arbitrator Nielsen its final
offer on the subject of employee health insurance.
15. On or about January 8, 2016, the State submitted to Arbitrator Nielsen a
document titled “final offer” on the subject of employee health insurance.
16. On January 10, 2015, the Union filed objections to the State’s final offer on
employee health insurance, contending that the offer concerned non-mandatory subjects of
bargaining.
17. On January 12, 2016, in response to the Union’s objection to the State’s offer on
health insurance, the State submitted a document titled “revised final offer” on the subject of
employee health insurance.
18. On January 13, 2016, the State filed a Petition for a Declaratory Ruling with the
Board’s General Counsel.
19. On March 1, 2016, the Board’s General Counsel issued her Declaratory Ruling.
20. On March 11, 2016, the State filed an unfair labor practice charge with the Board,
in the above-captioned case, alleging that the Union violated Section 10(b) of the Labor Act, 5
ILCS 315/10(b).
21. On June 6, 2016, the Board’s Executive Director dismissed the charge.
22. The State filed a timely appeal to the Board.
23. In a Board meeting on July 12, 2016, and a written Decision and Order issued
August 5, 2016, the Board reversed the dismissal and remanded the case for issuance of a
complaint for hearing.
4
24. On August 9, 2016, the State sent an e-mail to Arbitrator Dan Nielsen, requesting
that, pursuant to Board Rule set forth at 80 Ill. Admin Code 1230.90(k), the arbitration panel stay
any decision on health insurance and all other economic issues in the interest arbitration until the
Board has decided the health care issue.
25. On October 4, 2016, the Arbitration Panel issued an order denying the State’s
request.
I. Relevant Statutory Provisions
The duty to bargain is defined in Section 7 of the Act which provides in relevant part:
A public employer and the exclusive representative have the authority and duty to
bargain collectively set forth in this Section.
For the purpose of this Act, “to bargain collectively” means the performance of
the mutual obligation of the public employer or his designated representative and
the representative of the public employees to meet at reasonable times, including
meetings in advance of the budget-making process, and to negotiate in good faith
with respect to wages, hours and other conditions of employment, not excluded by
Section 4 of this Act, or the negotiation of an agreement, or any question arising
thereunder and the execution of a written contract incorporating any agreement
reached if requested by either party, but such obligation does not compel either
party to agree to a proposal or require the making of a concession.
The duty "to bargain collectively" shall also include an obligation to negotiate
over any matter with respect to wages, hours and other conditions of employment,
not specifically provided for in any other law or not specifically in violation of the
provisions of any law. If any other law pertains, in part, to a matter affecting the
wages, hours and other conditions of employment, such other law shall not be
construed as limiting the duty "to bargain collectively" and to enter into collective
bargaining agreements containing clauses which either supplement, implement, or
relate to the effect of such provisions in other laws.
5 ILCS 315/7 (2014).
Section 15(a) of the Act provides, in relevant part:
In case of any conflict between the provisions of this Act and any other law (other than
Section 5 of the State Employees Group Insurance Act of 1971 and other than the
changes made to the Illinois Pension Code by this amendatory Act of the 96th General
Assembly), executive order or administrative regulation relating to wages, hours and
5
conditions of employment and employment relations, the provisions of this Act or any
collective bargaining agreement negotiated thereunder shall prevail and control.
5 ILCS 315/15(a) (2014).
Section 5 of the State Employees Group Insurance Act of 1971 provides the following:
§ 5. Employee benefits; declaration of State policy. The General Assembly declares that
it is the policy of the State and in the best interest of the State to assure quality benefits to
members and their dependents under this Act. The implementation of this policy depends
upon, among other things, stability and continuity of coverage, care, and services under
benefit programs for members and their dependents. Specifically, but without limitation,
members should have continued access, on substantially similar terms and conditions, to
trusted family health care providers with whom they have developed long-term
relationships through a benefit program under this Act. Therefore, the Director must
administer this Act consistent with that State policy, but may consider affordability, cost
of coverage and care, and competition among health insurers and providers. All contracts
for provision of employee benefits, including those portions of any proposed collective
bargaining agreement that would require implementation through contracts entered into
under this Act, are subject to the following requirements:
(i) By April 1 of each year, the Director must report and provide information to the
Commission concerning the status of the employee benefits program to be offered for the
next fiscal year. Information includes, but is not limited to, documents, reports of
negotiations, bid invitations, requests for proposals, specifications, copies of proposed
and final contracts or agreements, and any other materials concerning contracts or
agreements for the employee benefits program. By the first of each month thereafter, the
Director must provide updated, and any new, information to the Commission until the
employee benefits program for the next fiscal year is determined. In addition to these
monthly reporting requirements, at any time the Commission makes a written request, the
Director must promptly, but in no event later than 5 business days after receipt of the
request, provide to the Commission any additional requested information in the
possession of the Director concerning employee benefits programs. The Commission
may waive any of the reporting requirements of this item (i) upon the written request by
the Director. Any waiver granted under this item (i) must be in writing. Nothing in this
item is intended to abrogate any attorney-client privilege.
(ii) Within 30 days after notice of the awarding or letting of a contract has appeared in the
Illinois Procurement Bulletin in accordance with subsection (b) of Section 15-25 of the
Illinois Procurement Code, the Commission may request in writing from the Director and
the Director shall promptly, but in no event later than 5 business days after receipt of the
request, provide to the Commission information in the possession of the Director
concerning the proposed contract. Nothing in this item is intended to waive or abrogate
any privilege or right of confidentiality authorized by law.
6
(iii) Except as otherwise provided in this item (iii), no contract subject to this Section
may be entered into until the 30-day period described in item (ii) has expired, unless the
Director requests in writing that the Commission waive the period and the Commission
grants the waiver in writing. This item (iii) does not apply to any contract entered into
after the effective date of this amendatory Act of the 98th General Assembly and through
January 1, 2014 to provide a program of group health benefits for Medicare-primary
members and their Medicare-primary dependents that is comparable in stability and
continuity of coverage, care, and services to the program of health benefits offered to
other members and their dependents under this Act.
(iv) If the Director seeks to make any substantive modification to any provision of a
proposed contract after it is submitted to the Commission in accordance with item (ii), the
modified contract shall be subject to the requirements of items (ii) and (iii) unless the
Commission agrees, in writing, to a waiver of those requirements with respect to the
modified contract.
(v) By the date of the beginning of the annual benefit choice period, the Director must
transmit to the Commission a copy of each final contract or agreement for the employee
benefits program to be offered for the next fiscal year. The annual benefit choice period
for an employee benefits program must begin on May 1 of the fiscal year preceding the
year for which the program is to be offered. If, however, in any such preceding fiscal year
collective bargaining over employee benefit programs for the next fiscal year remains
pending on April 15, the beginning date of the annual benefit choice period shall be not
later than 15 days after ratification of the collective bargaining agreement.
(vi) The Director must provide the reports, information, and contracts required under
items (i), (ii), (iv), and (v) by electronic or other means satisfactory to the Commission.
Reports, information, and contracts in the possession of the Commission pursuant to
items (i), (ii), (iv), and (v) are exempt from disclosure by the Commission and its
members and employees under the Freedom of Information Act. Reports, information,
and contracts received by the Commission pursuant to items (i), (ii), (iv), and (v) must be
kept confidential by and may not be disclosed or used by the Commission or its members
or employees if such disclosure or use could compromise the fairness or integrity of the
procurement, bidding, or contract process. Commission meetings, or portions of
Commission meetings, in which reports, information, and contracts received by the
Commission pursuant to items (i), (ii), (iv), and (v) are discussed must be closed if
disclosure or use of the report or information could compromise the fairness or integrity
of the procurement, bidding, or contract process.
All contracts entered into under this Section are subject to appropriation and shall comply
with Section 20-60(b) of the Illinois Procurement Code (30 ILCS 500/20-60(b)).
The Director shall contract or otherwise make available group life insurance, health
benefits and other employee benefits to eligible members and, where elected, their
eligible dependents. Any contract or, if applicable, contracts or other arrangement for
provision of benefits shall be on terms consistent with State policy and based on, but not
7
limited to, such criteria as administrative cost, service capabilities of the carrier or other
contractor and premiums, fees or charges as related to benefits.
Notwithstanding any other provisions of this Act, by January 1, 2014, the Department of
Central Management Services, in consultation with and subject to the approval of the
Chief Procurement Officer, shall contract or make otherwise available a program of
group health benefits for Medicare-primary members and their Medicare-primary
dependents. The Director may procure a single contract or multiple contracts that provide
a program of group health benefits that is comparable in stability and continuity of
coverage, care, and services to the program of health benefits offered to other members
and their dependents under this Act. The initial procurement of a contract or contracts
under this paragraph is not subject to the provisions of the Illinois Procurement Code,
except for Sections 20-60, 20-65, 20-70, and 20-160 and Article 50 of that Code,
provided that the Chief Procurement Officer may, in writing with justification, waive any
certification required under Article 50.
The Director may prepare and issue specifications for group life insurance, health
benefits, other employee benefits and administrative services for the purpose of receiving
proposals from interested parties.
The Director is authorized to execute a contract, or contracts, for the programs of group
life insurance, health benefits, other employee benefits and administrative services
authorized by this Act (including, without limitation, prescription drug benefits). All of
the benefits provided under this Act may be included in one or more contracts, or the
benefits may be classified into different types with each type included under one or more
similar contracts with the same or different companies.
The term of any contract may not extend beyond 5 fiscal years. Upon recommendation of
the Commission, the Director may exercise renewal options of the same contract for up to
a period of 5 years. Any increases in premiums, fees or charges requested by a contractor
whose contract may be renewed pursuant to a renewal option contained therein, must be
justified on the basis of (1) audited experience data, (2) increases in the costs of health
care services provided under the contract, (3) contractor performance, (4) increases in
contractor responsibilities, or (5) any combination thereof.
Any contractor shall agree to abide by all requirements of this Act and Rules and
Regulations promulgated and adopted thereto; to submit such information and data as
may from time to time be deemed necessary by the Director for effective administration
of the provisions of this Act and the programs established hereunder, and to fully
cooperate in any audit.
5 ILCS 375/5 (2014).
Section 7.1 of the State Employees Group Insurance Act of 1971 provides the following:
8
Any benefit received by an employee under this Act pursuant to a collective bargaining
agreement may be extended by the Director to employees whose wages, hours and other
conditions of employment with the State are not subject to a collective bargaining
agreement. In addition, if any benefit is offered by the Department of Central
Management Services to employees who are not members of a recognized bargaining
unit, then that benefit shall also be offered to all bargaining unit members through their
certified exclusive representative.
5 ILCS 375/7.1 (2014).
II. ISSUES AND CONTENTIONS
The issue is whether the Union violated Section 10(b)(4) of the Act when it submitted its
proposal on health insurance to the interest arbitrator.
The State asserts that the Union violated the Act by continuing to insist that the interest
arbitration panel decide the issue of health insurance after the State objected to its consideration.
The State claims that the Union thereby unlawfully insisted to impasse on a permissive subject of
bargaining. The State asserts that there is no time limit within which it may object to an
arbitrator’s consideration of an alleged permissive subject under Section 1230.90(k) of the
Board’s rules. It contends that the Union’s failure to withdraw its health insurance proposal
upon the State’s objection illustrates bad faith because the State then suffered prejudice from the
arbitrator’s later consideration of the health insurance issue.
The State explains that health insurance is a permissive subject of bargaining because it
has no duty to bargain over that subject. It asserts that health insurance is a matter “specifically
provided for in another law,” the State Employees Group Insurance Act (SEGIA), and therefore
exempt from the duty to bargain set forth in Section 7 of the Act. It claims that Section 15(a) of
the Act supports that contention because it provides that Section 5 of the State Employees Group
Insurance Act takes precedence over the IPLRA. The State asserts that the statutory obligation
of the Director of CMS to design health insurance plans, to enter into contracts with carriers, and
to determine premiums triggers these statutory exclusions from collective bargaining. The State
contends that the Union’s final offer and the interest arbitration award violate the Group
Insurance Act and the Procurement Code because the arbitration panel set the plan design,
insurance carriers, and premiums, rather than the Director of CMS, as required under the State
Employees Group Insurance Act.
9
The State also asserts that it has no duty to bargain health insurance under the Central
City test. The State denies that health insurance is a “wage[], hour[], or other condition[] of
employment” on the grounds that it is instead “specifically provided for” in another law, the
SEGIA. In the alternative, the State contends that health insurance is a matter of inherent
managerial authority under the SEGIA, which requires the Director of CMS to design health
insurance plans, to enter into contracts with carriers, and to determine premiums. Finally, the
State claims that the burdens that bargaining imposes on the State’s inherent managerial
authority outweigh any benefits to the decision-making process.
The State explains that the benefits of bargaining are minimal because bargaining over
plan design would not have any significant benefit to the decision-making process. It denies that
bargaining over health insurance saves the State money and contends, instead, that the State
would save the most money by setting health care costs and benefits unilaterally.
The State further asserts that the burdens that bargaining imposes on the State’s inherent
managerial authority are significant. Bargaining would remove the Director of CMS’s duty and
discretion to decide policy matters intimately connected to CMS’s core duties. It would diminish
CMS’s ability to effectively provide the health insurance program it is obligated to provide. It
would effect a “fundamental change” in the way the State provides health insurance. It would
negatively impact the already laborious insurance procurement process by requiring the State to
duplicate its contracting efforts. It would also complicate the health insurance implementation
process and increase the State’s financial reporting and budgeting duties. Finally, bargaining
health insurance would burden the State’s ability to bargain more broadly. It would require the
State to engage in a time-consuming bargaining process that has, in the past, resulted in impasse,
impeded the State’s attempts to meet its statutory reporting deadlines, and prevented the State
from achieving the cost savings it would have obtained through unilateral action. The State
concludes that the burdens of bargaining would be magnified if it were required to bargain health
insurance plan design with the 30 different unions that represent state employees.
The State contends that this RDO should address the issue of whether health insurance is
a mandatory or permissive subject, even if the complaint is dismissed on other grounds. It
explains that the question concerning the State’s obligation to bargain over health insurance is of
great public interest and that the issue is likely to arise again.
10
As a remedy, the State seeks a determination that health insurance broadly, or
alternatively, health insurance plan design and contracts, are permissive subjects of bargaining.
It further seeks an order directing the FOP to withdraw its health insurance proposal or that part
of the proposal that requires the panel to decide plan design or the identity of insurance
providers. Finally, it seeks a determination that the interest arbitration panel’s award is not
enforceable to the extent that it addresses permissive subjects of bargaining related to health
insurance.
The Union argues that it did not violate the Act when it submitted its health insurance
proposal to the interest arbitrator because a party’s mere submission of a proposal to an interest
arbitrator does not violate the Act as a matter of law, even if it is found to be permissive. The
Union contends that it did no more than merely submit its health insurance proposal to the
interest arbitrator because the parties agreed to allow the arbitrator to decide the issue of health
insurance and stipulated to the interest arbitrator’s jurisdiction over the matter. The Union notes
that the State had an opportunity to raise objections to the Union’s final offer on health
insurance, but declined to timely do so, and instead only objected months after the parties
completed their interest arbitration hearing.
The Union emphasizes that its continued pursuit of its health insurance proposal,
following the arbitrator’s rejection of the State’s objections to the Union’s proposal, did not
violate the Act. It reasons that the arbitrator correctly rejected the State’s objections on the
grounds that they lacked good faith. The Union contends that the arbitrator’s jurisdiction to
decide the issue of health insurance, to which the parties stipulated, cannot be removed by the
State’s subsequent, untimely objections. The Union claims that its submission of its health
insurance proposal did not prejudice the State, in light of the State’s conduct.
The Union also argues that its conduct does not violate the Act because health insurance
is a mandatory subject of bargaining, and a party is entitled to insist on the arbitrator’s
consideration of such subjects. The Union emphasizes that the State has an obligation to bargain
over health insurance. It denies that health insurance is a matter specifically provided for by
another law and further asserts that bargaining over health insurance merely supplements,
implements, or relates to the effect of the SEGIA. It also observes that Section 15(a) of the Act
likewise does not prohibit the State from bargaining of health care, even though it suggests that
Section 5 of the SEGIA takes precedence over the IPLRA. The Union reasons that Section 5 of
11
the SEGIA does not prohibit collective bargaining over health insurance and in fact
accommodates collective bargaining on health care matters. The Union asserts that other
sections of SEGIA, particularly Section 7.1, indicate that the State must bargain over health
insurance when those provisions are read in concert with the Act. Finally, the Union denies that
the word “shall” in Section 6 of the SEGIA grants the Director of CMS authority to unilaterally
decide health care matters.
The Union next asserts that health insurance is a mandatory subject of bargaining under
the Central City test. Health care costs impact employees’ terms and conditions of employment
because they directly affect employees’ wages. The Union denies that health insurance is a
matter of inherent managerial authority under the SEGIA and emphasizes that it is also not a
matter of inherent managerial authority under case law. More specifically, the Union contends
that its particular health insurance proposal does not burden the State’s alleged inherent
managerial authority to develop a plan design within the SEGIA’s specifications because its
proposal is the status quo health plan that the State currently uses. The Union denies that its
plan requests a change in vendors, requires the State to maintain at a particular vendor, or seeks
to “carve out” a separate population for an insurance risk pool. Finally, the Union contends that
the benefits of bargaining outweigh any burdens that bargaining might impose on the State’s
purported inherent managerial authority.
In support, the Union notes that the bargaining history between the State and unions
indicates that health insurance is amenable to bargaining. The Union emphasizes that the State
previously bargained with it over both health care costs and benefits and that it has done the
same with other unions. It observes that the State has obtained major concessions from unions
on issues of health care costs. It also contends that the State’s decisions on structural changes to
the health care plan benefited from union participation. Finally, the Union argues that the
State’s claim of burden is overstated. The Union denies that the State would be required to
bargain over different plan designs with 30 unions, noting that the State has frequently bargained
with coalitions of unions, including the AFSCME group and the trades unions. The Union also
claims that no union has ever sought a separate, carved out health plan that would require a new
procurement, but that even if it had, such evidence should be deemed irrelevant. The Union
notes that unions would not seek carved out plans with separate risk pools because doing so
would work against employees’ interests. It observes that bargaining would not burden the
12
State’s complex health insurance procurement and implementation process because these
processes are independent of collective bargaining and no union has ever sought to bargain over
them. In addition, the Union claims that the sole source exception to the procurement process
would eliminate the need for the full procurement that the State claims to be burdensome.
Finally, the Union argues that any remedy granted to the State in this case should be
prospective rather than retroactive.
III. FINDINGS OF FACT
1. Facts Underlying the State’s Unfair Labor Practice Charge
a. Bargaining and Exchange of Final Offers on Health Insurance
The State and the Union were parties to a collective bargaining agreement (“CBA”) for
the Unit with a stated expiration date of June 30, 2015. That CBA contained the following
provision relating to health insurance benefits for Unit employees:
Article 26
Insurance
During the term of this Agreement, the Department shall continue in effect for all
eligible employees and their dependents, the benefits, rights and obligations of group
health insurance, life and other insurance under terms and at such rates as made
available by the Director of Central Management Services pursuant to the State
Employee Group Insurance Act except as modified during the term hereof by
agreement of the parties. Employer shall provide employees an opportunity to be
given a hearing examination when hearing exams are being given to
telecommunicators.
On or about May 11, 2015, the State and the Union commenced negotiations for a
successor CBA.
On May 15, 2015, the Union’s General Counsel for Labor and initial spokesperson for
negotiations Bruce Bialorucki filed a Notice of No Agreement and a Request for Mediation
Panel with the Board.
On at least May 11, June 9, July 10, and October 14, 2015, the Union submitted
proposals to the State on the subject of employee health insurance. On at least September 18,
October 21 and November 17, 2015, the State submitted proposals to the Union on the subject of
employee health insurance. The State never contended during bargaining sessions for the 2015-
2019 contract that it was not required to bargain over health insurance or that health insurance
13
was a permissive subject of bargaining. It never characterized health insurance as a permissive
subject of bargaining at the bargaining table.
Bialorucki testified that health insurance was the most important issue for the Union’s
negotiating committee. It was also the most important issue between the parties. The parties’
negotiations over health insurance took up a significant amount of time.
The parties bargained to the point of impasse in their negotiations for a successor CBA.
The parties did not reach agreement on the subject of health insurance
On August 20, 2015, the Union filed a Demand for Compulsory Interest Arbitration for
the Unit. The Parties subsequently selected Arbitrator Daniel Nielsen to serve as the Neutral
Chair of a three-member interest arbitration panel. The Union appointed Bialorucki as the union
delegate to the panel and the State appointed Joseph Hartzler as the employer delegate to the
panel.
On October 30, November 11, November 20, and November 30 2015, Arbitrator Nielsen
conducted mediation sessions. The State did not take the position during mediation that health
insurance is a permissive subject of bargaining. However, mediation concluded before the
parties had any serious discussion of economic issues including health insurance.
The parties stipulated to the interest arbitrator’s jurisdiction over wages, hours, and
conditions of employment, including health insurance. The State never claimed that the
arbitrator lacked jurisdiction over the issue of health insurance, nor did it make the statement it
reserved the right to contest the arbitrability of health insurance, prior to filing its final proposals.
The parties agreed that each party would submit final offers to the interest arbitrator, the
opposing party had an opportunity to object, and the submitting party had the opportunity to
modify its proposal in response to the objection. The parties agreed that they could not make
any subsequent amendments to their final offers. The parties further agreed to submit issues
other than health insurance first and to present their final offers on health insurance later. The
parties submitted their final offers on health insurance later because the Union was waiting for
the State to respond to an information request related to health insurance.
On December 21, 2015, the parties presented final offers on all issues other than health
insurance.
After the parties submitted their initial batch of final offers, the Union objected to the
State’s merit pay proposal on the grounds that it sought the waiver of the Union’s right to
14
midterm bargaining. The State objected to the Union’s proposal addressing interest on back
wages, arguing that it conflicted with certain State statutes. The Union amended its final offer to
address the State’s objections.
On December 23, 2015, the parties attended the first day of their interest arbitration
hearing.
On or about January 8, 2016, the Union submitted to Arbitrator Nielsen its final offer on
the subject of employee health insurance. On or about January 8, 2016, the State submitted to
Arbitrator Nielsen a document titled “final offer” on the subject of employee health insurance.
The Union filed an objection to the State’s final offer on health insurance. It argued that
the State’s proposal sought a waiver of the Union’s right to midterm bargaining over changes to
health insurance. The State did not object to the Union’s final offer on health insurance.
On January 10, 2016, the Union filed objections to the State’s final offer on employee
health insurance, contending that the offer concerned non-mandatory subjects of bargaining.
On January 11, 2016, the parties attended the second day of their interest arbitration
hearing.
On January 12, 2016, in response to the Union’s objection to the State’s offer on health
insurance, the State submitted a document titled “revised final offer” on the subject of employee
health insurance. The State’s revised offer on health insurance was significantly different from
its original final offer on health insurance.
b. The Parties’ Final Offers on Health Insurance
i. Union’s Final Offer
The Union’s final offer on health insurance largely mirrored “Appendix A” from the
contract between the State and AFSCME covering the period 2012-2015. Appendix A is the
section of the AFSCME contract that sets forth health insurance benefits. The Union’s final
offer did not propose any changes to the benefits that existed under Appendix A. The Union did
not propose any new plan designs nor did it propose the addition of new plans.
However, the Union’s offer added the following new terms. It proposed to increase
member contributions for dependent managed care by 2.5%, 3% and 3% for the years 2016,
2017, and 2018, respectively. It proposed that the State would maintain existing premiums for
its managed care health plans. It proposed to increase deductibles for employees and increases in
15
copayments. It also proposed to increase the State’s share of health care costs to a level that is
greater than the 76% of health insurance costs that the State paid under the expired contract.
However, the Union’s offer increased employees’ payments by $700,000 over three years.
Marcia Armstrong of the State’s Bureau of Benefits testified that if the State were
required to implement a plan that had coinsurance, copays, and deductibles that were more
favorable to employees, that would lessen the CMS Director’s ability to use those tools to
minimize unnecessary utilization of health care. In addition, it could increase the actuarial value
of the plan and subject the State to a federal “Cadillac tax.”
In addition, the offer listed the dependent rates by vendor, whereas the AFSCME’s
Appendix A has an average for dependent rates for managed care.1
The Union’s offer also included language that proposes the creation of a joint labor
management committee. Armstrong testified that she believed that such language provided the
opportunity to negotiate, develop, and evaluate programs, plan designs and strategic initiatives,
which in turn would affect the State’s quality care health plan (QCHP).
The Union’s final offer did not require the State to contract with a particular vendor for
its quality health plan. The Union’s final offer did not expressly require the State to maintain the
health insurance providers listed by name in the offer. The Union’s final offer did not seek a
plan that carves out a separate population. Rather, the coverages that the Union sought are
exactly the same as those currently provided by the State.
The Union’s proposed increase in deductibles would not require the State to undertake a
full procurement to effect a change in deductibles if the State applied the change across all its
plans. In 2012, the State negotiated an increase in deductibles with another union. The State did
not seek a full procurement with respect to those deductible increases. Rather, the State merely
advised its vendors that the deductibles had increased and that when a member presented himself
at the doctor’s office for services, the provider should take into account the increased
deductibles.
Bialorucki testified that Union’s final offer on health insurance was similar to the State’s
revised final offer on health insurance as it relates to the quality health care plan and the
managed care health plan. The structure of the State’s plans was the same as the structure
1 The Union’s offer also maintains current levels of contributions until 60 days after signing the collective
bargaining agreement.
16
proposed by the Union, but the premium amounts and the salary tiers were different. In addition,
the Union’s proposal for member contributions for dependent coverage sets out a charge with
exact figures, divided by providers. By contrast, the State’s proposal sets out a weighted
average.
ii. State’s Final Offer
The State’s last best final offer to the Union on health insurance was the same as the
State’s final offer to AFSCME regarding health insurance, covering the same contract term.
The centerpiece of the State’s proposal was that employees would be responsible for 40%
of overall health insurance costs while the State would be responsible for 60% of overall health
insurance costs. The State proposed to change the cost split for two reasons: (1) it sought to
bring its health care costs in line with those of employers in the private sector, who pay
approximately 60% of their employees’ health care costs, and the costs of employee healthcare
borne by other States; (2) the State’s agents felt that the existing cost split was unaffordable. The
State was looking to cut its budget by 20-25%, across the board. This represented a change from
the existing cost-split under which the State pays for 76% of the costs of employees’ health
insurance while employees pay 24%.
Within that framework of cost-splitting, the State proposed to expand the number of plans
it offered employees from 7 plans to 28 plans. Specifically, it sought to add four additional sub-
plans to each of its existing seven plans. Each new plan would have a different actuarial value.
The State has not yet gone to market for the 28 plans it proposed.
The State identifies the actuarial value of its plans by “metal banding,” platinum, gold,
silver, and bronze. The actuarial value is based on the amount of out-of-pocket expenses that
the member pays for total medical services.2 The lower the actuarial value, the lower the
premium, but the greater the out-of-pocket costs. However, the overall or net value of each plan
remains the same because the employee is still responsible for 40% of the overall costs, while the
employer is responsible for 60% of the overall costs of health insurance.3 The State refers to the
2 The platinum plan has an actuarial value of approximately 90%. The gold plan has an actuarial value of
approximately 80%. The silver plan has an actuarial value of approximately 70%. The bronze plan has
an actuarial value of approximately 60%. 3 The net actuarial value of the plan is a combination of employees’ out-of-pocket expenses and their
premiums.
17
platinum plan as the “richest” plan and the remaining plans as successively “less rich.” The
proposal allowed employees to choose to pay lower premiums in exchange for increased out of
pocket costs.
The State determined copayments, deductibles, and coinsurance in each of its proposed
plans, based on the services provided and the structure of the copayments and coinsurance. In
addition, the State proposed to charge more for those services that it discourages members from
using (emergency room) and less for preventative health care. The State designed each of its
plans such that they would maintain the 60/40 cost split, regardless of the actuarial value of the
plan. The coinsurance, the copays, and the deductibles in the State’s proposal were designed to
minimize unnecessary use of medical expenses.
Almost 100% of all full-time active employees have their health insurance payments
deducted from their normal earnings. Employees’ paychecks are therefore reduced by the
amount they are charged for health insurance.4 In other words, their taxable income is reduced
by the amount that they are charged for health insurance.
Under the State’s proposal, employees with an annual base salary of $105,302 would see
their annual QCHP Insurance contribution increase from $2,532 to $5,124. Employees with an
annual base salary of 87,434 would see their annual QCHP Insurance contribution increase from
$1,944 to $3936. Employees with an annual base salary of $75,494 would see their annual
QCHP Insurance contribution increase from $1,728 to $3,492.
In addition, employees with an annual base salary of $105,302 would see their annual
Family Coverage QCHP Insurance contribution increase from $5,976 to $12,096. Employees
with an annual base salary of 87,434 would see their annual Family Coverage QCHP Insurance
contribution increase from $5,388 to $10,908. Employees with an annual base salary of
$75,494 would see their annual Family Coverage QCHP Insurance increase from $5,172 to
$10,464.
Further, employees who maintain HMO coverage would also see their annual
contributions increase. For example, if employees are currently enrolled in Coventry HMO,
employees with an annual base salary of $105,302 would see their annual contribution increase
from $2,232 to $4512. Employees with an annual base salary of 87,434 would see their annual
4 There are some programs, e.g., smoking cessation and weight loss, in which the employee makes a
personal payment, which the insurance company then reimburses.
18
contribution increase from $1,644 to $3,324. Employees with an annual base salary of $75,494
would see their annual contribution increase from $1428 to $2892.
Employees who maintain HMO plus two coverage would similarly see annual
contributions increase. For example, if employees are currently enrolled in Coventry HMO,
employees with an annual base salary of $105,302 would see their annual contribution increase
from $4,104 to $8,376. Employees with an annual base salary of 87,434 would see their annual
contribution increase from $3,516 to $7,188. Employees with an annual base salary of $75,494
would see their annual contribution increase from $3,300 to $6,756.
In sum, the State proposed that employees would pay more than double the amount for
health care that they currently pay.5
In addition, the State proposed to offer, by July 1, 2016, a plan design that allowed
employees to obtain the same employee contribution levels by salary tier as those in place on
June 30, with the exception that such a plan would also have additional salary tiers for
determining employee premium amounts for those employees whose salaries exceed $100,000.
Under the new plan design, employees would pay approximately $258 more in health insurance
costs each month.
The proposal further states that “for salary tiers over $100,000, the premiums will be
divided by a factor of 2.023 to adjust back to a comparable amount for premiums in place on
June 13. Such a plan will achieve the same level of cost sharing in aggregate between the State
and its employees as contained in appendix ___.” The proposal does not set forth those salary
tiers.
The proposal states that “on July 1, 2016, employees will also be offered the option to
receive health care coverage at the same level of cost sharing between themselves and the State
as at present on June 30, from July 1, 2016, through June 30th, 2019, with the exception that
such a plan will also have additional tiers for determining employee premium contribution
amounts.”6 The proposal additionally states that “as consideration for such coverage, employees
who choose the option would be responsible for premiums for their member and dependent
health care coverage after retirement.” The State’s proposal would lead to increased costs for an
employee upon retirement.
5 Specifically, the State proposed to raise existing rates by a factor of 2.03. 6 Those tiers have not been formulated yet, but they would lead to higher employee contribution amounts.
19
Next, the proposal provides that if members elect to keep their plan richness and current
premiums in exchange for being responsible for premiums after retirement, that they would not
be able to name themselves dependents of their spouse, if the spouse is also a state employee,
unless they had been a dependent for a minimum of one year previous to retirement. This aspect
of the proposal also proposes increased costs for employees. The State’s proposal would
increase employees’ payments by approximately $4 to 4.5 million per year.
Finally, the proposal provides for the creation of a Joint Labor/Management Committee
on health care benefits that will make recommendations to the Director of CMS regarding
potential savings opportunities for the State. It further provides that the State may increase
employees’ costs by up to 10% from the amounts specified in the agreement, if the Committee’s
recommendations result in increased costs to individual employees beyond what is specified in
the agreement.
Marcia Armstrong, of the CMS’s Bureau of Benefits, testified that the State’s health care
proposal is based on a relationship between the benefits to be included and the costs for those
benefits. Armstrong also testified that the State’s agents believed that its health care proposal
provided a reasonable relationship between the benefits and the expected distribution of expenses
because the proposal offered more plan options, which the State contended would allow
members in the State’s plan to make the best choice for their particular medical situation.
However, Armstrong conceded that the Appendix A, incorporated into the Union’s 2008-2012
contract and the Appendix A incorporated into the Union’s 2012-2015 contract also provided a
reasonable relationship between the benefits provided and the distribution of expenses.
Marcia Armstrong testified that FOP’s health insurance proposal was $35 million dollars
a month ($420 million a year) more expensive to the State than the State’s health insurance
proposal, noting that the total difference in cost would grow to in excess of a billion dollars over
the four-year span of the contract.7 However, this calculation compared the two proposals as
applied to all state employees and did not simply consider the costs of the proposals relative to
one bargaining unit.
7 That calculation represents the cost differential between the 76/24 split, proposed by FOP and the 60/40
split, proposed by the State, and it also included some estimates of cost savings for migration between
plans.
20
c. Events that Occurred After the Parties Exchanged Final Offers on Health
Insurance
On January 13, 2016, the parties attended the third day of their interest arbitration
hearing. That same day, the State filed a Petition for a Declaratory Ruling with the Board’s
General Counsel. The State requested a determination as to whether its own proposal on health
insurance was a permissive or mandatory subject of bargaining. The State argued that its
proposal was mandatory subject of bargaining. It also argued in the alternative that the topic
health insurance, broadly, was a permissive subject of bargaining with respect to the State.
The parties attended additional days of interest arbitration hearing on January 14 and 15,
2016, and February 4, 15, 16, 17, and 29, 2016.
On March 1, 2016, the Board’s General Counsel issued her Declaratory Ruling. The
General Counsel determined that the State’s specific proposal was mandatory in nature and that
health insurance was a mandatory subject of bargaining. In reaching this determination, she
found that both plan design and health insurance costs were mandatory subjects of bargaining
within the broader subject of health insurance.
On March 11, 2016, the State filed the unfair labor practice charge at issue in this case. It
alleged that the Union violated the Act by insisting to impasse on a permissive subject of
bargaining by submitting its health insurance proposal to the interest arbitrator.
The parties attended another day of interest arbitration hearing on March 30, 2016, and
concluded the hearing on April 8, 2016.
On June 6, 2016, the Board’s Executive Director determined that there were no issues of
fact or law for hearing and dismissed the charge. The State appealed the Executive Director’s
dismissal. On August 5, 2016, the Board reversed the Executive Director’s dismissal and
remanded this case for hearing.
In September 2016, Arbitrator Nielsen requested that both parties meet again to review
their respective positions. The parties did so, but did not reach an agreement on health
insurance.
On June 1, 2016, the parties filed their briefs in the interest arbitration case. The State’s
brief referenced this pending unfair labor practice charge before the Board in two footnotes. In
note 10, the State noted that “the Union’s proposal is…unreasonable because it attempts to
mandate bargaining over plan designs. This issue is the subject of the State’s pending ULP
21
charge against the Union.” The State then cited the case number. In note 40, the State again
referenced the charge. However, instead of objecting to the arbitrator’s consideration of the
parties’ offers on health insurance, the State expressed that it did not object. It stated the
following:
On March 11, 2016, the State filed with the ILRB an unfair labor practice charge
against the FOP in connection with the FOP’s insistence upon bargaining to
impasse a permissive subject of bargaining. That ULP Charge is currently
pending at the ILRB. For purposes of efficiency and without waiving any
arguments raised by the State before the ILRB which could impact this panel’s
jurisdiction to issue an award on health insurance, until such time as the ILRB
issues a ruling in that matter, the State does not object to this panel’s
consideration of the parties’ respective health insurance proposals.
On August 9, 2016, the State sent an e-mail to Arbitrator Dan Nielsen, requesting that the
arbitration panel stay any decision on health insurance and all other economic issues, pursuant to
Board Rule set forth at 80 Ill. Admin Code 1230.90(k), until the Board decided the health care
issue. The State did not specifically object to the Union’s proposal, nor did it identify any
objectionable features of that proposal. It simply “object[ed] to the panel deciding the health
insurance issue.”
As of August 9, 2016, the arbitration hearing had concluded and both parties had already
filed briefs. The State had not previously objected to the arbitrator’s consideration of the health
insurance issue in this interest arbitration case.
On October 4, 2016,8 the Arbitration Panel issued an order denying the State’s request on
the grounds that the State had not made its objection in good faith, as required under Section
1230.90(k) of the Board’s rules. In support, a majority of the panel noted that the State’s
objections were untimely because they were not submitted in compliance with the schedule for
objections set by the panel.9 The majority observed that the time set by the panel for objecting to
the parties’ respective health insurance proposals was in January, approximately seven months
prior to the date on which the State made its objection. They noted that under this schedule, the
State’s objections to the Union’s offer were still untimely even if they were considered “implicit”
in the State’s March petition for a Declaratory Ruling,” which sought a determination
8 The Order is dated October 3, 2016. However, the parties stipulated that it in fact issued on a later date. 9 They also cited Section 1230.90(c) of the Board’s rules in support of his assertion that the timelines for
submitting offers and raising objections in interest arbitration are left to the arbitration panel. 80 Ill. Adm.
Code 1230.90.
22
considering the State’s own health insurance proposal. In so holding, the majority reasoned that
the “State’s objection, while it may well be made in subjective good faith, is not a good faith
objection as contemplated by the rules, because it was not submitted in compliance with the
schedule for objections set by the panel.”
Finally, the majority noted that if even if the State’s objections to the Union’s proposal
were implicit in the State’s petition for a Declaratory Ruling the General Counsel’s ruling that
health insurance was a mandatory subject of bargaining, permitted the panel to consider the
parties’ health insurance proposals under Section 1230.90(k) of the Board’s rules. On this point,
the majority noted the following:
The bases for the state’s objection now are precisely the same bases on which it
argued to the General Counsel in…March [2016]…that health care was a non-
mandatory issue. The…General Counsel expressly considered the State’s theory,
considered the prior Declaratory Ruling on this same argument between these
same parties, considered the existing state of the law, and determined health care
“to be a subject over which the parties are required to bargain.”
On November 9, 2016, the State filed a motion with the Illinois Labor Relations Board,
State Panel, asking the Board to “direct… arbitrator Daniel Nielsen to wait until the Board rules
on whether the State has an obligation to bargain over health insurance…before issuing his
arbitration award.”
On November 28, 2016, the Board’s Acting General Counsel, Melissa Mlynski, denied
the motion.
2. Description of the State’s Current Health Plans
The State administers four separate health insurance programs. These include the State
Employees Group Insurance Plan, the College Investment Plan (CIP), the Teachers Retirement
Insurance Plan (TRIP), and the Local Government Health Plan. CIP is an independent plan that
the State administers for retired members of community colleges. Local Government Health
Plans cover local units of government that can elect to buy into the State plan. The programs, in
the aggregate, service approximately 450,000 individuals. The plan designs are consistent among
those groups, and they do not differ by union or by local government. The plans, the
copayments, and the coinsurance that the State provides through its plans are consistent across
the State’s population.
23
State Employees Group Insurance Plan covers approximately 350,000 individuals,
including retirees, dependents, and active employees. The State currently has seven plans and it
has 11 contracts to provide those plans. Six of the contracts are for plans that are self-insured
and five of contracts are for insured plans. In an insured plan, the State contracts with a third
party vendor that takes the risk and pays the benefit of the claim. The State negotiates a
capitated rate with the vendor. The capitated rate is a capped monthly rate that the vendor
charges for each member or dependent. The rate covers all care provided by the plan, and the
plan pays the doctors directly. The State adds its own administration costs to the rates charged
by the vendor to establish the final rate.
In a self-insured plan, the State absorbs all the risk and pays the benefits and the
insurance claims directly. The State performs a more complicated actuarial analysis, based on
liability, to set rates for the self-insured plans. However, the plan provider processes the
paperwork and creates networks of doctors and hospitals.
The State’s seven health care plans are designed to ensure that members throughout the
state receive health care benefits on an equitable basis. Some of the State’s plans are
geographically centered so that the State has multiple plans to cover the entire State. For
example, the Quality Care Health Plan is available in every county of the State and for members
who reside out of state. The quality care rates are consistent for employees who live out-of-state
and in-state so that the members are treated equitably no matter where they live and work. By
contrast, the HMO products have rules and networks that are more limited to the State of Illinois.
The Open Access Plan is available more broadly across the State because the State has
three tiers of networks. However, some HMO plans have participation in only some counties of
the State.
The State’s Open Access Plans were not collectively bargained. The State developed the
plan design, worked with its consultants, and awarded the bid without collective bargaining over
those plan designs. CMS considers affordability, cost of coverage and care, and competition
among health insurers and providers in designing a plan of health benefits. The State evaluates
the claims data and the insurers’ profit and ensures that the insurers do not make too much
money on their administrative services. CMS considers affordability in designing health plans.
For example, it seeks to narrow its networks by reducing the number of hospitals available to
members so that it can drive up value and receive discounts on that basis. It also tries to reward
24
providers and facilities that have better outcomes, shorter stay times, and fewer returns to
hospitals. The State implemented the Open Access Plans in 2000, and they are in existence
today.
3. The State’s Process for Procuring Health Insurance Products
Marcia Armstrong works for the State of Illinois, Central Management Services Bureau
of Benefits. She described the process by which the State obtains its health insurance contracts
and implements the plans.10 The State must perform the procurement process for each of its 11
health insurance contracts. It also performs the procurement process to provide behavioral
health insurance benefits, which supplement the State’s self-insured products, and prescription
benefits.
Full procurement and sole-source procurement are the methods by which the State
finalizes its procurements. Neither procurement method finalizes the rates that the State
negotiates with the vendors.
a. Full Procurement
The full procurement process takes approximately a year to complete, as described
below.
First, the State’s Bureau of Benefits staff provides initial drafts of the request for proposal
(RFP) for the insurance product. This process takes approximately three months.
Approximately two to three individuals work on the RFP on a full-time basis during that time.
Staff may complete between 10 to 30 drafts in preparation for procuring the insurance product.
Staff members tailor each RFP to the contract sought. Staff may discuss and review the RFP
with a consultant.
Second, the Bureau of Benefits drafts a procurement business case (PBC). The PBC is a
formalized template that the Bureau of Benefits drafts to summarize the procurement. It serves
to persuade the legal department, the fiscal department, and the Director of Central Management
10 Armstrong relied on a document entitled, “Bureau of Benefits 2016-2017 Timeline for Self-Insurance
Quality Care Procurement.” The document was based upon the State’s current procurement of health
insurance.
25
Services (CMS) to allow the State to proceed with the procurement. The legal department, the
fiscal department, and/or outside consultants provide feedback on the RFP or ask questions.
The Bureau of Benefits may substantively change the original RFP in response to the
feedback.
Once the Bureau of Benefits receives approval from the legal department to proceed with
the procurement, it submits the PBC to CMS’s Agency Procurement Officer (APO) for approval.
The APO reviews and edits the RFP. During this time, the State also assigns an evaluation
team, which is a committee that will review the bids submitted by the vendors. They provide
subject matter expertise and financial review.
The APO gives approval to publish the RFP. He then submits the approved RFP to the
State Purchasing Officer (SPO) for publication on the Illinois Procurement Bulletin, which is
where the State posts all opportunities for bidding on goods and services within the State. It
takes approximately eight months from the start of the procurement process to post an RFP on
the Illinois Procurement Bulletin.
After the SPO publishes the RFP, the vendors have approximately a month within which
to ask questions and to respond to the RFP. They may also ask for additional data, or additional
background information. When a vendor asks a question, the procurement code requires the
State to publish its answer to all bidders.
When the bidding period closes, the State performs administrative review of the bids.
This review ensures that each of the bids is complete, i.e., that each includes certain mandatory,
ancillary documentation.
The evaluation team convenes for technical evaluation meetings. Each member of the
team reads each of the bids and scores them. This process typically takes at least a month. The
APO, the SPO, and the Chief Purchasing Officer (CPO) also have the right to review the bids.
The SPO and the CPO have the authority to direct the Bureau of Benefits to perform a more
thorough review of the bids and can override CMS’s decisions regarding the bidding process.
Once the committee members score the bids, the APO looks at the scoring in conjunction
with the lead of the committee. If the APO sees that one of the evaluators rated the bids
differently than the other bidders, the evaluation team discusses the outlying evaluation. The
evaluator who issued the outlier score has the opportunity to reconsider his ratings.
26
The committee tabulates and weights the scores. It creates a list of finalists based on the
technical scoring of the bids, to determine which vendors will move to the price opening.
The evaluation committee then performs a price opening, in which it unseals the prices
offered by the contractors for the services. The pricing is the contractor’s administrative fee for
the process and the administrative work. The committee performs a price analysis in which it
weights the technical scores, using the offered price, and arrives at a final score. The bidder
with the highest overall score (highest technical score combined with the lowest price) is the
winning bidder. If the State received a number of high scoring bidders, the State asks the bidders
for a best and final offer, to lower the bidders’ prices.
Once the State selects a bidder, it issues an Intent to Award that it publishes in the
procurement bulletin. The Intent to Award announces that the State intends to award a contract
to the named vendor for specified services and the stated price. The posting gives the losing
bidders a 14-day window in which to file an appeal of the State’s decision. During this window
period, the State must respond to questions posed by unsuccessful bidders.
The Procurement Policy Board then performs a review of the proposed contract. The
Procurement Policy Board has 30 days to review any Intent to Award, contract documents, or
bids. They have the opportunity to ask questions and seek clarification. The Commission on
Government Forecasting and Accountability (COGFA) also has 30 days to review insurance
contracts and can likewise ask questions. The Bureau of Benefits is statutorily required to reply
to COGFA within five days.
Next, the State, through CMS, undertakes contract negotiations with vendor. The
negotiations can take between one to four months to complete. The selected vendor may seek
concessions from the State in negotiating the contract. For example, the selected vendor might
ask for prompt payment guidelines. Some vendors may accept the contract and negotiate the
terms “cleanly” based upon the RFP. However, the State may need to undertake lengthier
negotiations with other vendors.
Once the State and the vendor negotiate a contract, the State circulates the contract for
final execution and files the contract with the Office of the Comptroller.
27
b. Implementation of New Contracts Following Full Procurement
After the State performs a full procurement for an insurance product from a new vendor,
the State implements its plan by transferring membership and eligibility files from the existing
vendor to the new vendor. The State must establish new carrier codes for its programming, for
its rates, and for its claims history. The carrier codes establish the identity of the vendor. They
are also used to identify an individual’s rates. The State has different rates for different salaries,
and different numbers of dependents. Each rate has a separate carrier code. The State must
also implement changes to the financial systems for vendor payment. In the case of self-insured
plans, the State sets up health funds locally through the Treasurer’s account from which the
insurers write checks to the providers. The State implements changes to the payroll system
because of the new rates. The State also implements changes to the retirement system because
the retirees’ dependents pay the rate of active members.
The State then develops rates and implements them. The rates for the self-insured plans
are developed by the State and sent to actuaries for review, as required by the State’s auditors.
The State performs intensive modeling for rate setting purposes. It evaluates the claims data,
broken out by plan and by category. The State takes into account the claims that have not been
billed or for which the member has not yet asked for reimbursement by anticipating those costs
based on actual experience from previous years. The State also considers vendor rates,
administrative costs, federal reimbursement fees, and projected revenues.
Armstrong testified that rates are based in part on the number of people included in the
plan. When there are more individuals included in the plan, the State can obtain volume
discounts that reduce the cost. The rates for smaller populations are volatile because rates are
based in part on past health care use and experience, and the risk of health care use is spread out
over a smaller population. They are also volatile because a small increase or decrease in group
population, as a result of a job transfer, would have a greater impact on a smaller group. It is in
the plan participant’s best interests to be covered by a much larger pool so that the costs of an
extraordinarily medical event can be spread over a larger group of individuals. Armstrong
testified that creating separate plans for separate units would increase volatility in the rates and
increase rates because the populations covered would be smaller.
Finalizing the rates is a collaborative process between the State and its actuaries. The
State sends all its data, claims history, rates, and rate models to its actuarial firm, Deloitte.
28
Deloitte reviews the materials, engages in some “back and forth” with the State, and then issues a
letter stating that the rate is adequate and that it is a realistic forecast of the rates for the
upcoming year. Notably, the State performs this review yearly, even if the contract spans more than
one year.
The State provides the actuarial letter to the Federal Government and the State’s auditors.
The State delivers its contracts, including its list of rates and liabilities, to COGFA by the
statutory deadline of April 1. The State must separate the data by plan. If the State had a greater
number of plans, the State would need to provide a greater amount of information to COGFA.
Currently, the State prepares data for each of its 11 vendors, and each of those vendors’ plans.
The data includes enrollment, migration, claims data, and negotiated rates. The State must also
include information concerning retiree rates because the State spreads retiree costs back to active
employee payrolls. The State engages Deloitte to perform the calculations to establish retiree
rates. The data include enrollment reports, migration, and the IBNR run-out claims data. The
report also includes reports on collective bargaining negotiations, if the State has completed
negotiations. In such cases, the report includes information concerning plan design changes that
the State has negotiated with unions.
The State’s Group Insurance Division’s group insurance representatives (approximately
300 individuals) assigned to various State agencies, receive training to implement new health
insurance programs. The group insurance representatives help resolve discrepancies that arise
between the amount that the State should deduct from employees’ pay checks for health
insurance and how much it actually has deducted. These 300 individuals must have an
understanding of the group insurance manual. They receive approximately 6000 man hours of
training on the manual per year. Armstrong testified that if the State negotiated 30 separate
plans, there might be 30 different group insurance manuals and the State would need to train its
group insurance representatives on each program. However, the State performs annual training
and it also performs training any time it introduces new plans.
The State produces a benefit choice booklet, which includes the options for every plan,
the salary tiers, the deductibles, and the map of coverage. It also includes provider specific
information and definitions. If the State negotiated additional plans, the State would need to
include them in this booklet.
29
On May 1, the State opens its month-long benefits choice period for a plan that begins in
July of that year. When negotiations with AFSCME extend into the new plan year, the State
still conducts the May benefit choice period, but it also conducts a second benefit choice period
after the parties ratify the new contract, to allow employees to select from along the newly
negotiated health insurance plans. If AFSCME finalizes its agreement with the State before the
State has finalized agreements with other unions, the State does not conduct another benefits
choice period at the conclusion of its negotiations with other unions. This is because,
historically, the health care provisions that the State negotiated with AFSCME applied to all
State employees. Armstrong anticipated that if the State negotiated different plans with
different unions that the State would need to conduct benefits choice periods for each union that
negotiated a separate plan.
After June 30, the State has a two-month “lapse period” within which to pay its bills and
present vouchers to the Comptroller’s Office for payment. At the end of the lapse period, the
State must make a financial reporting by plan type and vendor that sets out costs that have been
incurred but not reported. The State must also review its accounts receivable and accounts
payable balances by vendor and by plan. The State must then extrapolate back to each school
district, each agency, and each board and commission an accounting of that unfunded group
insurance liability. 11
The new plan becomes effective on July 1. It takes approximately a year and half from
the beginning of the RFP process to the date of an effective plan.
The State must next undertake financial reporting for the previous fiscal year. This
includes the Comprehensive Annual Financial Reports (CAFR), which is the annual statewide
financial report that the Auditor General audits and that the Comptroller’s Office finalizes each
year. In that report, the State reconciles and closes out its books and reports the amounts. The
State’s financial reporting obligation also includes the Other Post-Employment Benefits (OPEB)
report, which is required under the Government Accounting Standards Board (GASB). In that
report, the State must account for the unfunded liability projections of future retirement benefits,
which include health insurance benefits. The State must make full disclosure of the present
dollar value of full benefits for its employees. The State’s consultant, Gabriel Roeder, values the
11 Every year, at the beginning of every fiscal year, the State must re-obligate all its contracts with the
Comptroller’s Office.
30
cost of retiree health insurance benefits overall and then ascertains how much of the cost is
attributable to each agency or entitle covered by the group insurance plan. The report takes into
account every plan used by the State.
Armstrong testified that if the State had additional plans, the report would take them into
consideration too, and the calculation would therefore be more complex. For example, if an
employee worked for five years represented by one union under one health plan and then
switched unions and was covered by a different plan, the consultant would have to modify its
formulas to achieve an accurate projection. The State must provide the consultant with all its
plan designs and claims data. If the State had additional plans and separate claims data under
those plans, it would have to provide those plans and those claims data to the consultant as well.
In its financial reporting, the State must include a footnote that describes its unfunded
health insurance liability. However, beginning in 2017, pursuant to a new standard, the State
will be required to separate the unfunded health insurance liability by agency and include that
amount in each agency’s financial statements. Currently, the State’s unfunded liability for health
insurance is $34 billion. Armstrong testified that the State would have more difficulty separating
the unfunded health insurance liability by agency if there were additional health care plans
resulting from collective bargaining over health care with various unions. She explained that
pursuant to the new standards, the analysis would need to include evaluations and projections
based on the employee base at an agency, the plans provided for that employee base, and also the
plans that would be provided to those employees in their retirement.
Next, the State must create shadow budgets and estimate funding for the next fiscal year.
The budget instructions from GOMB project an average overall insurance rate. When the State
performs average budgeting, it is based on overall average costs because, according to
Armstrong’s testimony, the State’s plan designs are “consistent across the board.” Accordingly,
when employees pick a plan, there is a specific, established rate for that plan. However, if the
State were required to budget for different plans, the State would be required to forecast the
enrollment and the migration in each plan to identify the employer-paid portion. The rates
would have to match to that employee base, whereas presently, it is standardized.
31
Finally, the State must submit its Statewide Cost Allocation Plan (SWCAP) and
reconciliation to the federal government.12 The SWCAP is a federally required plan that
addresses revolving funds. Revolving funds are internal service funds. CMS charges State
agencies for services that it provides, such as health care. The State agency then uses federal
funds to reimburse CMS for those services. The SWCAP report is used to show the federal
government that the State is not using too much federal funds to pay for health insurance. The
federal government audits the State’s rate-setting methodology and determines whether the State
has overcharged federal funds as compared to State and general funds. If the federal
government determines that the State has overcharged the federal government, the State can be
subject to penalties and interest.
The federal government requires the State to include certain information within its
SWCAP report. The SWCAP report includes information about each plan and its written rate-
setting methodology. The amount that the State charges the agencies depends on the estimated
amounts due from employees, which depends on the rates charge and the employee’s plan. It
calculates its expenses, offset by its revenues. The State then splits that rate, or premium,
between the employer and employee. The detail provided under the methodology changes for
each new plan. If the State had additional plans, as a result of collective bargaining, the State
would need to provide the details of each plan’s rate setting methodology to the federal
government.
The SWCAP report may include up to five years of data because the report is based on
imputed costs and actual liability incurred in the fiscal year, regardless of when the State receives
the bill. Accordingly, the State includes data regarding claims and liability in past years, until
the State has received all rebates and refunds, and has included all subrogation.
Armstrong testified that if the State negotiated separate health plans with other unions, it
would be required to separately list those plans and their labilities in the CAFR report, the
SWCAP report, and the Other Post-Employment Benefits (OPEB) report.
The State has never bargained over the health insurance procurement process. The State
does not wait until collective bargaining is complete to negotiate its 11 contracts with the
12 The Governor’s Office of Management and Budget (GOMB) must approve the SWCAP report before
the State submits it to the federal government.
32
insurance provides. Unions are not involved in the State’s negotiations with its health insurance
carriers. Unions do not have a role in preparing the RFPs or in scoring the RFPs.
c. Sole Source Procurement
Sole source procurement is a faster, more straightforward process of procurement than
full procurement. Sole source procurement allows the State to negotiate directly with an existing
vendor for a new service. The State seeks to undertake a sole-source procurement when it wishes
to make a minor change to the manner in which a vendor provides services under an existing
contract. The State has also sought to use sole source procurement to add new plan designs to
existing contracts that apply to the same population covered under the original contract. The
State may undertake a sole source procurement if receives approval from the State Purchasing
Officer (SPO) and the Chief Purchasing Officer (CPO) to return to the existing vendors and
negotiate directly with them for a new service. The SPO and the CPO may approve a sole-
source procurement where it would not make sense to open the market to additional bids.13
The State must still give other potential contractors notice of the sole-source
procurement. Those contractors have a 14-day window period in which they can protest the sole
source procurement. If a contractor files a protest, the SPO holds a hearing at which the
contractor can lodge its protest.
The State has previously made changes to plan designs without undertaking RFPs.
However, those changes applied to the State’s entire population. Plan design changes that are
applied consistently across the board may be performed without an RFP, and instead effectuated
through a sole-source procurement because the State can simply negotiate a modification of the
existing contract. The premise of the contract remains the same. Armstrong testified that a plan
design change that carves out a specific population would likely require a separate procurement
because the covered population would change and the geographic application could also change.
In February of 2016, the State requested to undertake sole source procurement for certain
health care vendor contracts, including Cigna, Caremark PCS14, Magellan, Coventry HMO,
Coventry OAP and HealthLink OAP. The State thereby sought to create additional plan designs
13 The State Purchasing Officer (SPO) and the Chief Purchasing Officer (CPO) report to the Executive
Ethics Commission, and are independent of CMS, whereas the APO works for the agency and reports
directly to the Director of CMS. 14 This is the State’s prescription vendor.
33
for four of its existing health plan systems including the State Employees Group Insurance plan,
the College Investment Plan, the Teachers Retirement Insurance Plan, and the Local Government
Health Plan.
The sole source request for Cigna was entitled “Custom Benefit Expansion for Self-
Insured Health Plans, Cigna.” The request for sole source procurement stated that “critical
changes to the existing contract are necessary and best accomplished by the contract holder.”
The State sought to add additional plans (gold, silver, and bronze). The plans that the State
sought to add would be provided to all populations. Specifically, the request provided that the
State “has developed and plans to offer additional plan design options for all health plan types,
HMO, OAP, PPO indemnity [Quality Care Health Plan].” The State planned to offer these
additional plan designs during the May 2016 annual open enrollment, with coverage effective
July 1, 2016.
At the time of this request for sole source procurement, the State had already
competitively procured vendors to provide various plan types, with four- and five-year terms.
However, they only contemplated one plan design, known as the platinum plan. The State
sought to add the newly developed additional plan design options to ensure availability of those
options for the May 2016 open enrollment. The State had not collectively bargained these plans,
but it had proposed them in bargaining with AFSCME and the Union in this case.
In its request for sole source procurement, the State justified its approach on the grounds
that it was not seeking to add a new service. It merely sought to expand the existing current
services provided by the vendors. It noted that the State had already procured and awarded to the
vendor a contract to provide the primary service. This sole source procurement sought to add
plans that would be available to the entire population.
In its request, the State further noted that it had engaged in negotiations for each new plan
design option with each vendor, with the assistance of the agency’s actuarial consultations. It
further stated that it believed it negotiated fair and reasonable pricing with each vendor for each
new plan design option.15 In this case, the vendors informed the State that they would administer
the new plans under the existing administrative fee.
15 Armstrong noted that this sole source procurement sought to modify a self-insured plan, in which the
State paid all claims directly and only negotiated and paid the vendor the administrative fees. The State
negotiated those fees at the time it submitted its request for sole source procurement.
34
The State’s request for sole source procurement also explained why competitive selection
was not a viable alternative for the acquisition of new plans. The State explained that the
agency was satisfied with each vendor’s health plan administration under current contracts. It
further stated that “due to the state’s desire to offer the plan design options during the May 2016
open enrollment period, a full competitive procurement prior to that time is not administratively
feasible.” Initiating a full competitive procurement would create an unnecessary risk of not
having any contracted vendors in place to administer the State’s health plans prior to the open
enrollment period. The State further explained the impact to the State that would result if the
sole source procurement were not approved. It stated that “if a full competition procurement is
required, the State will be unable to implement the new plan design options, which are expected
to lower the overall State cost for group insurance coverage for the 2017 plan year. The
projected overall cost savings of the new plan options and cost sharing between the State and
enrollees is anticipated to be $378 million per year. Further, requiring a competitive bid for the
new plan design options while maintaining the contracts for the currently available plan design
could result in different vendors administering new options, thereby creating the potential for
significant member disruption. That disruption could include the changing [of] doctors or
member hardship.”
The requests for sole source procurement for benefit expansion covering Caremark
PCS16, Magellan, Coventry HMO, Coventry OAP and HealthLink OAP, contained similar
language to justify the sole source procurement. The State Purchasing Officer and the Chief
Procurement Officer approved sole source procurement as the method by which the State could
add more plans and benefits.
The State did not finalize any of these sole source procurements. To do so, the State
would have to place a notice in the Illinois Bulletin, to allow potential competing vendors to
object to the sole source procurement. If a vendor objected, the CPO would be required to hold
a public hearing to consider the objections. The CPO may approve the sole source procurement,
notwithstanding an objection, but only after conducting the hearing. 30 ILCS 500/20-25(a)-(c).
The Department of Insurance may also need to approve the plan, if the Department of
Insurance had not previously approved the plan design. The State would need to work with its
vendors to finalize and establish rates for any new plans and products. Next it would need to
16 This is the State’s prescription vendor.
35
provide the vendors with additional information regarding the plan designs and work with them
to negotiate the rates based on the number of plans they would need to administer and the
number of different populations they would need to administer. The State would provide them
with claims data and migration data so that the provider could ascertain the appropriate cost for
individuals who elected that plan. Then, the State would segregate every plan and population in
its financial statements, SWCAP reporting, and OPED valuation.
Blue Cross Blue Shield did not agree to add additional plan designs and the State
therefore did not seek permission for a sole source procurement from Blue Cross Blue Shield.
The State did nevertheless enter a contract renewal with Blue Cross Blue Shield under the terms
of the original contract. However, the State will need to pursue a full procurement to obtain a
health insurance provider that will provide the services Blue Cross and Blue Shield provides, but
within the framework of the State’s newly proposed plans, because Blue Cross and Blue Shield
declined to do so.17
The State must undertake a full procurement where it seeks to radically change the plan
and in cases where the plan would cover a different geographical area. This is because the
procurement process requires an evaluation of network coverage and saturation.
d. Contract Renewals
State insurance contracts have renewal options that are included in the contract terms.
They allow the state to extend the contracts for a year at a time. The State does not need to
undertake a procurement to renew a contract. The renewals extend the original contracts, on
their original terms, and do cover new additional plan designs or rates. Currently, all the State’s
contracts contain renewal provisions.
When the State renews a contract, the State can reevaluate and renegotiate the rates
(“premiums rates”) it pays. The State evaluates its rates based on medical information, trending,
profit sharing, and service-level agreements. The State’s reevaluation and renegotiation of its
rates with the vendors occur independent of collective bargaining. The State negotiates
premium rates with vendors based on claims experience,18 verified demographics, actuarial
factors, projected health care costs trends. The CMS Director does not unilaterally set the
17 See p. 442 and 443. 18 The State considers approximately 10-12 years of claims experience when negotiating with vendors
36
premium rate. The premium rates for the State are negotiated as part of the State’s renewal of
its contracts. These premium rates are not the same as the premiums that the unions seek to
negotiate with the State. Unions seek to negotiate only the employees’ share of the premium.
The employees’ share of the premium is simply a mathematical calculation.
The State entered into contract renewals for Coventry Health Care on June 27, 2016 and
for HealthLink HMO at around the same time. The renewed contracts contained the same terms
as the original contracts, which represented the State’s platinum plan.
If the State amended existing contracts to add new plans, which would require a sole-
source procurement, the term of the contract would likely be the term of the original contract. If
the term of the original contract included the option to renew, those options to renew would
extend to cover renewal of the modified contract. If the State successfully modified an existing
contract after performing sole source procurement and if the original contract included the option
to renew yearly for five years, the State could maintain that contract and avoid conducting an
RFP.
4. The Potential Difficulties of Carving Out a Separate Population For Insurance Purposes
Armstrong testified that if the State were to remove a subsection of its employee
population and put them in a separate pool for the purposes of providing insurance, the State
could lose opportunities for cost savings and it would increase the volatility of the cost of
insurance within the carved out population. It might also increase the State’s administrative
costs because the vendors might increase the administrative portion of their rates based on the
fact they would need to monitor different plan designs and issue different ID cards. The State
would pass on those increased costs to employees. A larger membership pool provides more
stability in pricing and more consistent data. Armstrong testified that in her experience, a larger
pool leads to better rates for insurance, which means a lower premium because the risk is spread
out across a larger group If the State separated out populations for different insurance, it would
have to conduct a separate benefits choice period for that group. The financial reporting would
also be more complicated. The calculation of retiree benefit would also be more complicated.
Armstrong further stated that it would be more complicated for the State to compile
claims data on members who have switched plans that provided for different benefits and have a
different plan design. Armstrong further testified that the State would need to track every retiree
37
throughout their course of employment along with the union to which they may have belonged to
determine their retiree dependent copayments. The State tracks enrollment with a membership
system. It also has a warehouse where all claims data is stored. When the State collects claims
data, it cross matches its membership and eligibility data to obtain the appropriate claims data
associated with the member. Armstrong conceded that the State’s current system would allow it
to compile claims data on members who have switched to plans with different benefits and plan
designs.
Armstrong testified that she would attempt to dissuade unions from seeking a carved out
health plan by informing them that such a plan could actually cost them more in deductibles and
point-of-service fees, depending on their actual claims experience. For example, the cost of
medical catastrophe (e.g., a heart transplant) would have greater on an impact on the health
insurance costs of members enrolled in a plan with fewer members because that cost would be
distributed among fewer individuals, in the following year’s premiums. Their claims experience
would not be pooled with those of the rest of the State.
Armstrong stated that if an arbitrator required the State pay different rates for health
insurance that covered one bargaining unit, as opposed to another, it would reduce the State’s
ability to provide equitable rates to employees. The Union’s bargaining unit has 1500 members.
5. The State’s History of Bargaining Over Health Insurance
CMS negotiates approximately 31 or 32 agreements on behalf of the State.
Approximately 11 collective bargaining units in the State are entitled to interest arbitration.
It is undisputed that the State has negotiated with unions over employees’ share of health
care costs for over 28 years. The changes in vendors have not been the subject of collective
bargaining.
a. General Patterns of Bargaining
John Terranova, Deputy Director of the Office of Labor Relations for the Department of
Central Management Services, testified that the State typically negotiates extensively with
AFSCME first and then presents to other unions the agreement on health care that the State
38
reached with AFSCME.19 It then presents other unions with a summary of the health insurance
benefits to which AFSCME had agreed. When the State presented other unions with the health
insurance provisions to which AFSCME agreed, the other unions would ask what the State
granted as wage increases. Terranova claimed in his experience, which did not include
negotiations with the Union at issue here, the Union would provide counter proposals on other
matters, but not on health insurance. For example, the unions provided counterproposals on
clothing allowances, wages, bullet proof vests, vehicle enhancements, boots, or other economic
items. Terranova called these items sweeteners.
The State changed its historical pattern of bargaining in 2015. In the negotiations for
contracts covering 2015-2019, the State presented health insurance proposals to INA, the trades
unions, and IFT, to which AFSCME had not yet agreed.20
The State’s bargaining history with its various unions is discussed more specifically
below.
b. The State’s Negotiations with Respondent-Union FOP on Health Insurance
Bialorucki testified that he was not aware of any benefits that the Union ever bargained
with the State that were better than the benefits that AFSCME bargained with the State. The
Union has at times accepted the very proposal on health insurance to which the State and
AFSCME had agreed. Bialorucki stated that the Union’s acceptance of that proposal required
other concessions from the State.
i. 1997 Negotiations with FOP
Bialorucki testified that during negotiations with the State in 1997, the Union proposed
that health benefits should include hearing aids and hearing testing for officers because officers
are susceptible to hearing injury from the sound of gunshots. At the time, the State had already
negotiated with AFSCME to provide employees in certain AFSCME job titles21 with hearing
tests. However, the State had not offered them to the Union (FOP). The Union and the State
ultimately agreed that health benefits should include hearing testing, but not hearing aids.
19 The agreement with AFSCME is termed the Master Agreement, and it covers eight or nine different
bargaining units. The State negotiates the terms for those units at one time. 20 Terranova later testified that he did not believe that the State offered Appendix A to the trades Unions. 21 These titles included the telecommunicators.
39
ii. 2000 Negotiations with FOP
Sometime in 2000, the State proposed pension enhancement legislation, pursuant to
which certain employees would receive an increased payout from the State (from 75% to 80%).
The proposed legislation would lower the service requirement, which is the number of years that
an employee must work to become eligible for the maximum pension benefit (29 years to 26.8
years).
During the 2000 negotiations with the Union, the State informed the Union that its
proposed pension enhancement legislation would not include the Union’s members. In
response, the Union informed the State that it would not accept the State’s health insurance
proposal if the State did not include its members in the proposed pension enhancement
legislation. That health insurance proposal provided that the Union’s members would receive
the same health insurance benefits as all other state employees. The Union accepted the State’s
proposal on health insurance in exchange for the State’s inclusion of its members in the proposed
pension enhancement legislation.
iii. 2008-2012 between the State and FOP
The State’s 2008-2012 contract with the Respondent-Union FOP22 contained reference
to a Joint Labor/Management Advisory Committee, and also contained a reopener. This
language appeared in the Insurance provisions of the collective bargaining agreement. The
contract included most of the last two paragraphs of the MOU language, set forth above. It
stated the following:
Pursuant to the Memorandum of Agreement entitled Joint Labor/Management
Advisory Committee on Insurance Benefits, effective December 1, 2010, the State
shall have the right to re-open the Agreement on the issue of the healthcare plan
only by serving the Union with written notice not later than December 15, 2010.
In the event that the State exercises its right to reopen the Agreement as provided
herein, the Union shall have the right to re-open the Agreement limited to the
issue of higher wages only, by serving the State with written notice not later than
December 31, 2010.
Thereafter, the parties shall convene expedited negotiations not later than January
15, 2011, on the issue(s) subject to the re-opener. If not agreement is reached by
22 The 2008-2012 contract between the State and the FOP covering the troopers, at issue in this case, is a
public document within the Board’s possession.
40
February 15, 2011, either side may invoke interest arbitration and the parties shall
select a mutually agreed upon arbitrator who shall have full authority to resolve
all re-opened issues by a final and binding award. The interest arbitration shall be
based on the framework provided in Section 14 of the Illinois Public Labor
Relations Act.
iv. Negotiations for the 2012-2015 FOP CBA
Negotiations for the 2012-2015 contract between the Union and the State began in May
2012 and lasted approximately two years. Around that time, the State’s Chief Negotiator,
Stephanie Shallenberger, called Union Chief Negotiator Michael Powell and informed him that
the State was interested in finding savings in health care costs.
During bargaining, the Union tried to find alternative solutions to the existing salary band
system, under which employees payed a fixed rate for health care based on their salary. The
Union did not think the existing plan was fair because employees were paying different amounts
for the same product. The salary band structure troubled the union because the State proposed to
restructure the bands so that the vast majority of the Union’s membership would have
significantly increased coinsurance payments. The Union sought to tie health care costs to
fitness levels and made a proposal under which employees would pay less if they scored higher
on a fitness test. The Union also proposed that age should be factor in determining an
employee’s cost for health insurance. The Union proposed a cost-splitting framework under
which the State would pay 80% of the cost for employee health insurance and the Union would
pay 20%. The Union also proposed changing the rates based on the number of employees’
dependents.
The State showed most interest in the cost splitting proposal. During these negotiations,
the State presented the Union with a proposal on health insurance that dramatically increased the
cost sharing provisions from those contained in the parties’ prior contract.
In May 2013, the State made the Union an offer on the contract, which included a
proposal on health insurance. CMS Director of Benefits Janice Bonneville stated that the health
insurance proposal was one that the State had negotiated with AFSCME. The Union’s
membership did not vote to accept the contract because they felt that the concessions the State
sought from the Union on health insurance were not balanced with the other economic proposals
they offered. The Union members felt that it was not a fair trade. Bonneville informed the
Union that the State would implement the health insurance proposal on July 1 of that year.
41
Powell informed Bonneville that the Union had not negotiated these health insurance terms. He
further stated that if the State decided to implement its proposal, the Union would take legal
action.
The State implemented the proposal on July 1, 2013. The Union filed an unfair labor
practice charge and a grievance. Union won the grievance at arbitration. Arbitrator Harvey
Nathan determined that the State violated the parties’ contract by unilaterally implementing its
health insurance proposal. The parties later reached an agreement regarding the grievance
arbitrator’s award. The Union agreed to forgo any retroactivity, but both parties agreed that the
award would be binding going forward.
The Union initiated interest arbitration proceedings. The parties presented issues on
wages, hours, and conditions of employment to an interest arbitrator that included wages, health
care, and other matters. The Union requested the Board’s General Counsel to issue a declaratory
ruling on the issue of health care in which the General Counsel found that health care is a
mandatory subject of bargaining. The arbitrator issued an award in which he considered wages,
hours, and conditions of employment in health care. The health care plan awarded at interest
arbitration by Arbitrator Nielsen in his award of July 16, 2014, was the same plan that the State
unilaterally implemented on July 1, 2013.
c. Negotiations with the Trades Coalition
Since 2008, the State has negotiated with the trades unions as a group known as the
Trades Coalition. Representatives from each trade union would meet prior to bargaining with
the State to identify a spokesperson and to discuss the Coalition’s priorities for the upcoming
negotiation. The State and the Coalition would meet, offer proposals and counterproposals, and
reach a tentative agreement. The trades unions’ representatives would meet with the State to
reach common agreements. The State would present the Coalition members with the agreement
the State had reached with other unions on health insurance. The Coalition members would
caucus to review whether they should accept or reject the State’s proposal on health insurance
and to determine whether the Coalition members could ratify their contracts with such terms.
Although each of the trades unions’ representatives sign off separately on their respective
agreements, the agreements are, to a large degree, a result of the common negotiations. In past
negotiations, the Coalition had never rejected the health insurance plan offered by the State that
42
had been negotiated with AFSCME. The Coalition is not required to accept the health insurance
plan that the State offers AFSCME.
The State’s negotiations with the Trades Coalition over health insurance covering the
2015-2019 contract terms was different than its past negotiations with this group’s members.
Negotiations began in early May 2015 and ended in October or November 2015. Sometime prior
to August 21, 2015, the State made an initial health insurance proposal to the Coalition, on which
it had not yet agreed with AFSCME. In August of 2015, Tim Healy, Director of the Firemen and
Oilers Division of SEIU Local 1 and the informal spokesperson for the Trades Coalition,23
informed the State’s agents that the Coalition did not wish to negotiate over the specifics of
health insurance. He told the State’s negotiating team that the Coalition preferred other unions to
“get into the fine-tooth negotiations on health care,” rather than the Coalition, and that the
Coalition simply wished to review that language and accept or reject what other unions had
negotiated.
Nevertheless, the State negotiated health insurance with the Coalition, and the parties set
aside three dates on which to discuss that subject.24 Healy testified that the Coalition attempted
to negotiate employee contributions for health insurance and to “limit some of the plan designs
offered by the State.” When the Coalition rejected the State’s initial proposals on health
insurance, the State offered new, modified proposals on health insurance.
For example, on August 28, 2016, the State newly proposed that the members of the
Trades Coalitions could opt out of the State’s proposed health insurance plan and opt into the
health insurance plan offered by the unions.
During negotiations on August 27 or 28, 2015, the State proposed the following
language: “if the Employer subsequently agrees to a negotiated health insurance benefit program
for employees represented by AFSCME Council 31 that provides a richer plan design and that is
23 The ground rules from the 2015 negotiation between the State and the Coalition state that at
negotiations, “there shall be only one spokesperson from the State of Illinois and for the Trades.” Healy
signed the ground rules on behalf of the Coalition. Jack Vrett, the State’s Chief Negotiator for the
Coalition contracts, stated that although Healy initially introduced himself as chief negotiator, he made it
clear during the course of negotiations that he did not speak on behalf of any other union but his own,
SEIU Local 1. 24 The State did not attempt to present a different set of health insurance proposals to each member of the
Coalition. No member of the Coalition suggested that it should have a health plan that was separate from
that offered to other members of the Coalition. The State made copies of a single proposal to all
members of the Coalition and handed them out at the negotiation sessions.
43
less costly to employees, the Parties agree to meet, confer, and renegotiate the Health Insurance
benefits applicable to employees under this Agreement in order to afford such employees access
to the more attractive health insurance plan negotiated by AFSCME Council 31 for its Master
Contract with the State of Illinois. This provision applies only to negotiated benefits and does
not apply to benefits imposed through arbitration.” Jack Vrett, Chief Negotiator for the State in
collective bargaining with the Coalition, characterized this language as a “me too” provision,
which Coalition members had repeatedly requested.
On September 14, 2015, the State proposed that employees and their dependents could
maintain the existing level of cost sharing, provided that they paid for their insurance coverage
and their dependents’ insurance coverage after retirement. The September 14 proposal also
included a provision addressing dual state income households. That provision stated that
employees who elected to maintain the existing cost sharing could not place their spouse or
partner on the plan if the partner was also a state employee and did not elect the same option
(i.e., to maintain the same cost splitting in exchange for paying for their, and their dependents’
health insurance coverage after retirement). On the same date, the State proposed a wage freeze
for the four-year term of the agreement.
On or about September 16, 2016, the Coalition made a counteroffer on wages and health
insurance. The Coalition proposed that “in exchange for the Employer’s withdrawal of its
proposal for a wage freeze, the Union is prepared to agree to an increase in employee health
insurance premium contribution rates from 17% to 20% effective January 1, 2015.”
On September 18, 2015, the State offered a package proposal in which it responded to the
Coalition’s concerns regarding bargaining unit erosion and job training. It linked its offers on
those matters to the Coalition’s acceptance of the State’s proposal on health insurance, which
imposed an increase in employee premium contribution rates to 35%.
On September 24, 2015, the State added a section to its insurance proposal stating that it
would continue to explore cost containment initiatives including the introduction of a “State
private medical exchange,” under which members could select from multiple plans.
On October 9, 2015, the State proposed to give the Coalition prevailing rates, and not
impose a wage freeze, as long as the Coalition unions accepted the State’s proposed health
insurance language and ratified their respective agreements by November 16, 2015. The health
insurance provisions contained in the contracts between the State and the Coalition members did
44
not include a provision that addresses dual state income households. Although all the Coalition
contracts contain the “me too” clause, the parties agreed to remove the limitation that the “me
too” provision would apply only to negotiated benefits and not arbitrated benefits. The contracts
allowed employees to opt out of the State’s health plan and to opt into the Coalition plan. Vrett
testified that those employees who opted into the State’s plan were offered the same health
insurance benefits as all other employees in the State.
d. The State’s History of Negotiations over Health Insurance with AFSCME
i. Negotiations between AFSCME and the State for Health Insurance, 2000
to 2015
The result of the State’s negotiations with AFSCME has become known as Appendix A
of the AFSCME/State collective bargaining agreement. Appendix A includes a detailed list of
benefits and costs. Each of the State’s agreements with AFSCME covering the years 2000-2004,
2004-2008, 2008-2012, 2012-2015, respectively, include an Appendix A. The State and
AFSCME negotiated different terms for Appendix A in each successive contract. AFSCME
made proposals in negotiations over plan design and employee costs. The State made
counterproposals.
The parties stipulated that the Appendix As, incorporated into the contracts covering the
years 2000-2004, 2004-2008, 2008-2012, and 2012-2015, accurately describe the health
insurance costs and benefits for the quality care health plans and the managed care health plans
agreed to by the State and AFSCME for the stated time periods. They accurately reflect the
changes in costs and benefits agreed to by the State and AFSCME, including, but not limited to,
changes in deductibles for employees and dependents; copays for emergency room, hospital,
doctor, and specialty office visits; coverages for alcohol and substance abuse, transplant, and
hospice care; prescription drug copayments; wellness plans, including weight loss and smoking
cessation; dental plans; vision plans; medical services copayments; employee contributions for
the medical plans and contributions for dependent plan coverage; covered services in medical,
dental, and vision plans; joint committees responsible for designing changes in the health plans
to reduce health costs.25
25Pursuant to the parties’ stipulation, Union Exhibits 43, 44, 44A, and 44B are true and correct copies of
Appendix A to the collective bargaining agreements negotiated between the State and AFSCME for 2000
45
The 2008-2012 agreement between AFSCME and the State contained a health insurance
reopener. The parties set forth the reopener in a document entitled MOU [Memorandum of
Understanding] Joint Labor/Management Advisory Committee on Insurance Benefits. It
provided that the State could reopen the health insurance provisions of the collective bargaining
agreement with AFSCME and that AFSCME, in turn, could reopen the contract for wage
increases, if the State elected to exercise the reopener on health insurance. More specifically, it
stated the following:
Effective January 1, 2009, the Joint Labor/Management Advisory Committee on
health care benefits shall be restructured to provide for the development and
introduction of value-based benefit design changes for all health plans, with the
goal of improving the health of the covered population.
The Committee shall establish a budget and approve the selection of consultants
and vendors, in conformity with the contracting rules of the State, to carry out the
initiatives of the Committee.
The Committee will be composed of a group of Employer and Union
representatives.
The Committee shall:
a) Research and make recommendations and decisions within its
authority related to the achievement of significant and measurable
savings in the cost of employee health care during the terms [sic]
of this Agreement.
b) Develop incentives for employees to participate in offered
programs, including but not limited to, waivers of co-payments,
reductions in co-insurance and reward programs for participating
in various preventative screenings and testing.
c) Approve design changes that will promote better health resulting in
lower cost trends and significant cost containment or savings for
either the self-insured or the managed care plans[.]
d) The State will provide to the Committee with data on the
healthcare costs on a quarterly basis and all data regarding the
percentage change in cost for the recently ended fiscal year by
October 31st of the current fiscal year.
e) The Committee shall submit its recommended modifications, if
any, to the plan no later than January 31st of the current fiscal year
in order to provide for review and implementation for the
following fiscal year.
to 2004, 2004 to 2008, 2008 to 2012, and 2012 to 2015. The exact wording of the parties’ stipulation
appears on page 1034 of the transcript.
46
In the event that the Committee has not reached an agreement on changes to the
plan by December 1, 2010, the State shall have the right to re-open the Agreement
on the issue of the healthcare plan only by serving the Union with written notice
not later than December 15, 2010. In the event that the State exercises its right to
reopen the Agreement as provided herein, the Union shall have the right to re-
open the Agreement limited to the issue of higher wages only, by serving the
State with written notice not later than December 31, 2010.
Thereafter, the parties shall convene expedited negotiations not later than January
15, 2011, on the issue(s) subject to the re-opener. If no agreement is reached by
February 15, 2011, either side may invoke interest arbitration and the parties shall
select a mutually agreed upon arbitrator who shall have full authority to resolve
all re-opened issues by a final and binding award. The interest arbitration shall be
based on the framework provided in Section 14 of the Illinois Public Labor
Relations Act.
A number of other unions, representing a total of 11 separate bargaining units also signed
virtually identical MOUs applicable to the 2008-2012 contract term. These included the
following: AFSCME CU-500, IFPE RC-45, IFPE RC-56, INA RC-23, ISEA RC-104; IFPE RC-
29; Conservation Police Lodge RC-110; Teamsters Cook County, Teamsters Downstate,
Teamsters Protech, and ISEA VR-706. Each of these unions’ MOUs similarly provided that
[t]the State shall have the right to re-open the Agreement on the issue of the healthcare plan…in
the event that the State exercises its right to re-open the Agreement…the Union shall have the
right to re-open the Agreement limited to the issue of higher wages only.”
The State’s 2008-2012 contract with the Respondent-Union FOP also contained reference
to the MOU and also contained a reopener. However, this language appeared in the Insurance
provisions of the collective bargaining agreement and not in a separately signed document. As
noted above, the contract included most of the last two paragraphs of the MOU language.
On January 26, 2010, AFSCME and the State entered into a Mediated Resolution
Memorandum, which stated the following in relevant part:
Pursuant to the Joint Labor/Management Advisory Committee on Insurance
Benefits Memorandum of Understanding, the Committee shall meet to discuss
cost savings with the targeted goal of $70 million in related savings in the State
Employee Group Insurance Program. If the targeted goal is met as a result of this
process, it shall satisfy the requirement for the Committee to reach an agreement,
thereby precluding the re-opening of the collective bargaining agreement on the
issue of the healthcare plan.
47
In July 2010, the State invited unions representing state employees to come to a series of
meetings, discussions, and negotiations to find areas in which the State could save money in a
way that would be beneficial to the State and acceptable to union members. AFSCME, Troopers
Lodge 41, IFT, IFPE, and the Teamsters sent representatives to the meeting. Although the
representatives of the unions did not caucus at these meetings, Powell testified that he had
fruitful discussions with AFSCME representative Hank Scheff throughout the process.
Specifically, Powers asked Scheff whether the potential or proposed changes were significant to
Powers and whether it would hurt his union’s membership. During the discussion process,
CMS presented ideas to the unions that the unions would in turn vet. Powers did not believe that
AFSCME was representing all unions’ interests. He suggested that had AFSCME represented all
the unions’ interests, there would have been no need for representatives from other unions to
attend the meetings. These meetings were not formal contract negotiations. Rather, they
represented a collaborative effort to find common areas of agreement to avoid having to reopen
the contracts on the issue of health insurance. 26
On September 13, 2010, the State and AFSCME entered into a Memorandum of
Agreement, which contained the header “$70,000,000 Savings in the State Employees Group
Insurance Program.”27 In relevant part, it stated that “the parties agree that the following items
satisfy the cost savings requirement, thereby precluding the re-opening of the collective
bargaining agreement on the issue of the healthcare plan.” The agreement increased copays for
prescription drugs, or mandated use of generics over brand name drugs, changed the distance that
employees could drive to providers, and changed some out of pocket maximums. The cost
savings reached by AFSCME and the State applied to all employees covered by the State health
insurance plan. Pursuant to the MOA, employees would pay more for health insurance.
AFSCME and the State reached this agreement through a collaborative process, in which
AFSCME accepted concessions that impacted their members’ health insurance costs.
On September 24, 2010, the State and AFSCME entered into another Cost Savings
Agreement, wherein the parties jointly adopted a goal of identifying budgetary savings of $100
million. In relevant part, the State and AFSCME agreed that the State would not undertake
26 Union Exhibit 75, is a PowerPoint document that summarizes the collaborative work of CMS and the
Union at the above-referenced meetings. 27 The Memorandum of Agreement included an attachment that the parties executed on September 22,
2010, which explained the underlying agreement’s terms.
48
layoffs until June 30, 2012 provided that the parties succeeded in identifying at least $50 million
in savings. The parties further agreed that the parties could achieve part of that savings by
finding additional sources of savings in the State Employee Group Insurance Program. The
parties agreed to retain Arbitrator Edward Benn to decide any dispute relative to the parties’ cost
saving agreement.
ii. Savings Reached as a Result of Negotiations between AFSCME and the
State on Health Insurance, 2012-2015
The parties stipulated to the admission into evidence of a document28 that the parties
agreed was prepared under the direction of Robb Craddock, now-former CMS Deputy Director
of Labor Relations. That document demonstrates the projected costs and savings of the various
economic benefits negotiated between the State and AFSCME for the 2012-2015 collective
bargaining agreement, including the projected health insurance savings.
The State and AFSCME agreed to approximately $700 million in health care savings for
the 2012-2015 contract term. During negotiations for the 2012-2015 contract, each party made
proposals and counter offers. The parties negotiated with respect to the QCHP deductible, the
emergency room deductible, out-of-pocket maximums (individual and family), co-payments for
the prescription drug plan, deductibles for the managed care plans, emergency room co-
payments, pharmacy payments, pharmacy tiers, vision care plan, quality care dental plan. They
also negotiated employee contributions for QCHP, managed care health plans, and dependent
contributions. In 2012, AFSCME and the State negotiated the employees’ share of the
premiums for optional coverage for dependents.
The changes negotiated by AFSCME and the State for this contract term included
increases in deductibles, increases in dependent health care contributions and increases in the
prescription deductibles. They also included increases in copayments for the generic preferred
and not preferred brand prescriptions, increases in the mail order prescription costs, increases in
HMO and OAP physician costs, increases in emergency room costs, increases in outpatient
surgery costs, increases in home health visit costs, increases in inpatient surgery costs, increases
28 Union Exhibit 80(b). The parties further stipulated that Lodge Exhibits 80C through 80I are records and
memoranda concerning health care benefits and savings obtained in collective bargaining negotiations for
the years indicated on the documents.
49
in out of pocket maximum payments. Although the changes included a reduction in coinsurance
for out of network physicians, from 80% to 60%, coinsurance remained at 90% for in-network
costs.
All these changes were designed to save the State money with respect to health care
costs. Employees also paid more for health care as a result of these negotiations, as judged by a
fixed dollar amount. Their percentage share of total costs of health insurance did not increase;
the State sought increases in terms of stated dollar amounts.
The State did not realize all of the projected health insurance savings from the 2012-2015
agreement with AFSCME. The State lost approximately $128 million in projected savings
because it lost a lawsuit pertaining to retiree contributions. In addition, the State lost
approximately $53 million because it did not implement the wellness programs. The State also
did not fully realize the SERS opt-out savings. Nevertheless, the negotiated changes saved the
State approximately $500 million over two years.
Terranova testified that the initial proposal on health insurance, which AFSCME rejected,
would have saved the State approximately $1.118 billion over the term of the contract. This
number includes a combination of revenue increases and savings increases. By contrast,
AFSCME’s initial proposal on health insurance, which the State rejected, would have saved the
State less than $700 million in health care costs.
During those negotiations, the State sought to save money and reduce its overall liability.
The State’s overall liability either remained stable or decreased slightly, by about 1%, as a result
of these negotiations with AFSCME.
After the State completed negotiations with AFSCME in 2012, the State did not seek an
RFP to implement the negotiated changes that would take effect in 2013 and 2014. Rather, it
sought amendments to the vendor contracts to implement the collectively bargained plan design
changes. The State also coordinated with its vendors to negotiate any necessary changes in
rates due to plan design changes that called for increases in copayments because the vendors
consider plan design changes when renewing the State’s rates. Upon renegotiation of its rates,
the State paid lower rates than it would have paid had employees’ payments not increased.
When the State has negotiated over health insurance with AFSCME, the parties
historically established a health insurance subcommittee. The parties would each send four to
five representatives to the subcommittee and they would discuss proposals for health insurance.
50
The purpose of the subcommittee was to discuss plan designs, to reach some consensus, and then
to bring those ideas back to the table for negotiation. Yet, the parties bargained over of health
insurance contract language only at the main negotiating sessions.
The State has historically bargained over health insurance plan design and premium cost-
sharing with the American Federation of State, County, and Municipal Employees, Council 31
(AFSCME). If AFSCME wanted something different in terms of plan design or cost sharing, the
State would work with its contracting partners to adjust the plan design as necessary, across the
State. The State did not carve out a separate population, which was covered under a separate
plan.
In 2012, the State extended benefits negotiated with AFSCME to employees not covered
by collective bargaining agreements, to university employees, and to individuals covered under
the Teachers Retirement System. These included increases in employee contribution levels,
increases in co-payments, increases in deductibles, and increases in out-of-network payments.
The changes affected OAP plans, HMO plans, and self-insured plans. Armstrong testified that
the State extended the plans to non-unit employees because the State’s administrative systems do
not allow for distinction between those classes of employees. She further stated it would not be
administered in any different way. The State customarily offers the benefits it negotiates with
unions to non-union State employees.
iii. Negotiations between AFSCME and the State for Health Insurance for the
2015-2019 Contract Term
AFSCME and the State have not reached agreement on a contract to cover the period of
2015-2019. The parties asked me to take notice of ALJ Sarah R. Kerley’s Recommended
Decision and Order as it relates to the bargaining history between the State and AFSCME for the
proposed 2015-2019 contract. See State of Illinois, Department of Central Management
Services, 33 PERI ¶ 67 (IL LRB-SP 2016).
According to ALJ Kerley, the State and AFSCME “made proposals with respect to health
insurance in their initial economic proposals…[and] on May 27, 2016, the parties had general
discussions regarding economic issues. On June 29, 2015, the parties again discussed health
insurance. On July 1, 2015, AFSCME reformed its initial proposal and offered it to the State in
that new format.
51
On August 13, 2015, the State made a new proposal on health insurance. On September
9, 2015, the State modified that proposal on health insurance. On October 20, 2015, the State
again modified its proposal on health insurance. On November 19, 2015, the State made
another proposal on health insurance. On December 2, 2015, the Union made its first proposal
on health insurance since July 1, 2015. On December 17, 2015, the State made another health
insurance proposal. On January 8, 2016, the Union made another proposal on health insurance.
That same day, the State presented a last best final offer to AFSCME, which included its
December 17, 2015 proposal on health insurance.
It is undisputed that During the State’s 2015-2016 negotiations with AFSCME both
parties made proposals and counterproposal over plan design and employee costs. Terranova
never took the position during the State’s 2015-2016 contract negotiations with AFSCME that
health care for State workers was a permissive subject of bargaining.
6. Health Insurance Provisions Contained in the State’s Contracts with other Unions
covering 2004 to the Present (summary excludes AFSCME Council 31 and FOP)29
a. Contracts covering the years 2004-201530
Between 2004 and 2015, all but six of the contracts between the State and the unions
representing state employees provided that the State would continue in effect the Group
Insurance, Health and Life Plan applicable to all Illinois State employees pursuant to the
provisions of the State Employees Group Insurance Act of 1971. Some of these contracts
expressly incorporated AFSCME’s Appendix A. A number of contracts additionally included
the phrase “and insurance plans negotiated thereunder [the SEGIA].”
The six contracts with different terms were the SEIU Childcare agreements (2006-2009;
2010-2013; 2013-2015), the SEIU Personal Assistants agreements (2006-2007; 2008-2012;
2012-2015), and the Teamsters Local 700 agreement (2012-2015).31 The SEIU Personal
Assistants agreement (2006-2007) provided that union members would not receive statutorily
mandated health benefits, as they were not technically State employees. The remaining
29 This also includes summaries of the Trades Contracts, though they were discussed briefly earlier. 30 The State negotiated many contracts during this period and they covered different time spans. 31 The State and the Teamsters Local 700 entered into a side agreement in July 2013, which stated that
“the parties will continue to explore the movement of employees into the Teamsters 727 insurance
program as long as it is in the best interest of both parties.”
52
agreements contained provisions under which the State would pay into a union health care fund,
and members could participate in a union-administered health insurance plan. The Teamsters
Local 700 agreement (2012-2015) also provided that the State would continue in effect the
Group Insurance, Health and Life Plan applicable to all Illinois State employees pursuant to the
provisions of the State Employees Group Insurance Act of 1971 and insurance plans negotiated
thereunder.
Fifteen of the State’s contracts between 2004 and 2015 called for the creation of a Joint
Labor Management Advisory Committee on health care benefits. These include the following:
Teamsters Protech 2004-2008, AFSCME CU-500 2008-2012, IFPE RC-45 2008-2012, IFPE
RC-56 2008-2012, INA RC-23 2008-2012; ISEA RC-104 2008-2012; RC-29 2008-2012; RC-
110 2008-2012; Teamsters Cook County 2008-2012, Teamsters Downstate 2008-2012,
Teamsters Protech 2008-2012, VR-706 2008-2012, RC-45 2012-2015, CPL 2012-2015, and
IFPE RC-56 2012-2015.
The Teamsters Protech 2004-2008 agreement contained the following language: “A joint
committee on Health Insurance is established by the parties for the purposes of reviewing cost
containment, plan administration and ancillary benefits. With respect to cost containment the
committee shall study other cost containment methods, including HMO or PPO development,
and those methods previously discussed during the negotiation of this agreement, but not
adopted. The committee may study quality control and financing of the program (i.e., self-
insurance, minimum premium). It shall explore proposals that do not reduce existing benefits,
increase the amount that the employees must pay through higher premium payments,
deductibles, or co-insurance, or reduce the access to or quality of services provided. With respect
to plan administration, the committee shall study the problems of challenges and demands on
claims; charges made by providers in excess of the usual and customary fees; carrier
unresponsiveness; and quality control maintenance. With regard to ancillary benefits the joint
committee shall investigate available delivery systems together with their attendant costs,
specifically including the feasibility of providing dental benefits.”
The 2008-2012 agreements, referenced above, contained similar language regarding the
creation of a Joint Labor Management Advisory Committee on health care benefits, but they also
contained reopener provisions. They stated the following in relevant part: “The Committee on
health care benefits shall be restructured to provide for the development and introduction of
53
value based benefit design changes for all health plans with the goal of improving the health of
the covered population.” The agreements charged the Committee with the following
responsibility: (a) to research and make recommendations and decisions within its authority
related to the achievement of significant and measurable savings in the cost of employee health
care during the terms of this Agreement, (b) to develop incentives for employees to participate in
offered programs including, but not limited to, waivers of co-payments, reductions in
coinsurance and reward programs for participating in various preventive screenings and testing;
and (c) to approve design changes that will promote better health resulting in lower cost trends
and significant cost containment or savings for either the self-insured or the managed care plans.
The reopeners stated that if the Committee did not agree on changes to the health care
plan by a certain date, the State had the right to re-open the agreements on the issue of the health
care plan. If the State reopened the agreements on health care, the respective unions had the
right to reopen the agreements “limited to the issue of higher wages.”
The 2012-2015 agreements did not contain reopeners but included similar language to the
2008-2012 agreements regarding the creation of a Joint Labor/Management Advisory Committee
on health care benefits. The parties intended the Committee to “provide for the development and
introduction of value-based benefit design changes for all health plans, with the goal of
improving the health of the covered population.” The Committee was charged with the
following responsibility, in relevant part: (a) to research and make recommendations and
decisions within its authority related to the achievement of significant and measurable savings in
the cost of employee health care during the terms of the agreement; (b) to develop incentives for
employees to participate in offered programs including, but not limited to, waivers of co-
payments, reductions in coinsurance, and reward programs for participating in various preventive
screenings and testing; (c) to approve design changes that will promote better health resulting in
lower cost trends and significant cost containment or savings for either the self-insured or the
managed care plans; (d) to identify an additional $30 million in savings across the State
Employees Group Insurance Program for FY15.
54
b. 2015-2019 Contracts and One Tentative Agreement
The State reached agreement with 19 unions for the 2015-2019 contract term. These
include five agreements with different Teamsters local unions,32 13 agreements with the trades
unions, and one agreement with an Illinois Federation of Teachers unit at the Jacksonville School
for the Deaf. The State also reached a tentative agreement with the INA, but the INA’s
members rejected that agreement.
A total of seven unions, two SEIU units and five Teamsters units, offered their members
their own health insurance. The agreements covering these unions allowed members to opt out
of the State insurance plan and to instead opt into the plan administered by their respective
unions. The agreements provide that the State would contribute a specified amount into the
union’s benefit fund for each employee who opted out of the State’s plan. That specified amount
differs by contract.
Terranova testified that the health insurance language agreed to by the parties in the
trades agreements was consistent with the State’s health insurance proposals to both FOP and
AFSCME. There is nothing in the trades agreements’ language that offers covered employees
any different benefits than those that the State offered AFSCME in its last, best, final offer.
i. Trades Agreements
All the trades agreements contain the same health insurance language.33 They preserve
some language from the prior contracts been these parties, which sets forth Employer’s
obligation to continue in effect the Group Insurance Health and Life Plan, applicable to all
Illinois State employees as amended or modified in regard to the level of benefits and
contribution costs for all State employees, pursuant to the State Employees Group Insurance Act.
They additionally set forth specific benefits and plan designs as specified below.
They provide that the Employer will increase employees’ contribution share of the
premium from 17% to 35%. They provide that the State will add four salary tiers to adjust
32 These include Local 700 “Cook County Teamsters,” Local 330 “Fox Valley Teamsters,” Professional
Technical Teamsters, and the Master Sergeants. All but the Master Sergeants would negotiate their
agreements together. 33 The health insurance language contained in the Operating Engineers contract is materially the same as
the health insurance language in the other trades contracts except that the first paragraph states that the
benefits are as set forth in Appendix C. Appendix C in turn mirrors the health insurance language in the
other trades contracts. This contract also has a provision that allows members to select a union-
administered plan and which requires the State to contribute to the funding of that plan.
55
employee premium contributions for employees whose annual salary exceeds $100,000. They
additionally state that the average actuarial value of such plans will be the same as the actuarial
value of such plans as of June 30, 2015.34
Next, they indicate that the State will offer, by July 1, 2016, a health care plan design that
would allow employees to obtain the same premium contribution by salary tier as those in place
on July 30, 2015, for the term of the contract, except that the plan would also have salary tiers for
determining employee premium contribution amounts for those employees whose annual salary
exceeds $100,000. For those tiers that are for employees whose salaries exceed 100,000, the
premium would be adjusted to an amount comparable to those premiums in place on June 30,
2015. They state that the plan will achieve the same average level of cost sharing as the above-
referenced plan.
They provide that the State will offer by July 1, 2016 a plan whose richness falls between
the two earlier mentioned designs, but that retains the same tier structure and cost sharing
between the State and its employees as the plans described above. In addition, the plan will, on
average, evenly split employee costs between premium contributions and other charges incurred
at the time of treatment.
They state that employees may also elect the same health insurance coverage as it existed
on June 30, 2015. However, the plan would have additional salary tiers for determining
employee contributions for employees whose annual salary exceeds $100,000. As consideration
for this benefit, employees would be responsible for the premiums of their members and
dependents after retirement. The provision stated that if this option was deemed invalid or illegal
under State law, employees who selected this option would reimburse the State an amount equal
to the different in value of the savings they obtained by selecting that option.
It provided that the State would implement other initiatives to save $150 million in
annual savings.
The agreements further provide that as an alternative to the above-referenced plans,
employees could elect to be a member of the health insurance plan offered by the Union, and the
State would contribute to pay for the costs of that plan. The State would contribute an average
monthly amount of $967 for an individual employee and their dependents. Terranova testified
that the State’s contribution equaled the amount that would equal the State’s share of payment
34 Terranova described this plan as the premium platinum plan.
56
for an employee’s participation in a State plan. The amount paid into these funds by the State is
less than the amount the State pays into similar Teamsters funds, discussed below.
Finally, the parties agreed that the State would continue to explore cost containment
initiatives to provide employees with greater choice and to stimulate competition among carriers.
The parties agreed that members would receive the prevailing wages if the contracts were
ratified prior to a date in November of 2015.
ii. Teamsters agreements
The “Teamsters agreements” include the State’s agreements between the ISP Master
Sergeants, the Teamsters Downstate union, the Teamsters Cook County union, the Teamsters
Fox Valley union, and Teamsters Protech union.
All the Teamsters agreements are materially the same with respect to their health
insurance provisions. They provide that the State will offer group health, life and other
insurance under such terms and at such rates as are made available by the Director of CMS
pursuant to the State Group Insurance Act. The remaining language allows members to opt out
of the State plan and opt into the Teamsters Plan identified in the agreement. It specifies the
terms of the State’s contribution to the particular fund from which the union pays for its plan.
The State pays approximately 1600 a month per employee into the teamsters Health and Welfare
Funds for employees who opt out of the State’s health care plan. Finally, it provides that the
State will continue the stated contractual benefits until the implementation of a successor
agreement.
The health insurance language of these agreements differs with respect to the effective
date for the commencement of State contributions into the fund and the name of the benefit fund
into which the State must make its contributions. The Master Sergeants and the Teamsters Cook
County agreements contain an additional difference that sets them apart from the other
Teamsters agreements. They provide that if employees opt out of the State’s health plan and opt
into the Teamsters plan, the State will contribute money into the Teamsters Local Union No. 727
Legal Education and Assistance Fund in addition to the Health and Welfare Fund. Accordingly,
under these agreements, the State pays an additional $82.50 a month for each employee who opts
out of the State plan, and it pays that money into a Legal Education and Assistance Fund. The
57
Union uses the money from the Legal Education and Assistance Fund to help its members
regarding legal issues and to provide educational assistance.
The State did not negotiate with the any of the Teamsters unions over the health
insurance coverage that the union members would receive in their respective plans.
iii. IFT agreement
The health insurance language in the agreement between the State and the IFT contains
some language that the parties included in their prior agreement. It also contains new language
that is different from the health insurance language of the other contracts, discussed above. It
provides that the aggregate level of cost sharing borne by employees covered by the agreement
would increase from 24% to 40%. Calculation of the aggregate share would include the cost of
employee premium contribution share and/or other changes incurred at the time of treatment
such as copays, deductibles, and coinsurance. Aggregate costs include all costs borne by
employees. This cost split is consistent with the 40/60 cost split that the State sought from
AFSCME. The language offers no insurance coverage that the State did not also offer to
AFSCME in its last best final offer.
iv. INA Tentative Agreement
The INA tentative agreement contains different health insurance language than contracts
negotiated by the State covering the same term (2015-2019). It both omits language contained in
the agreements discussed above and adds language that those agreements do not contain.
First, it contains no opt out provision because the INA does not administer its own health
insurance plan.
Second, the health insurance provisions do not include the creation of an additional salary
tier for employees with salaries in excess of $100,000. If INA had accepted the tentative
agreement, there would have been nurses covered by that agreement who earned over $100,000.
Such nurses would not have been subject to a different health insurance salary tier, whereas
employees under the trades union contracts who receive a salary that exceeds $100,000 are
covered under a separate health insurance salary tier.
Finally, the INA tentative agreement includes language addressing dual State income
households. It provides the following: “In some households, both the employee and their spouse
58
or partner may hold jobs that qualify for state-funded health insurance. In such cases, an
employee who selects the option to maintain the cost sharing, as it existed under the prior
agreement, while agreeing to forgo post-retirement health insurance, may not place their spouse
or partner on this plan as a dependent if their spouse has not also selected this option. Similarly,
under such cases, employees who select this option agree to pay the full cost of their retiree
premiums and may not be listed as a dependent on their spouse’s retiree coverage upon
retirement. The preceding exclusions also apply to any employees that select this option and
subsequently marry an individual who qualifies for state-funded health insurance.”
IV. DISCUSSION AND ANALYSIS
1. The Union’s submission of its health insurance proposal to the interest arbitration
panel does not violate Section 10(b)(4) of the Act.
The Union did not violate Section 10(b)(4) of the Act when it submitted its health
insurance proposal to the interest arbitration panel and later declined to withdraw it.
Section 10(b)(4) of the Act provides that “[i]t shall be an unfair labor practice for a labor
organization or its agents…to refuse to bargain collectively in good faith if it has been
designated in accordance with the provisions of this Act as the exclusive representative of public
employees in an appropriate unit.” 5 ILCS 315/10(b)(4).
A party violates the duty to bargain in good faith when it insists to impasse on a
permissive subject of bargaining. Skokie Firefighters Union, Local 3033 v. Illinois Labor
Relations Bd. (“Skokie”), 2016 IL App (1st) 152478, ¶ 6; Board of Trustees of the University of
Illinois v. Illinois Education Labor Relations Board, 244 Ill. App. 3d 945, 949 (4th Dist. 1993).
Impasse exists as a matter of law on a subject when parties reach an interest arbitration hearing
and have still failed to reach agreement on the subject in dispute. Skokie, 2016 IL App (1st)
152478, ¶ 18.
Courts have distinguished between mere submission of a permissive subject to an interest
arbitrator and bad faith insistence to impasse on such a subject. Compare Wheaton Firefighters
Union, Local 3706 v. Illinois Labor Relations Bd.(“Wheaton”), 2016 IL App (2d) 160105, ¶ 21
and Skokie, 2016 IL App (1st) 152478, ¶ 17, 18. Mere submission to an interest arbitrator of a
contract proposal pertaining to a permissive subject of bargaining does not violate the statutory
59
duty to bargain in good faith. Wheaton, 2016 IL App (2d) 160105, ¶ 21. Parties may agree to
submit a permissive subject to an interest arbitrator. Skokie, 2016 IL App (1st) 152478, ¶ 20.
Moreover, when parties have not agreed to its submission, they have recourse under the Board’s
rules. Wheaton, 2016 IL App (2d) 160105, ¶ 21; 80 Ill. Adm. Code 1230.90(k). The rules
provide that, “[w]henever one party has objected in good faith to the presence of an issue before
the arbitration panel on the ground that the issue does not involve a subject over which the
parties are required to bargain, the arbitration panel's award shall not consider that issue.” 80 Ill.
Adm. Code 1230.90(k). Although the rules also state that the arbitrator may consider a disputed
subject if the Board or the General Counsel have declared the subject a mandatory one, absent
such legal guidance, parties can simply remove permissive subject from the arbitrator’s
consideration by objecting. Id. However, courts have also held that a party acts in bad faith by
insisting on a permissive subject after the opposing party indicated that it did not intend to
relinquish its rights regarding that permissive subject, and then suffers prejudice. Skokie, 2016
IL App (1st) 152478, ¶ 22.
For example, in Wheaton, the Court affirmed the Board’s finding that the respondent
merely submitted its permissive proposal to the interest arbitrator and did not engage in bad faith.
Wheaton, 2016 IL App (2d) 160105 at ¶ 22. There, the union struck the allegedly permissive
proposal from the arbitrator’s consideration, as permitted under the Board’s rules. 80 Ill. Adm.
Code 1230.90(k). The arbitrator in turn honored the union’s claim that the employer’s proposal
addressed a permissive subject and did not address the disputed matters in his award. Wheaton,
2016 IL App (2d) 160105 at ¶ 22. He simply retained jurisdiction to decide those issues upon
resolution of the unfair labor practice complaint. Id. The court reasoned that, “a party is not
prejudiced by the submission of the issue, because its objection will preclude the arbitrator from
considering it.” Id.
By contrast, in Skokie, the Court found that the respondent’s conduct in pursuing a
permissive proposal at interest arbitration demonstrated bad faith. There, the union objected to
the employer’s proposal as permissive, but the arbitrator did not honor the union’s claim as the
arbitrator in Wheaton had. Not only did the arbitrator consider the disputed permissive proposal,
he awarded it. Skokie, 2016 IL App (1st) 152478, ¶ 30. The court reasoned that the employer did
not merely submit its permissive proposal to the interest arbitrator. Id. Rather, it also “refuse[d]
60
to accede” to the union’s “clear statutory rights” in a manner that resulted in “substantial
prejudice” to the union. Id.
Here, health insurance is a mandatory subject of bargaining and the Union’s insistence on
that mandatory subject to impasse was therefore lawful. See discussion infra. Moreover, the
Union’s conduct remains lawful, even if the Board determines that health insurance is a
permissive subject of bargaining. The significant distinctions between this case and Skokie
illustrate that the Union’s pursuit of the health insurance issue did not violate the Act,
irrespective of the State’s claims that health insurance is a permissive subject of bargaining.
First, the parties in this case stipulated to the arbitrator’s jurisdiction to decide the now-
disputed issue, whereas the parties in Skokie did not. On this basis alone, Skokie is inapplicable
because the court there premised its ruling on the principle that “[a]bsent an agreement to the
contrary, permissive subjects of bargaining are not to be decided by the arbitrator.” Skokie, 2016
IL App (1st) 152478, ¶ 15 (citing 5 ILCS 315/14(h) and 80 Ill. Adm. Code 1230.90(k)). The
parties had precisely such an agreement here. Moreover, the State never expressly withdrew its
stipulation to the arbitrator’s consideration of the issue.
The State contends that it did in fact object to the arbitrator’s consideration of the health
insurance issue by filing a charge and then referencing the charge in its post-arbitration brief, but
such objections did not require the Union to withdraw its health insurance proposal in light of the
State’s conduct. The assessment of a respondent’s bargaining conduct must be made in the
context of the parties’ bargaining history and the charging party’s own behavior. Tri-State
Professional Firefighters Union, Local 3165, 31 PERI ¶ 78 (IL LRB-SP 2014) (considering both
parties’ conduct in assessing alleged violation of Section 10(b)(4) of the Act) aff’d by unpub.
ord. no. 1-14-3418. Here, the State plainly asserted that “it [did] not object to [the] panel’s
consideration of the parties’ respective health insurance proposals.” Although the State sought to
preserve its arguments before the Board that the arbitrator lacked jurisdiction to address the
permissive subject, the State cannot preserve its right to claim that the union’s pursuit of the
issue was in bad faith where the State’s own actions induced that complained-of conduct. Thus,
the Union cannot be expected to withdraw its own health insurance proposal, under the duty to
bargain in good faith, where the State itself sought a determination from the arbitrator on the
disputed issue “for purposes of efficiency” and simultaneously pursued its own proposal on the
61
same allegedly permissive subject.35 Cf. Skokie, 2016 IL App (1st) 152478 (no consent by
objecting party to proceed under reservation of rights; withdrawal of respondent’s proposal
would have entirely removed permissive subject from arbitrator’s consideration).
Second, the late timing of the State’s first objection also distinguishes this case from
Skokie. In Skokie, the charging party informed the arbitrator at the interest arbitration hearing
that the respondent’s proposal was a permissive subject of bargaining and that the arbitrator
could not award the proposal over the Union’s objections. Skokie, 2016 IL App (1st) 152478, ¶
7. By contrast in this case, the State did not inform the panel that it should decline to issue an
award on health insurance until August 9, 2016, five months after the hearing concluded and
seven months after the January 2016 deadline set by the arbitrator for submitting objections.
The State suggests that it objected earlier by informing the Union of its belief that health
insurance was a permissive subject of bargaining. It points to its January 13, 2016, Petition for
Declaratory Ruling on health insurance and its March 11, 2016, unfair labor practice charge in
this case.36 However, the State’s mere claims regarding the permissive nature of the subject do
not suffice as an objection where parties can agree to submit permissive subjects to an interest
arbitrator and, in this case, did agree to submit the issue of health insurance. The State petition
does not indicate a withdrawal of its earlier stipulation and rather represents a request for
guidance on whether the Act required bargaining over its health insurance proposal, and the
subject of health insurance more broadly. 80 Ill. Adm. Code 1200.143. The State’s unfair labor
practice charge likewise does not constitute a withdrawal of its stipulation where the State
entered into the stipulation before the arbitrator and did not, at the time of filing, bring its change
of position to the neutral arbitrator’s attention. Cf. Int’l Ass’n of Machinists & Aerospace
Workers, Lodge No. 1777 v. Fansteel, Inc., 900 F.2d 1005, 1009 (7th Cir. 1990)(objection to
35 Whether the State effectively reserved the right to object to the arbitrator’s jurisdiction in circuit court
is a different question because it turns solely on the State’s conduct and not the relationship between the
parties’ actions, relevant to the unfair labor practice charge. However, the State likely did not make such
an effective reservation of rights because it waited until its post-arbitration hearing brief to reserve its
right object to the arbitrator’s jurisdiction, though it could have objected far earlier. See Vill. of Posen v.
Illinois Fraternal Order of Police Labor Council, 2014 IL App (1st) 133329, ¶ 32 (party must object to
arbitrability in “a timely manner, which is described as the earliest possible moment to save the time and
expense of a possibly unwarranted arbitration.”); see also Int’l Ass'n of Machinists & Aerospace Workers,
Lodge No. 1777 v. Fansteel, Inc., 900 F.2d 1005, 1009 (7th Cir. 1990)(party must “carefully and
explicitly makes known to the arbitrator and the opposing party its clear intention that it is maintaining its
objections to arbitrability even though it is agreeing to proceed with the arbitration hearing”). 36 The State also references positions it took in the parties’ last bargaining cycle (2014), but these are
irrelevant to the parties’ positions in this case.
62
arbitrability must be made known to both opposing party and the arbitrator) and Skokie, 2016 IL
App (1st) 152478 (union raised its objection to arbitrator and opposing party).37 As discussed
more fully below, even if the State had informed both the neutral arbitrator and the Union of its
position, the Union was entitled to rely on the General Counsel’s determination that health
insurance was a mandatory subject of bargaining in pursuing the matter. Illinois State Police, 32
PERI ¶ 162 (IL LRB-SP GC 2016); City of Country Club Hills, 17 PERI 2043 (IL LRB-SP
2001).
In the alternative, the State contends that the timing of its objection is immaterial absent a
regulatory deadline to object, but its argument overlooks the fact that any objection must be
judged by an objective,38 good faith standard under the Board’s rules. The rules provide that
“[w]henever one party has objected in good faith to the presence of an issue before the
arbitration panel on the ground that the issue does not involve a subject over which the parties
are required to bargain, the arbitration panel’s award shall not consider that issue.” 80 Ill. Adm.
Code 1230.90(k)(emphasis added). This good faith qualification of the term “whenever”
undermines the State’s claim that a party’s objections to an arbitrator’s consideration of an
allegedly permissive subject are effective irrespective of when they are made.
Here, the timing of the State’s objection demonstrates bad faith in two different respects.
First, the State missed the arbitrator’s January 2016 deadline for filing objections by many
months. Although the State revised and resubmitted its own final offer on health insurance by
the arbitrator’s January 12, 2016 deadline, to cure the alleged permissive features objected to by
the Union, the State did not voice any objections to Union’s proposal. It also failed to inform the
arbitrator of any limitations on his authority to consider it. In fact, the State made no request to
strike the issue of health insurance from the arbitrator’s consideration until August 9, 2016.
37 The Board’s rules indicate that objections to an arbitrator’s consideration of a subject must be made to
the arbitrator rather than simply to the opposing party because the rule that sets forth the manner in which
parties may object to arbitrators’ consideration of alleged permissive subjects appears in a section entitled
“Conduct of the Interest Arbitration Hearing.” 80 Ill. Adm. Code 1230.90 (describing the manner in
which the arbitration hearing must be conducted, including its location, the manner in which parties may
object to subjects, the informal nature of proceedings, and the topics properly considered). 38 The State has cited to no test applied by the Board that turns on a party’s subjective belief of good faith.
63
Even if the Board construes the State’s comment in its arbitration brief as an objection, these
similarly came months too late, on June 2, 2016.39
Furthermore, by the time the State objected to the panel’s consideration of health
insurance on the grounds that it was a permissive subject of bargaining, the General Counsel had
already issued a Declaratory Ruling that stated the opposite conclusion. On March 1, 2016, the
General Counsel held that health insurance was a mandatory subject of bargaining overall, and
that the State’s proposal specifically was a mandatory proposal with no permissive features.
Illinois State Police, 32 PERI ¶ 162. Contrary to the State’s contention, the General Counsel’s
comments that the State had raised some “salient considerations” regarding the burdens of
bargaining over health care, did not change her conclusion that health care was a mandatory
subject. Id. (“the Board is at liberty to reexamine its case law and interpretations of the Act,
whereas I am guided by the Board' s prior case law”).
The State contends that it never expressly waived the right to object at a later date, but
questions concerning this procedural issue are the province of the arbitrator. Ordinarily,
procedural questions such as waiver, delay, time limits, notice, laches, estoppel are for the
arbitrator to decide. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 82 (2002) (addressing
procedural arbitrability in the context of grievance arbitration). The Act incorporates this
principle by providing that the arbitrator has the authority to “direct each of the parties to submit,
within such time limit as the panel shall prescribe” their “last offer of settlement of each
economic issue.” 5 ILCS 315/14(g). The rules similarly state that the neutral arbitrator has the
authority enforce the rules the panel set and to control the hearing process. 80 Ill. Adm. Code
1230.90(c). Here, the neutral arbitrator stated that the time set by the panel for objecting to the
parties’ respective health insurance proposals was in January 2016, and he determined pursuant
to his authority that the State’s objections were untimely. My decision here does not second-
guess the arbitrator’s determination on this purely procedural issue.
Third, the General Counsel’s Declaratory Ruling on the issue of health insurance further
distinguishes this case from Skokie and illustrates that the Union’s pursuit of the health insurance
issue before the interest arbitrator was not in bad faith. The “entire purpose of the declaratory
ruling process is to permit parties to obtain determinations as to whether bargaining is required
39 As noted above, the State expressly consented to the arbitrator’s consideration of the issue, though it
sought to preserve its right to later challenge the arbitrator’s jurisdiction to decide the health insurance
issue.
64
regarding a certain subject without committing an unfair labor practice.” City of Country Club
Hills, 17 PERI 2043 (emphasis in original). The legal determination set forth in the General
Counsel’s March 1, 2016, ruling gave the Union safe harbor to pursue the subject of health
insurance before the interest arbitrator, even though, in this case, it was the State that sought a
Declaratory Ruling, not the Union. The State did not just seek a determination that its own
proposal was a mandatory subject of bargaining, it also argued in the alternative that health
insurance overall was a subject over which it was not required to bargain. The General Counsel
ruled on, and rejected, the State’s alternate argument and determined that health insurance costs
and plan design were mandatory subjects of bargaining. The State’s later pursuit of a change in
the law, here, does not render unlawful the Union’s failure to withdraw its health insurance
proposal where the State had already obtained a determination from the General Counsel that
health insurance was a mandatory subject.
Finally, there is no merit to the State’s claim that a ruling in the Union’s favor here would
allow the Union to “hold hostage” the State’s right to have a ruling on its bargaining obligations.
Such a claim ignores the declaratory ruling process, the very purpose of which is to provide such
rulings at the request of either party. City of Wheaton, 31 PERI ¶ 131 (IL LRB-SP 2015) aff’d
by Wheaton, 2016 IL App (2d) 160105; 80 Ill. Adm. Code 1200.143 and 1230.90(k). It also
ignores the fact that the State did employ this process with respect to its own health insurance
proposal and indeed, regarding health insurance overall, yet failed to seek review of the Union’s
proposal to determine whether it contained permissive provisions.
The State understandably wishes to obtain a different result here than it did before the
General Counsel, but that does not justify rewriting the process that the Board and the Court
carefully reaffirmed in Wheaton. Wheaton, 2016 IL App (2d) 160105 (mere submission of
permissive proposal does not violate the Act because objecting party can remove permissive
subject from consideration). Nor does it justify application of the results obtained in Skokie or
Village of Wheeling40 where the facts here are decidedly different. The State had the
opportunity to object to the disputed subject and remove it from the arbitrator’s consideration,
but instead stipulated to the panel’s jurisdiction with respect to health insurance and only
invoked the regulatory objection process months after arbitration concluded. It also could have
obtained specific guidance regarding the Union’s proposal through the declaratory ruling
40 Vill. Wheeling, 17 PERI ¶ 2018 (IL LRB-SP 2001).
65
process, but declined. Cf. Skokie, 2016 IL App (1st) 152478 (parties never stipulated to
arbitrator’s consideration of disputed subject, regulatory objection process failed where arbitrator
ignored objection) and Vill. Wheeling, 17 PERI ¶ 2018 (IL LRB-SP 2001)(charging party
objected to the respondent’s initial submission of the allegedly permissive proposal).
Thus, the Union did not violate the Act when it submitted its health insurance proposal to
the interest arbitrator and later refused to withdraw it.41
2. Health insurance is a mandatory subject of bargaining
As a preliminary matter, it is unnecessary to address the question of whether health
insurance is a mandatory or permissive subject of bargaining to resolve this case because the
Union’s conduct was lawful even if the Board determines that health insurance is permissive.
Nevertheless, in reversing the Executive Director’s dismissal in this case, the Board determined
that the health insurance issue is “a matter of such significance and broad application across
State government [that it] warrants the full vetting that will be achieved by a hearing on the
merits before an Administrative Law Judge.” State of Ill., Dep’t of Cent. Mgmt. Servs. (Ill. State
Police), 33 PERI ¶ 30 (IL LRB-SP 2016). The Board would not have directed a “full vetting”
had it not wished the ALJ to conduct a complete analysis of the issues presented. That analysis
follows below.
a. Health Insurance is not exempt from bargaining as a matter
“specifically provided for” in another law.
Health insurance costs and benefits are not matters “specifically provided for” in the
State Employees Group Insurance Act (SEGIA). Rather, they are matters that supplement,
implement and relate to the effect of the SEGIA on employees’ wages and terms and conditions
of employment.
41 The State contends that the Board effectively rejected this entire analysis by reversing the Executive
Director’s dismissal and remanding the case for hearing. However, the Board’s remand order issued
before the Appellate Court decided Skokie, and it is the juxtaposition between Skokie and Wheaton that
gives context to the outcome here. Accordingly, even if the Board implicitly found distinctions between
this case and Wheaton that justified reversal of the Executive Director’s dismissal, the even greater
distinctions between this case and Skokie justify the Board’s reconsideration of its earlier approach.
66
Section 7 of the Illinois Public Labor Relations Act (the Act) sets forth the duty to
bargain. It states the following in relevant part: “The duty ‘to bargain collectively’
shall…include an obligation to negotiate over any matter with respect to wages, hours and other
conditions of employment, not specifically provided for in any other law or not specifically in
violation of the provisions of any law. If any other law pertains, in part, to a matter affecting the
wages, hours and other conditions of employment, such other law shall not be construed as
limiting the duty ‘to bargain collectively’ and to enter into collective bargaining agreements
containing clauses which either supplement, implement, or relate to the effect of such provisions
in other laws.” 5 ILCS 315/7.
In City of Decatur the Illinois Supreme Court considered whether the City was required
to bargain over a proposal by the Union that would permit employees to submit disciplinary
grievances to arbitration. City of Decatur v. Am. Fed'n of State, County, & Mun. Employees,
Local 268, 122 Ill. 2d 353, 359 (1988). The City argued that the union's proposal for final and
binding arbitration of disciplinary grievances was a matter specifically provided for in another
law because the union’s proposal would “supplant certain of the statutory civil service provisions
adopted by the city.” City of Decatur, 122 Ill. 2d at 359. The Court rejected this argument and
determined that the City was required to bargain over the Union’s proposal. Id. In reaching this
conclusion, the Court considered (1) the purpose of the Act, (2) the nature of the law that the city
claimed the union’s proposal supplanted, and (3) the legislature’s express preference for
arbitration to resolve labor disputes. Id. at 366-7.
Applying the considerations used by the court in Decatur, it is clear that health insurance
costs and benefits are not matters exempt from bargaining as “specifically provided for” in
another law.
(1) The Purpose of the Act Favors Collective Bargaining over
Health Insurance
First, the purposes and policies of the Act weigh in favor of finding that health insurance
costs and benefits are not excluded from collective bargaining as “specifically provided for” by
another law.
The Act was intended to “grant public employees full freedom of association, self-
organization, and designation of representatives of their own choosing for the purpose of
67
negotiating wages, hours and other conditions of employment or other mutual aid or protection.”
5 ILCS 315/2 (statement of policy). In interpreting the broad duty to bargain, the Supreme
Court noted that the “mere existence of a statute on a subject does not, without more, remove
that subject from the scope of the bargaining duty.” City of Decatur, 122 Ill. 2d at 365.
Furthermore, “statutes that pertain in part to a mandatory subject do not have preemptive effect,
and the parties remain obligated to bargain over supplementary clauses.” Id. at 363-4.
Here, health insurance concerns wages, the core subject over which the Act intended
parties to bargain. 5 ILCS 315/2. Health insurance costs have a direct and concrete effect on
wages because the State deducts virtually all employees’ health insurance costs from their
paychecks. Any increase in health care costs is a decrease in employees’ taxable pay. The
scope of benefits covered by a health insurance plan likewise has a direct and concrete effect on
compensation because it represents the value received by the employee for the stated cost. Any
cost of a health insurance benefit that the employer does not cover is borne by the employee
himself.
The State’s policy favoring collective bargaining in Decatur is equally applicable here,
though the subject of health insurance is different from the arbitration of disciplinary disputes
considered in that case. Am. Fed’n of State, County & Mun. Employees, Council 31, AFL-CIO
v. County of Cook, 145 Ill. 2d 475, 486 (1991).
(2) The Generalized Language of the SEGIA Shows that
Health Insurance Costs and Benefits are not Specifically
Provided for by the SEGIA.
Second, the nature of the SEGIA also supports a finding that health insurance costs and
benefits are not matters “specifically provided for in another law.”
The SEGIA does not specify costs of coverage or describe the full spectrum of covered
benefits. Rather, it sets forth the broad contours of the State’s program of benefits and mandates
that it “provide for protection against the financial costs of health care expenses incurred in and
out of hospital including basic hospital-surgical-medical coverages.” 5 ILCS 375/6(a). To that
end, the program must simply (1) “provide a reasonable relationship between the benefits to be
included and the expected distribution of expenses”; (2) “specify as covered benefits and as
optional benefits, the medical services of practitioners in all categories licensed under the
68
Medical Practice Act of 1987”; (3) “include reasonable controls to prevent or minimize
unnecessary utilization…of [offered benefits]…and…provide reasonable assurance of stability
of the program”; and (4) “provide benefits to the extent possible to members throughout the
State, wherever located, on an equitable basis.” Id. SEGIA explains that the program “may
include” certain features such as supplementary coverages, but it does not exhaustively list the
benefits that a program must include to provide protection against financial costs of health care
expenses. It also does not limit a plan’s coverage to those types of benefits mentioned. Although
SEGIA does expressly prohibit the “non-contributory portion” of the health insurance program
from including the expenses of certain procedures related to abortion, induced miscarriage, or
induced premature birth (with some limited exceptions)42 the Union has not sought to bargain
with the State over terms that conflict with this provision. 5 ILCS 375/6(a).
None of the other provisions of SEGIA indicate that health insurance costs and benefits
are “specifically provided for” by the SEGIA. The State points to Section 5 of SEGIA, which
requires the CMS Director to “contract or otherwise make available…health benefits to [eligible
members and dependents].” It emphasizes that “any contract…for provision of benefits shall be
on terms consistent with State policy and based on, but not limited to, such criteria as
administrative cost, service capabilities of the carrier or other contractor and premiums, fees or
charges as related to benefits.” However, this section does not expressly set forth any benefits
that the State’s health insurance program must contain, nor does it set forth the costs of such
benefits. Notably, the Director’s authority to enter into contracts with providers its unrelated to
the duty to bargain over health insurance costs benefits because the process by which the
Director selects health insurance carriers and contracts with them is separate and apart from the
collective bargaining process. Moreover, the general policy provisions set forth in this section
do not undercut the State’s obligation under Section 7 to bargain over health insurance where the
Union here simply sought to bargain over terms to supplement the SEGIA’s provisions.
Contrary to the State’s assertion, the CMS Director’s authority to establish or modify
premiums does not show that the employees’ costs of health insurance coverage are “specifically
42 “However, nothing in this Act shall be construed to permit, on or after July 1, 1980, the non-
contributory portion of any such program to include the expenses of obtaining an abortion, induced
miscarriage or induced premature birth unless, in the opinion of a physician, such procedures are
necessary for the preservation of the life of the woman seeking such treatment, or except an induced
premature birth intended to produce a live viable child and such procedure is necessary for the health of
the mother or the unborn child.” 5 ILCS 375/6(a).
69
provided for” by the SEGIA. The word “premium,” as used in SEGIA, represents the cost
charged to the State by the insurance carrier and not the employees’ share of the premium, which
the Union in this case sought to bargain. The State negotiates an overall premium with the
insurance carrier based on claims experience, verified demographics, actuarial factors, projected
health care costs trends. It then shifts part of that cost to employees, which then becomes the
employees’ share of the premium. The Director’s authority to establish or modify the premiums
charged to the State by the insurance carrier does not eliminate the State’s obligation to bargain
over the share of the premium that employees pay.
The State emphasizes that the SEGIA’s language is, in fact, specific because it mandates
that the “program of health benefits shall be designed by the Director to” ensure that the program
meets the criteria, described above. Id. Yet, the very breadth of those criteria combined with
marked absence of specifically-mandated costs and benefits indicates that the SEGIA pertains
only in part, to an otherwise bargainable matter, and that it should “not be construed as limiting
the duty ‘to bargain collectively.’” 5 ILCS 315/7. There is room to bargain over specific terms
such as the employees’ share of health insurance costs and the particular benefits that the plan
will cover. Moreover, the Union may bargain to obtain a higher level of benefits than those
minimally required under SEGIA. City of Decatur, 122 Ill. 2d at 365.
The State’s focus on the mandatory nature of the law (“the Director shall…”) obscures
the threshold issue, whether SEGIA’s contents leave room to bargain over specifics. Here, the
Director’s obligation to design a plan within certain broadly-defined parameters does leave room
to bargain supplementary terms concerning the services covered and the cost of coverage for
employees under various plans.
In addition, the mandatory nature of the law does not preclude bargaining because no
court has ever held that the SEGIA grants the Director exclusive authority to determine the
contents of a health insurance program. The absence of such precedent further supports the
finding that health insurance, as a general matter, is not specifically provided for by the SEGIA.
Bd. of Governors of State Colleges & Universities on Behalf of Ne. Illinois Univ. (BOG) v.
Illinois Educ. Labor Relations Bd., 170 Ill. App. 3d 463, 472 (4th Dist. 1988) (rejecting claim by
Employer that “shall” in Civil Service Act granted Merit Board exclusive authority to determine
issues of discipline); cf. Nall v. Int'l Ass'n of Machinists & Aerospace Workers, AFL-CIO, Local
70
Lodge 822, Dist. 123, 307 Ill. App. 3d 1005, 1010 (4th Dist. 1999) and City of Markham v. State
& Municipal Teamsters, Chauffeurs & Helpers, Local 726, 299 Ill. App. 3d 615, 618 (1st 1998).
For the same reason, the SEGIA’s definition of the term “program” is not determinative.
The State emphasizes that SEGIA defines program as “the group life insurance, health benefits
and other employee benefits designed and contracted for by the Director under this Act.” 5 ILCS
375/3(n). However, such language does not preclude a finding that the Director designs the
plans after collective bargaining with the Union, and that he includes those negotiated benefits in
the plan he designs. Section 5 of the SEGIA supports this latter interpretation by expressly
referencing collective bargaining over employee benefit programs. It provides that the Director
may delay the annual benefit choice period if “collective bargaining over employee benefit
programs for the next fiscal year remains pending on April 15.” 5 ILCS 375/5 (emphasis
added).
Nall and City of Markham, the cases relied upon by the State, are further distinguishable
on the grounds that the statutes at issue in those cases, which “specifically provided for” and
supplanted the subject of bargaining, contained no such express references to collective
bargaining.43 Cf. Nall, 307 Ill. App. 3d 1005 and City of Markham, 299 Ill. App. 3d 615.
Moreover, the State’s attempts to analogize itself to the non-home rule municipalizes at
issue in Nall and City of Markham are unpersuasive. The State contends that it is bound by the
SEGIA in the same way that the non-home rule municipalities in Nall and City of Markham were
bound by the Municipal Code. It emphasizes that this is the prime distinguishing factor between
this case and Decatur, which in turn warrants a different result. However, the Board has
previously rejected this interpretation, reasoning that “it would be illogical to conclude that,
when it enacted the Act, the legislature intended to impose a duty to bargain on home rule
governments with respect to otherwise mandatory subjects covered by the Code, while excusing
non-home rule units from those same obligations.” Vill. of Franklin Park, 8 PERI ¶ 2039 (IL
SLRB 1992) (citing American Federation of State, County and Municipal Employees Council
75, Local 350 v. Clackamas County, 69 Or. App. 488 (1984)) aff'd by Vill. of Franklin Park v.
Illinois State Labor Relations Bd., 265 Ill. App. 3d 997 (1st Dist. 1994). The Board further
reasoned that the legislature’s interest in “fostering a State-wide, uniform system of collective
43 The legislature later amended the sections of the Municipal Code at issue in Nall to add such a
reference.
71
bargaining” was “no less compelling” where the employer “is a non-home rule municipality.”
Vill. of Franklin Park, 8 PERI ¶ 2039 (promotional procedures were not “specifically provided
for” in the Municipal Code, even though the employer was a home rule municipality that was not
empowered to enact different provisions). Thus, the distinction emphasized by the State here is
not controlling.
(3) The Legislature Expressed a Preference For Collective
Bargaining Over Health Insurance in Both the IPLRA and
the SEGIA
Next, the legislature’s preference for collective bargaining over health insurance costs
and benefits undermines the State’s claim that the CMS Director’s authority, set forth in the
SEGIA, overrides the duty to bargain.
First and foremost, the legislature maintained the Act’s supremacy over Section 6 of the
SEGIA, which confers authority on the Director to design a program of health benefits. It also
maintained the Act’s supremacy over Section 3 of SEGIA, which defines “program” as “benefits
designed and contracted for by the Director.” 5 ILCS 375/3(n). Although the legislature
amended the Act in 2004 to exempt Section 5 of SEGIA from the Act’s preemption provision, it
declined to exempt those very sections of the SEGIA that the State claims confer authority upon
the Director to unilaterally establish plan design. 5 ILCS 315/15(a); 5 ILCS 375/6(a). The only
section of SEGIA exempted from the preemption provision (Section 5) is simply the declaration
of State’s policy underlying the SEGIA, which also sets forth certain reporting requirements
relative to contracts for the provision of employee benefits.
The State argues that Section 5 does contain language that overrides the duty to bargain
because it authorizes the Director to execute contracts for “programs,” defined in another section
of SEGIA as “benefits designed and contracted for by the Director.” 5 ILCS 375/3(n). But that
Section of the Act, which the State seeks to incorporate by reference into Section 5 is not itself
exempt from the Act’s preemption provisions. Id. Section 5, the only provision that in fact
supersedes the Act, does not speak to the Director’s authority to established a health insurance
program, does not confer upon the Director authority to unilaterally set benefits, and does not
specify any benefits the Director must include in a plan.
72
In fact, Section 5 contemplates that the State will bargain over health insurance. It
expressly references collective bargaining, noting that the Director may delay the annual benefit
choice period if “collective bargaining over employee benefit programs for the next fiscal year
remains pending on April 15.” 5 ILCS 375/5. It also indicates that the State will enter into
contracts with health insurance providers to implement terms it negotiated with unions by setting
forth the manner in which the State must report those contracts. Id. These reporting
requirements apply to “all contracts for provision of employee benefits,”44 which include “those
portions of any proposed collective bargaining agreement that would require implementation
through contracts entered into under this Act.” Id.
Contrary to the State’s contention, these provisions support a finding that the State must
bargain over health insurance, even if the term “any” in the above-quoted section contemplates
that there may be zero agreements that require implementation through contracts entered into
under SEGIA. The absence of such collective bargaining agreements speaks only to the results
of bargaining and not the bargaining process or the State’s bargaining obligation. For example, a
collective bargaining agreement would not require implementation through a SEGIA contract if a
union accepted the State’s proposal to have the same health insurance enjoyed by other State
employees. However, there is no merit to the State’s logic that a union’s negotiated acceptance
of these terms proves that the State could impose them unilaterally.
In turn, there is no language in Section 5 of SEGIA that would trigger its preemption of
the duty to bargain, set forth in Section 7 of the Act, because there is no conflict between these
two provisions. If there is a conflict between the Act and any other law related to wages, hours
and conditions of employment and employment relations, the Act prevails. 5 ILCS 315/15(a).45
However, if there is a conflict between Section 5 of the SEGIA and the Act, Section 5 of the
SEGIA takes precedence. Id. Yet, Section 5 of the SEGIA does not conflict with the broad duty
to bargain by barring the State from engaging in collective bargaining over health care costs and
44 “All contracts for provision of employee benefits, including those portions of any proposed collective
bargaining agreement that would require implementation through contracts entered into under this Act,
are subject to the following requirements:” 5 ILCS 375/5. 45Section 15(a) states the following in relevant part: “In case of any conflict between the provisions of this
Act and any other law (other than Section 5 of the State Employees Group Insurance Act of 1971 and
other than the changes made to the Illinois Pension Code by Public Act 96-889 and other than as provided
in Section 7.5), executive order or administrative regulation relating to wages, hours and conditions of
employment and employment relations, the provisions of this Act or any collective bargaining agreement
negotiated thereunder shall prevail and control.” 5 ILCS 315/15(a).
73
the benefits covered by a plan. Vill. of Franklin Park, 8 PERI ¶2039 (no conflict found between
Section 7 and Municipal Code where the Code did not expressly prohibit collective bargaining
over promotional issues).
Contrary to the State’s claim, Section 5’s supremacy over the Act does not indicate that
the legislature sought to convert health insurance, broadly, into a permissive subject of
bargaining for the State. Principles of statutory interpretation support this finding. It is well
established that, by employing certain language in one instance and wholly different language in
another, the legislature indicates that different results were intended. In re K.C., 186 Ill. 2d 542,
549-50 (1999). Where the legislature has sought to expressly remove a topic from the duty to
bargain, the legislature has done so in express terms. See 5 ILCS 315/7.5 (employers shall not be
required to bargain over matters affected by the changes made to Article 14, 15, or 16 of the
Illinois Pension Code”). Section 15, which gives precedence to Section 5 of SEGIA, does not
contain such language. Accordingly, it should not be read to bar bargaining over health
insurance costs and benefits, even though Section 5 of the SEGIA references health insurance
more broadly.
Other provisions of the SEGIA likewise illustrate that the legislature intended the State,
to bargain over health insurance costs and benefits, and that it did not view these subjects as
“specifically provided for” by SEGIA. For example, Section 7.1 of the SEGIA indicates that
unions may receive health insurance benefits as a result of collective bargaining, i.e., “pursuant
to a collective bargaining agreement.” 5 ILCS 375/7.1. It provides that, “[a]ny benefit received
by an employee under this Act pursuant to a collective bargaining agreement may be extended
by the Director to employees whose wages, hours and other conditions of employment with the
State are not subject to a collective bargaining agreement.” Id. The State contends that the word
“any” illustrates that there may be none, and that health insurance is therefore a permissive
subject of bargaining. However, a plain reading of that phrase indicates that it simply confers
discretion upon the Director to extend some, all, or none of the collectively bargained benefits to
non-union employees. The second sentence confirms that reading by conversely requiring the
Director to offer union employees “any benefit” offered to the non-union workforce: “if any
benefit is offered by the Department of Central Management Services to employees who are not
members of a recognized bargaining unit, then that benefit shall also be offered to all bargaining
unit members through their certified exclusive representative.” Id.
74
The State contends that the requirements of the Procurement Code also indicate that
health insurance is a matter specifically provided for in another law, but the State does not
identify how any of the Code’s provisions supplant the duty to bargain over health insurance.
SEGIA obligates the Director to follow the Procurement Code’s procedures by requiring to
Director to enter into contracts for health insurance, and it also sets forth the criteria that the
Director may consider in awarding or extending contracts. 5 ILCS 375/5, 6. Yet, the State
points to no provision in the Procurement Code that sets forth health insurance costs or benefits.
Indeed, the procurement process is separate from, and independent of, collective bargaining over
those subjects.
Finally, there is no merit to the State’s claim that the Union’s final offer on health
insurance, incorporated into the arbitration award, violates the Procurement Code and the SEGIA
by mandating the selection or maintenance of specific health insurance carriers. The offer does
not expressly require the State to maintain a particular carrier. Nor does it expressly require the
State to affirmatively contract with a new carrier. Instead, it merely lists the State’s existing
carriers to help identify employees’ costs under each such carrier. Thus, the proposal does not
interfere with the CMS Director’s authority to enter into contracts with other carriers.46 Am.
Fed’n of State, Cnty. and Mun. Empl. v. Ill. State Labor Rel. Bd., 190 Ill. App. 3d 259, 269 (1st
Dist. 1989) (“The evidence that a party in labor negotiation intended to waive a statutory right
must be clear and unmistakable.”).
In sum, the language of the Act and the SEGIA demonstrates that health insurance costs
and benefits are not matters excluded from collective bargaining as “specifically provided for”
by another law.
b. Health Insurance is Mandatory Subject of Bargaining Under the
Central City Test
Health insurance is a mandatory subject of bargaining under the Central City test. Health
insurance costs and benefits impact employees’ terms and conditions of employment, and they
are not matters of inherent managerial authority. Even if the Board determines that health
insurance costs and benefits are matters of inherent managerial authority, the benefits of
46 As discussed below, the State must still maintain employees’ costs of coverage and benefits pursuant to
the duty to bargain in good faith.
75
bargaining outweigh the burdens that bargaining imposes on the State’s inherent managerial
authority.
Parties are required to bargain collectively regarding employees’ wages, hours and other
conditions of employment—the “mandatory” subjects of bargaining. City of Decatur, 122 Ill. 2d
at 361-62; Am. Fed. of State, Cnty. and Mun. Empl., 190 Ill. App. 3d at 264; Ill. Dep’t of Cent.
Mgmt Serv., 17 PERI ¶ 2046 (IL LRB-SP 2001); Cnty. of Cook (Juvenile Temporary Detention
Center), 14 PERI ¶ 3008 (IL LLRB 1998). It is well-established that a public employer violates
its obligation to bargain in good faith, and therefore Sections 10(a)(4) and (1) of the Act, when it
makes a unilateral change in a mandatory subject of bargaining without granting prior notice to
and an opportunity to bargain with its employees' exclusive bargaining representative. Cnty. of
Cook v. Licensed Practical Nurses Ass’n of Ill. Div. 1, 284 Ill App. 3d 145, 153 (1st Dist. 1996).
In Central City, the court set forth a three-part test to determine whether a matter is a
mandatory subject of bargaining. The first question is whether the matter is one of wages, hours
and terms and conditions of employment. Cent. City Educ. Ass’n, IEA-NEA v. Ill. Educ. Labor
Rel. Bd. (“Central City”), 149 Ill. 2d 496 (1992). If the answer to that question is no, the inquiry
ends and the employer is under no duty to bargain. Central City, 149 Ill. 2d at 522-523. If the
answer is yes, then the second question under the Central City test is whether the matter is also
one of inherent managerial authority. Id. If the answer is no, then the analysis stops and the
matter is a mandatory subject of bargaining. Id. If the answer is yes, the Board will balance the
benefits that bargaining will have on the decision-making process with the burdens that
bargaining will impose on the employer's authority. Id.
As discussed below, the State must bargain over health insurance costs and benefits.
(1) Health insurance is a matter of wages, hours and terms and
conditions of employment
Health insurance qualifies as “wages” within the meaning of Section 7 of the Act and it is
also a term and condition of employment, more generally.
The term “wages” in labor law is read to include health insurance. City of Blue Island, 7
PERI ¶ 2038 (IL SLRB 1991). Illinois courts have held that “typical terms and conditions [of
employment] include health insurance” because it is “something that an employer provides
which intimately and directly affects the work and welfare of the employees.” Bd. of Educ. of
76
City of Chicago v. Illinois Educ. Labor Relations Bd., 2015 IL 118043, ¶ 26; Vienna School
District No. 55 v. Illinois Educational Labor Relations Board, 162 Ill. App. 3d 503, 507 (4th
Dist. 1987).
Here, the State’s share of employees’ health insurance costs is part of employees’ overall
compensation. The connection between health insurance and wages is further underscored by
the fact that the State deducts employees’ share of health insurance costs from their paychecks.
The more employees pay for health insurance, the less they receive in taxable income.
The health insurance benefits included in a plan likewise qualify as compensation, and
they also undeniably impact employees’ welfare. Health insurance costs and benefits are
inextricably intertwined because the value of a plan cannot be judged without regard to the
spectrum of benefits included for its cost. A health plan with fewer covered benefits is less
valuable than a health plan of the same cost that includes a greater number of benefits because
the employee must use his own earnings to fill in the gaps of coverage. Indeed, neither the
Board nor the courts have ever separated the costs of insurance benefits from the benefits
covered by that costs in considering an employer’s bargaining obligation.
Moreover, a review of the State’s final offer illustrates that its proposed change from the
status quo costs to employees is significant, both in terms of a percentage and a dollar amount.
The State proposed to increase employees’ contributions by 102%, which more than doubles
employees’ contributions. This increases employees’ costs by thousands of dollars, annually.
The exact dollar amount varies by the plan an employee selects and the number of individuals
covered. Nevertheless, a sampling47 of the options, by salary, illustrates the magnitude of the
change.
Employees with an annual base salary of $105,302 would pay an additional $2592
annually if they chose QCHP Insurance individual coverage, amounting to a total payment of
$5,124. They would pay an additional $2,280 if they chose HMO individual coverage,
amounting to a total payment of $4,512. They would pay an additional $6120 annually if they
chose QCHP family coverage, amounting to a total payment of $12,096. They would pay an
additional $4272 annually if they choose HMO plus two coverage, amounting to a total payment
of $8,376. In sum, the State’s proposed health insurance costs for an employee with an annual
47 This summary does not include the differences in cost between every HMO plan in existence and the
State’s proposed HMO costs. The differences set forth below use Coventry HMO as the basis for
comparison to the State’s proposal, which does not specifically name any HMO.
77
base salary of $105,302 would reduce that employee’s annual taxable, income to $100,178 under
QCHP Insurance individual coverage, to $100,790 under HMO individual coverage, to $93,206
under QCHP family coverage, and to $96,926 under HMO plus two coverage.
Employees with an annual base salary of $87,434 would pay an additional $1,992 each
year if they maintained QCHP Insurance individual coverage, amounting to a total cost of
$3,936. They would pay an additional $1,680 if they maintained HMO individual coverage,
amounting to a total cost of $3,324. They would pay an additional $5520 if they chose QCHP
family coverage, amounting to a total cost of $10,908. They would pay an additional $3,672 if
they chose HMO Coventry plus two coverage, amounting to a total cost of $7,188. In sum, the
State’s proposed health insurance costs for an employee with an annual base salary of $87,434
would reduce that employee’s taxable income to $83,498 under QCHP Insurance individual
coverage, to $84,110 under HMO individual coverage, $76,526 under QCHP family coverage,
and to $80,246 under HMO plus two coverage.
Employees with an annual base salary of $75,494 would pay an additional $1,764 each
year if they maintain QCHP Insurance individual coverage, amounting to a total cost of $3,492.
They would pay an additional $1,464 if they maintained HMO individual coverage, amounting
to a total cost of $2,892. They would pay an additional $5,292 if they maintained QCHP family
coverage, amounting to a total cost of $10,464. They would pay an additional $3,456 if they
maintain HMO plus two coverage, amounting to a total cost of $6,756. In sum, the State’s
proposed health insurance costs for an employee with an annual base salary of $75,494 would
reduce that employee’s taxable income to $72,002 under QCHP Insurance individual coverage,
to $72602 under HMO individual coverage, $65,030 under QCHP family coverage, and to
$68,738 under HMO plus two coverage.
Each of these costs of health insurance could further increase by up to 10% under the
State’s proposal, if the Joint labor/Management Committee on health care benefits made
recommendations to the Director of CMS regarding potential savings opportunities for the State,
that would increase employees’ costs. In turn, employees’ taxable income could further
decrease by up to 10% of their share of health insurance costs.
The State on brief does not deny the magnitude of the proposed change on employees’
taxable income, and it does not deny the impact of benefits on employees’ conditions of
employment. It simply contends that health insurance costs and benefits are matters provided for
78
in the SEGIA and therefore are exempt from the duty to bargain. As discussed above, they are
not.
In sum, health insurance is a matter of wages, hours and terms and conditions of
employment.
(2) Health insurance is not a matter of inherent managerial
authority.
Health insurance is not a matter of inherent managerial authority under Section 4 of the
Act.
Section 4 of the Act states in pertinent part that “employers shall not be required to
bargain over matters of inherent managerial policy, which shall include such areas of discretion
as the function of the employer, standards of services, its overall budget, the organizational
structure and selection of new employees, examination techniques and direction of employees.”
5 ILCS 315/4. Health insurance does not fall within any of the above-referenced categories.
First, the State has not demonstrated that health insurance costs and benefits are matters
of the employer’s overall budget, within the meaning of Section 4. Where the employer is the
State, the court considers the particular budget of the state agency for which the bargaining unit
members work to determine whether the decision concerns the employer’s overall budget. Am.
Fed’n of State County & Mun. Employees v. State Labor Relations Bd., 274 Ill. App. 3d 327,
333 (1st Dist. 1995) (addressing layoffs). It then determines whether the decision at issue is
motivated by economic constraints resulting from the shortfall in that agency’s budget; if it is,
then the decision concerns the employer’s overall budget and is a matter of inherent managerial
authority. Id. (considering budget of Illinois Department of Public Aid, even where caption
stated Department of Central Management Services).
Here, the State has not shown that health insurance is a matter of the employer’s overall
budget because it has not drawn a connection between the costs of health insurance and the
budget of the Illinois State Police, the state agency at issue. The State has not introduced into
evidence the proposed budget of the Department of Illinois State Police. The State has not
introduced evidence concerning its other proposed expenditures for the Department of State
Police, with respect to available or projected funds. Am. Fed’n of State County & Mun.
Employees, 274 Ill. App. 3d at 333 (focusing on budget of the particular state agency at issue). It
79
has also failed to demonstrate that the cost of health insurance for the 1500 union members at
issue in this case would impair the ability of the Illinois State Police to provide services by
necessitating the use of other Illinois State Police operating funds to pay for employee benefits.
The documented increases in health insurance liability, and the financial struggles of State
government more broadly do not sufficiently demonstrate that decisions concerning health
insurance costs concern the overall budget of the Illinois State Police. Id. (layoff related to
overall budget because it was motivated by economic constraints resulting from a shortfall in
agency’s budget); see also Illinois State Toll Highway Authority, 29 PERI ¶ 181 (IL LRB-SP
ALJ 2013) (elimination of program with “enormous” cost was not a matter of employer’s overall
budget where it did not show what effect the cost had on its ability to provide public services).
The State’s reliance on the IELRB’s decision in Peoria School District 150 is misplaced
in light of the Appellate Court’s approach, outlined above. In Peoria School District 150, the
IELRB found health insurance costs to be a matter of inherent managerial authority where the
school district was subject to economic constraints; however, the Appellate Court’s focus on the
state agency’s budget controls here because the IELRB’s decisions are merely persuasive
authority. Compare Am. Fed’n of State County & Mun. Employees v. State Labor Relations
Bd., 274 Ill. App. 3d 327 and Peoria School District 150, 22 PERI ¶ 180 (IELRB ALJ 2006),
aff’d, 24 PERI ¶ 105 (IELRB 2007). Moreover, the Appellate Court’s decision is also more
compelling because the employer in that case was a state agency, as is the employer in this case.
Next, health insurance costs and benefits are also not linked to the function or the
standards of service of the Illinois State Police, the arm of the State at issue here.48 The function
of the Illinois State Police is law enforcement, not the provision of health insurance to its
employees. 20 ILCS 2605/2605. The State has failed to demonstrate how bargaining unit
members’ health insurance costs and benefits impact its provision of law enforcement services.
Bd. of Trustees of Univ. of Illinois v. Illinois Educ. Labor Relations Bd., 224 Ill. 2d 88, 106
(2007) (university’s function was providing education and not selling parking spaces); Town of
Cicero v. Illinois Ass’n of Firefighters, IAFF Local 717 AFL-CIO, CLC, 338 Ill. App. 3d 364,
48 Although the caption on the Complaint names the State of Illinois, Department of Central Management
Services, more broadly, the charging party listed on the charge form is the “Illinois State Police.”
Moreover, there is no question that the Union in this case represents solely individuals employed by the
Illinois State Police. The 2016 interest arbitration award that sets forth the contractual obligations of the
parties to this case cites the Illinois Department of State Police as the employer.
80
370 (1st Dist. 2003) (residency requirement not adequately linked to town’s provision of
emergency response services); City of Chicago, 31 PERI ¶ 3 (IL LRB-LP 2014) (library’s
function was loaning reading material, not securing its copy machine).
The State suggests that its functions and standards of service must be viewed through the
broader lens of its obligations as the State of Illinois, as opposed to the narrower function of the
Illinois State Police, but this has not been the approach taken by the Board and the courts.
Rather, they have repeatedly focused on the smaller governmental division for which the union-
represented employees perform work in assessing whether a subject of bargaining concerns the
employer’s functions or standards of service. Town of Cicero, 338 Ill. App. 3d at 364 (Town
required to show connection between residency and fire suppression services where unit
employees worked for fire department); City of Chicago, 31 PERI ¶ 3 (City required to show
connection between surveillance of employees and loaning of books where unit employees
worked for library). This has been the case even where the State is the named employer. Am.
Fed. of State, Cnty., and Mun. Empl., AFL-CIO, 190 Ill. App. 3d 259 (State required to show
connection between drug testing and prison security where unit employees worked for the
Department of Corrections).
Even if the State’s broader functions were the relevant inquiry, as opposed to simply the
function of the Illinois State Police, the State’s obligation to provide its employees with health
insurance does not qualify as “the function of the employer” under Section 4 of the Act. The
Board has defined an employer’s function by its obligations to the public (its service mission),
and not by its obligations to its own employees. Indeed, health insurance is not a public service
at all because membership in the State’s health plan is not open to the public, and only the plan’s
members and their dependents benefit. Int’l Bhd. of Teamsters, Local 700 v. Illinois Labor
Relations Bd., 2017 IL App (1st) 152993, ¶ 37 (considering employer’s function with respect to
the public, which required it to prevent crime and maintain public safety); County of Cook v.
Illinois Labor Relations Bd., 2017 IL App (1st) 153015, ¶ 56 (considering functions of operating
a safe courthouse and jail, preventing crime, and maintaining citizens' safety); Cnty. of Cook, 4
PERI ¶ 3004 (IL LLRB 1997) (employer’s mission is to effectively deliver public services); City
of Chicago (Police Dept.), 9 PERI ¶ 3001 (IL LLRB 1992) (employer’s mission was law
enforcement); Cnty. of Cook (Cermak Health Serv.), 10 PERI ¶ 3009 (IL LLRB 1994)
(employer’s function was maintaining security within its jail).
81
The fact that the State’s obligation to provide quality health insurance derives from a
statute does not change the analysis. The State must nevertheless “link the objective of the [law]
with…the enunciated managerial rights stated in Section 4 of the Act.” County of Cook v.
Illinois Labor Relations Bd. Local Panel, 347 Ill. App. 3d 538, 552 (1st Dist. 2004). As
discussed above, the SEGIA’s objective to “assure quality benefits to members [of the State’s
health plan] and their dependents” is not “the function” of the employer, although it may qualify
as “a” function, in a more general sense. 5 ILCS 375/5; Bd. of Trustees of Univ. of Illinois, 224
Ill. 2d at 106 (provision of parking spaces to students was auxiliary to university’s essential
academic functions) and cases supra.
The State contends that the statutory obligation in this case is similar to the one
referenced in Chief Judge of the Circuit Court of Cook County, and that the Board’s reasoning in
that case justifies the same outcome here on the second prong of the Central City test. Chief
Judge of the Cir. Ct. of Cook Cnty., 31 PERI ¶ 114 (ILRB-SP 2014) (“Chief Judge”). However,
in that case the statute set forth the function of the employer (to provide probation services).
Chief Judge of the Cir. Ct. of Cook Cnty., 31 PERI ¶ 114. Here, by contrast, the referenced
statute (SEGIA) does not describe the function of the Illinois State Police (law enforcement) or
the function of the State with respect to its taxpayers (provision of services). Moreover, in Chief
Judge, the employer sufficiently connected its decision with the enunciated managerial rights set
forth in Section 4 of the Act, including its function, its organization structure and its standards of
service, whereas the State here has not. Id. (considering employer’s reorganization).
The State further contends that it has an obligation to provide services in a fiscally
responsible manner,49 but this is too generalized a basis on which to find that health insurance is
a matter of inherent managerial authority. If such grounds were sufficient, then any economic
decision would be a matter of inherent managerial authority, regardless of whether it impacted
the employer’s function, its standards of service, or its overall budget under Section 4 of the Act.
Vill. of Westchester, 16 PERI ¶ 2034 (IL LRB-SP 2000) (employer’s decision related to
discipline did not implicate matter of inherent managerial authority despite employer’s interest in
saving taxpayers money by discouraging abuse of sick leave).
The State also looks to the potential results of bargaining and its future plans to support
its claim that health insurance is a matter of inherent managerial authority, but such an inquiry
49 The State cites to the CMS Director’s duties and state policy for this proposition. 20 ILCS 405/405-10.
82
improperly melds the last two prongs of the Central City test. The Illinois Supreme Court
reasoned that step two of the test addresses “only whether…the issues raised in the proposal
actually affect inherent managerial authority” and “not how core managerial rights may be
indirectly affected under some conceivable outcome of the bargaining process.” Bd. of Trustees
of Univ. of Illinois, 224 Ill. 2d at 105 (emphasis in original).
Yet, the State presents precisely the types of arguments that the Court in Board of
Trustees found inapposite. The State argues that it could not fulfill its statutory obligation to
provide equitable rates and continuity of coverage to members of its statewide program if it
bargained over health insurance because each of its 30 unions might obtain different plans
through collective bargaining. In turn, employees might pay more for health insurance because
the State would lose the advantages of a large risk pool and economies of scale. In addition,
smaller networks might impair the State’s ability to provide continuity of coverage. The State
further contends that even if it could achieve some measure of uniformity through bargaining
with its non-protective service units, protective service units might still obtain different health
insurance terms through arbitration, which would pose the same problem. These arguments
erroneously focus on the impact of one conceivable outcome of the bargaining process as
opposed to whether the issues in the proposal—health insurance costs and benefits—actually
affect the State’s inherent managerial authority.
The fact that the outcome of bargaining in this case has already been determined by the
arbitration panel does not distinguish this case from Board of Trustees of the University of
Illinois or justify a different analysis of the second prong of the Central City test. Although the
Supreme Court in that case acknowledged that the employer did not yet know the outcome of
bargaining, the court did not end its analysis with that comment or rely on that observation in
reaching its decision. To the contrary, it held that the employer’s focus on bargaining outcome
“misse[d] the crux of the inquiry,” even apart from being “purely speculative.” Bd. of Trustees
of Univ. of Illinois, 224 Ill. 2d at 105. Accordingly, the Court emphasized the narrow focus of
the second prong of the test, which the State in this case seeks to improperly broaden with its
emphasis on the award’s terms. The State cannot proceed directly to the third prong of the test
where it has not demonstrated under the second prong that health insurance costs and benefits are
matters of inherent managerial authority.
83
The State’s remaining argument on the question of inherent managerial authority
misconstrues the Union’s final offer on health insurance, awarded by the majority of the
arbitration panel. The State contends that the Union’s offer concerns a matter of inherent
managerial authority because it seeks to bargain over the employer’s choice of health insurance
carrier, but a plain reading of the Union’s offer does not support the State’s claim City of
Kankakee (Kankakee Metropolitan Wastewater Utility), 9 PERI 2034 (IL SLRB 1993) (finding
selection of carrier was a matter of inherent managerial authority, but requiring employer to
bargain that selection where it substantially impacted employees’ benefits). The Union’s offer
simply names the State’s existing carrier to identify the costs that employees would pay, should
they select one carrier over another. It does not seek a change in existing carrier and it does not
mandate that the State maintain those carriers listed. The State’s argument to the contrary
anticipates that the State will make a change to those carriers listed in the award and that some
future, neutral decision-maker will determine that the State must maintain the listed carriers—
neither event has occurred. Cf. City of Kankakee (Kankakee Metropolitan Wastewater Utility), 9
PERI 2034 (city changed carrier, union filed a charge, Board considered lawfulness of the
change).
Thus, health insurance is not a matter of inherent managerial authority and the inquiry
should end at this step. Bd. of Trustees of Univ. of Illinois, 224 Ill. 2d at 108 (“application of the
balancing test in step three hinges on a finding in step two that the union proposal affects the
scope of the employer's inherent managerial authority…Without an affirmative finding at step
two, there is simply no legal basis for a step three analysis.”); see also Central City, 149 Ill. 2d at
523.
(3) The benefits of bargaining to the decision-making process
outweigh the burdens that bargaining imposes on the
State’s inherent managerial authority.
Even if the Board determines that health insurance is a matter of inherent managerial
authority, it is still a mandatory subject of bargaining because the benefits of bargaining over
health insurance outweigh the burdens that bargaining imposes on the State’s inherent
managerial authority.
84
As a general matter, the balance favors bargaining where the issues are amenable to
resolution through the negotiating process, i.e., where the union is capable of offering proposals
that are an adequate response to the employer’s concerns. Cnty. of St. Clair and the Sheriff of St.
Clair Cnty., 28 PERI ¶18 (IL LRB-SP 2011), aff'd by unpub. ord., 2012 IL App (5th) 110317-
U (union need not present evidence of its actual proposals). For example, there are significant
benefits to bargaining where the employer’s decision is economically motivated because the
union can provide helpful suggestions to reduce labor costs. Id.; Chicago Park Dist. v. Ill. Labor
Rel. Bd., 354 Ill. App. 3d 595, 603 (1st Dist. 2004); Vill. of Ford Heights, 26 PERI ¶145 (IL
LRB-SP 2010); Vill. of Bensenville, 19 PERI ¶119; City of Peoria, 3 PERI ¶2025; State of Ill.
(Dep ' t of Cent. Mgmt. Servs.), 1 PERI ¶2016 (IL SLRB 1985).
In contrast, the balance favors unilateral decision-making where the employer's decision
concerns policy matters that are intimately connected to its governmental mission or where
bargaining would diminish its ability to effectively perform the public services it is obligated to
provide. Vill. of Franklin Park, 8 PERI ¶2039 (“the scope of bargaining in the public sector must
be determined with regard to the employer’s statutory mission and the nature of the public
service it provides”); State of Ill. Dep’ts of Cent. Mgmt. Servs. and Corrections, 5 PERI ¶2001
affirmed, 190 Ill. App. 3d 259 (1st Dist. 1989). Consequently, the benefits of bargaining are
minimal when the employer’s decision effects a fundamental change in the manner in which the
employer conducts its business. City of Evanston, 29 PERI ¶162; State of Ill. Dep’ts of Cent.
Mgmt. Servs. and Corrections, 5 PERI ¶2001, affirmed, 190 Ill. App. 3d 259 (1st Dist. 1989).
The benefits of bargaining over health insurance are significant. First, the issue of
employee health insurance is particularly amenable to bargaining because it is an economic issue
that relates to labor costs. Am. Fed'n of State County & Mun. Employees, 274 Ill. App. 3d at
334; Cnty. of St. Clair and the Sheriff of St. Clair Cnty., 28 PERI ¶18 aff'd by unpub. ord., 2012
IL App (5th) 110317-U; Vill. of Bensenville, 19 PERI ¶ 119 (IL SLRB 2003). The cornerstone
of the State’s health insurance proposal, the “60/40 split,” illustrates the predominantly economic
nature of health insurance. That “60/40 split” seeks to shift more of the costs of health insurance
onto employees. Under this proposal the State would pay 60% of the costs of health insurance
and the employee would pay 40% of the cost, a distribution which represents a change from the
status quo under which the State pays 76% and employees pay 24% of health insurance costs.
Accordingly, health insurance is amenable to bargaining because “the bargaining process
85
provides the union an opportunity to offer money-saving suggestions or concessions in other
areas to achieve the necessary financial savings” that the State sought from that cost shift. Vill.
of Ford Heights, 26 PERI ¶ 145 (IL LRB-SP 2010) aff’d by 2012 IL App (1st) 110284-U; see
also Cnty. of St. Clair and the Sheriff of St. Clair Cnty., 28 PERI ¶18 aff’d by 2012 IL App (5th)
110317-U. Indeed, the “bargaining representative is frequently in the best position to provide
alternatives which may alleviate economic conditions.” Am. Fed’n of State County & Mun.
Employees, 274 Ill. App. 3d at 334.
The financial concessions that the State has, in fact, obtained through bargaining over
health insurance with the Respondent-Union and other unions underscores this finding. In 2010,
the State and a coalition of unions including AFSCME agreed to $70 million in health insurance
cost savings to avoid reopening their 2008-2012 agreements on health insurance and wages.
Although only AFSCME signed the memorandum of understanding to memorialize the new
health insurance terms, other unions participated in the Joint Labor/Management Advisory
Committee that determined them. Moreover, each of the participating unions’ agreements
allowed the respective unions to reopen their own contract on wages if the Joint
Labor/Management Advisory Committee did not find the required savings and the State
reopened the contracts on health insurance. The final memorandum of understanding signed by
AFSCME increased copays for prescription drugs, or mandated use of generics over brand name
drugs, changed the distance that employees could drive to providers, and changed some out of
pocket maximums.
Likewise, during negotiations with AFSCME for the 2012-2015 contract, the State
agreed to approximately $700 million in health care savings, and the State realized
approximately $500 million of that savings over two years.50 The State achieved these savings
from increases in copayments for the generic preferred and not preferred brand prescriptions,
increases in the mail order prescription costs, increases in HMO and OAP physician costs,
increases in emergency room costs, increases in outpatient surgery costs, increases in home
health visit costs, increases in inpatient surgery costs, and increases in out of pocket maximum
payments. Employees paid more for health care as a result of these negotiations, as judged by a
fixed dollar amount.
50 The State did not realize all the agreed-upon savings in part because of a lawsuit pertaining to retiree
contributions and its failure to implement the wellness programs.
86
Next, the State obtained $700 million in cost savings from increases in employees’ costs
of health insurance over a four-year term in the arbitrated award that sets the terms of the 2015-
2019 agreement between the State and the Respondent-Union. These increases will be
implemented in large part by increasing employees’ share of the premiums.
The State claims that health insurance is not amenable to bargaining because bargaining
could not yield (or has not yielded) the savings that the State seeks, but this argument misstates
the inquiry. The question of amenability to bargaining is framed in broader terms—it compares
the nature of the employer’s problem to the union’s potential response. St. Clair and Sheriff of
St. Clair County, 28 PERI ¶ 18 (IL LRB-SP 2011)(unions need not provide specific evidence of
proposals that would benefit the bargaining process); Vill. of Bensenville, 19 PERI ¶ 119.
Where the problem is economic, the union is in a position to lessen the employer’s financial
burden and provide concessions. Am. Fed’n of State County & Mun. Employees, 274 Ill. App.
3d at 333; Clair and Sheriff of St. Clair County, 28 PERI ¶ 18; Vill. of Ford Heights, 26 PERI ¶
145. Under such circumstances, the issue is amenable to bargaining irrespective of whether the
union’s proposals will present a feasible solution to the employer’s fiscal problems. Am. Fed’n
of State County & Mun. Employees, 274 Ill. App. 3d at 333 (addressing layoffs); St. Clair and
Sheriff of St. Clair County, 28 PERI ¶ 18 (citing Vill. of Bensenville, 19 PERI ¶ 119; cf. Vill. of
Glenview, 31 PERI 187 (IL LRB-SP GC 2014). Whether the Union in this case can adequately
address the State’s financial problems and whether the State could better achieve its desired
financial savings through unilateral action is beside the point. By extension, whether the
arbitrated award in fact produced the savings sought by the State is similarly irrelevant to the
question of amenability to bargaining.51
Moreover, the State’s arguments to the contrary seek a financial hardship exception to the
duty to bargain, which is neither contemplated by the Act nor supported by precedent. In
essence, the State contends that even a fundamentally economic subject is not amenable to
collective bargaining where the Union cannot offer, or has not offered, the magnitude of savings
that the employer seeks. However, the Act favors collective bargaining, and it offers employers
no escape from that obligation on the basis of financial hardship, standing alone. 5 ILCS 315/2
51 The State contends that it loses money during bargaining because it must maintain the status quo, but
this argument presupposes that it entitled to reap the financial benefits of its own proposal. The State
cannot claim a loss based on what it could have saved from unilateral implementation if it is not
entitled to unilaterally set health insurance costs and benefits in the first place.
87
(setting forth policy). The State Panel recently rejected a similar attempt to create a financial
hardship exception to collective bargaining. Vill. of Dixmoor, 33 PERI ¶ 49 (IL LRB-SP 2016)
(elimination of fire department was a mandatory subject of bargaining, despite employer’s
financial hardship and the failure of union’s proposal to address or alleviate employer’s
economic conditions). Accordingly, health insurance is amenable to bargaining, even though the
Union’s actual proposals on health insurance may not have alleviated the State’s financial
problems.
Third, the State’s bargaining history demonstrates, in two distinct ways, that health
insurance is amenable to bargaining. First, it underscores the fact that health insurance
decisions are economic matters that are inextricably intertwined with labor costs, which the
Board and the courts have traditionally found amenable to bargaining.52 In cases where unions
simply accepted the State’s offer on health insurance, they sought and obtained economic
concessions from the State to counterbalance the impact of increased health insurance costs on
employees. Terranova admitted that the unions that chose not to bargain over health insurance
specifics pushed for economic “sweeteners,” including wage increases, in exchange for
accepting the State’s health insurance proposal, which offered terms the State had already
negotiated with AFSCME. Similarly, where the State sought to negotiate an option to reopen its
contracts on health insurance, unions repeatedly negotiated corresponding options to reopen
negotiations on wages. At least fifteen of the State’s contracts with different unions contain
such matching reopeners. Finally, where unions agreed to allow their members to opt out of the
State plan and into a union funded plan, the union also obtained financial contributions from the
State to cover each member who elected to opt out.
Next, the State’s bargaining history illustrates that the State has repeatedly and
consistently negotiated over health insurance. The fact that parties have bargained in the past
over a subject may be relevant to the third step of the Central City analysis, though it is not alone
determinative of the obligation to bargain.53 City of Elgin, 30 PERI ¶ 202 (IL LRB-SP 2014).
52 See Cnty. of St. Clair and the Sheriff of St. Clair Cnty., 28 PERI ¶18 aff'd by unpub. ord., 2012 IL App
(5th) 110317-U; Chicago Park Dist., 354 Ill. App. 3d at 603; Vill. of Ford Heights, 26 PERI ¶145; Vill. of
Bensenville, 19 PERI ¶119; City of Peoria, 3 PERI ¶2025. 53 By once bargaining and agreeing on a permissive subject, the parties, naturally, do not make the subject
a mandatory topic of future bargaining. Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404
U.S. 157 (1971).
88
Here, the State has negotiated with unions over employees’ share of health care costs for over 28
years. The State has also bargained over benefits with more than one union.
The State has bargained over health insurance costs and specific benefits with AFSCME.
Between 2000 and 2015, the State bargained four separate contracts with AFSCME, each of
which set forth varying costs of health insurance and covered benefits. These included changes
in deductibles for employees and dependents; copays for emergency room, hospital, doctor, and
specialty office visits; coverages for alcohol and substance abuse, transplant, and hospice care;
prescription drug copayments; wellness plans, including weight loss and smoking cessation;
dental plans; vision plans; medical services copayments; employee contributions for the medical
plans and contributions for dependent plan coverage; covered services in medical, dental, and
vision plans; wellness plans; and joint committees responsible for designing changes in the
health plans to reduce health costs. The State again bargained with AFSCME over health
insurance costs and benefits for the 2015-2019 contract term, though the parties did not reach
agreement on the subject of health insurance.
The State also reached agreement with a coalition of unions in 2010, including AFSCME,
regarding specific health insurance costs and benefits through the Joint Labor/Management
Advisory Committee. That Committee sought to obviate the need to reopen, and formally
renegotiate the health insurance and wage provisions of union contracts by cooperatively
reaching an agreement on health insurance savings. Although the State contends that it dealt
only with AFSCME during those discussions and that AFSCME represented all the unions’
interest, this claim is belied by the fact that the State also invited other unions to the table. It is
also undermined by the fact that each contract which referenced the Committee was signed
separately by each union and also contained a wage reopener unique to the union that signed it.
The Committee’s success in obtaining the required savings was a joint effort, motivated in part
by unions with an equal stake in controlling costs and avoiding a more adversarial process that
might increase health insurance costs without a sufficiently counterbalanced wage increase. In
short, the State engaged in successful, albeit informal, coalition bargaining on the subject of
health insurance.54
54 The State contends that the exercise was not bargaining, but it offers no definition of bargaining that
would exclude the identified conduct from its scope.
89
In addition, the State bargained over health insurance costs and benefits with the Trades
Coalition’s members in 2016. Although the Coalition was a reluctant partner, the State and the
Coalition’s members agreed to an established set of costs and benefits for the 2015-2019 contract
term. During bargaining, the State presented a number of health insurance proposals across the
table and modified aspects of those proposals in response to the Coalition’s demands. Tim Healy,
Chief Spokesperson for the Coalition, credibly testified that the Coalition attempted to negotiate
employee contributions for health insurance and to “limit some of the plan designs offered by the
State.” The parties’ proposals reflect these attempts. The Trades Coalition proposed a
withdrawal of the State’s proposed four-year wage freeze in exchange for accepting an increase
in employees’ health insurance premium contribution rates from 17% to 20%. The State
countered with a package proposal addressing the Coalition's concerns regarding bargaining unit
erosion and job training, but linked it to the Coalition’s acceptance of an increase in premium
contribution rates to 35%. The State then proposed to allow employees to maintain existing
costs of coverage if they waived the right to post-retirement health insurance, but also required
both partners of dual-state-employee households to waive their right to post-retirement health
insurance if either wished to maintain existing costs of coverage.55 The Coalition ultimately
agreed to the State’s proposal on health insurance, in exchange for the State’s withdrawal of the
proposed wage freeze, the removal of the dual-state-employee provision, financial contribution
to a union benefit fund if employees opt out of the State’s plan, and a “me too” clause that allows
the Coalition members to obtain access to AFSCME benefits56 if AFSCME obtains health
insurance terms more favorable to employees than the ones negotiated by the Coalition. In
short, the State and the Trades Coalition bargained over the 60/40 cost spit that lies at the heart
of the State’s self-termed “plan design.” They also negotiated over other benefits—negotiation
55This proposal prohibited employees of dual state employee households from circumventing the effects
of the waiver by strategically riding on each other’s insurance. For example, if one partner waived and
the other did not, the non-waiving partner could stay on the waiving partner’s cheaper insurance as a
dependent until retirement. The waiving partner could then become a dependent on the non-waiving
partner’s health insurance upon retirement, and the waiver would produce no cost-savings for the State. 56 The State contends that the parties’ negotiation of a “me too” clause is evidence that the State has never
bargained over plan design or premiums with any union but AFSCME, but this claim ignores the fact that
the State did just that with the Coalition. At best, the “me too” clause illustrates the Coalition’s
motivation to obtain more favorable benefits, and the State’s motivation to make an economic concession
in exchange for more uniformity in the benefits it provides to its unions.
90
that the State seeks to foreclose through a finding that health insurance is a permissive subject of
bargaining.
The State has also negotiated over health insurance costs and benefits with the
Respondent-Union. In 1997, the Union negotiated the inclusion of additional health benefits,
that were not previously covered by the health plan the State offered. The Union proposed that
health benefits should include hearing aids and hearing testing for officers. Although the State
did not accept the Union’s proposal, in toto, the parties ultimately agreed on a compromise that
hearing testing would be a covered benefit but hearings aids would not be covered. The fact that
hearing testing was already a covered benefit for certain titles in another union only emphasizes
that the State has provided disparate benefits to different groups. In 2000, the Union negotiated a
significant economic benefit of increased pension payout and lower service requirements for
pension eligibility, in exchange for accepting the State’s offer on health insurance. It also
negotiated over health insurance costs, salary tiers, and the manner in which employees’
insurance costs would be determined. The Union initially sought to tie health care costs to
fitness, and also proposed that age should be the determining factor for health insurance. In
addition, the Union proposed a cost-splitting framework, under which the State would pay 80%
of the cost for employee health insurance and the Union would pay 20%. The Union abandoned
its earlier proposals when the State showed most interest in the cost-splitting aspects of the
Union’s offer.
Likewise, the State bargained over health insurance costs with the IFT, the Teamsters
unions, and the INA for the 2015-2019 contract term, and it reached agreement on provisions
that were different from those set forth in other contracts covering the same term. For example,
the Master Sergeants and the Teamsters Cook County agreements require the State to make
contributions for employees who opt out of the State plan, but those contributions are greater
than those the State must make under the other contracts with opt-out provisions.57 In addition,
the INA tentative agreement calculates some employees’ health insurance costs differently than
the Trades contracts because it omits a separate salary tier that requires increased payments by
employees who earn more than $100,000 a year.
In light of this evidence, it is clear that the State negotiated over health insurance with
more than one union, including the Respondent-Union. The State’s claim to the contrary
57 The State makes these additional contributions to the Legal Education and Assistance Fund.
91
erroneously focuses on the results of bargaining rather than on the process. The State may have
obtained uniformity in health insurance terms across many contracts, but that was through
negotiation, not without it. Nor does this bargaining history indicate that the State negotiated
exclusively with AFSCME over the particular benefits covered in a health insurance plan. It
simply indicates that the State’s negotiations with AFSCME over health insurance were in some
instances more detailed that the State’s negotiations with other unions over the same subject.
Third, union members have a significant interest in bargaining over health insurance.
Courts have repeatedly held that Union members’ significant interest in the matter at stake is a
consideration in the balancing analysis. Int’l Bhd. of Teamsters, Local 700, 2017 IL App (1st)
152993, ¶ 39; Cnty. of Cook, 2017 IL App (1st) 153015, ¶ 60; Town of Cicero, 338 Ill. App. 3d
at 371. Here, employees have a strong interest in bargaining over health insurance costs because
those costs are inextricably connected to employees’ taxable income and, in turn, take-home pay.
The greater the employees’ health insurance premium, the lower their taxable income, and the
less money they take home to their families. The scope and nature of the benefit included in a
health insurance plan are also tied to employees’ financial interests and their wellbeing. If an
employee requires a treatment that is not covered by a health plan, then the employee must foot
the bill or suffer the illness. Similarly, the higher the deductible, the more employees pay out of
pocket for the particular benefit to which the deductible attaches.
These interests are even more weighty than the ones previously found by the court to
justify bargaining because they involve both money and intimate matters related to personal
health. See Int’l Bhd. of Teamsters, Local 700, 2017 IL App (1st) 152993, ¶ 39 (considering
employer’s “Gang Order”; employees had an interest in avoiding discipline from enforcement of
an order that prohibited association with members of a known criminal organization); Cnty. of
Cook, 2017 IL App (1st) 153015, ¶ 60 (considering secondary employment policy; employees
had strong interest in how they could spend time away from work and how they would be
disciplined for such off-work conduct); Town of Cicero, 338 Ill. App. 3d at 371 (considering
residency requirement; employees had strong interest in where they could live); City of Chicago,
20 PERI ¶ 183 (IL LRB-LP G.C. 2004) (health insurance is “among the most basic of fringe
benefits that [employees] enjoy and form a part of their wages, hours and terms and conditions of
employment.”).
92
The State contends that employees’ interests are irrelevant to the third prong of the
Central City test, but this is incorrect. Central City, 149 Ill. 2d at 523. The Central City Court
never foreclosed consideration of employees’ interests in assessing benefit of bargaining to the
decision-making process. In fact, employees’ unique perspective can inform the employer’s
decision and employees’ stake in a subject can motivate them to produce workable solutions that
further the employer’s own interests. Central City School Dist. 133, 9 PERI ¶ 1051 (IELRB
1993). The voicing of employees’ interest during negotiation can also promote interest-based or
principled bargaining,58 revealing those aspects of the decision that are most important each side
and guiding the way towards a mutually-agreeable outcome. It is likely for these reasons that the
Illinois Appellate Court in three different cases expressly considered employees’ interests when
assessing the benefits of bargaining to the decision-making process under the third prong of the
test. Int’l Bhd. of Teamsters, Local 700, 2017 IL App (1st) 152993 (considering employee’s
interests); Town of Cicero, 338 Ill. App. 3d at 371 (same); Cnty. of Cook, 2017 IL App (1st)
153015 (same).
The State’s claim, that unions have nothing to offer the decision-making process, is
belied by the State’s own proposal to create a Joint Labor/Management Advisory Committee on
health care benefits, comprised of an equal number of labor and management delegates. The
State proposed that the Committee would make suggestions on health insurance cost
containment, develop reward programs to incentivize employee participation in preventative
testing and screening, and provide for the development and introduction of overall plan-design
options and premium contributions.
The fact that the proposal for a Committee contemplates input rather negotiation does not
undercut the benefits of bargaining to the decision-making process. The benefits of union
“input” amplify the benefits to the bargaining process since an employer is unlikely to reap the
same benefits of that input without mandatory bargaining. Where an employer is not required to
consider suggestions, “the exclusive representative has less incentive to devote time and effort to
preparing” them. Central City School Dist. 133, 9 PERI ¶ 1051. Here, as in Central City,
unions’ interest in the outcome benefits the process by motivating them to produce proposals that
the employer is obligated to consider. Id. Accordingly, the State cannot successfully advance
58 See ROGER FISHER ET AL., GETTING TO YES: NEGOTIATING AGREEMENT WITHOUT
GIVING IN, xviii (Bruce Patton ed., Houghton Mifflin Co., 2d ed. 1991).
93
the position that bargaining does not benefit the health insurance decision-making process, while
proposing to solicit input from unions on that very issue. In light of this analysis, bargaining
benefits the decision-making process even if not all the union’s previous health insurance
proposals advanced solely the State’s interest.
By contrast, the burdens that bargaining imposes on the State’s inherent managerial
authority are minimal. First, decisions concerning health insurance do not turn on a change in
the nature or direction of the employer’s operations, as the State here suggests. The Board has
previously found that a decision turns on a change to the nature or direction of the employer’s
operation where the employer provides a different service or provides its existing services in a
substantially different way. Chicago Transit Authority, 32 PERI ¶ 161 (IL LRB-LP 2016)
(employer changed existing transit services in a substantially new way when it allowed
customers to pay with credit debit card using “tap and go” entrance); City of Evanston, 29 PERI
¶ 162 (IL LRB-SP 2013) (creation of a centralized 311 call center and elimination of department-
specific was matter of inherent managerial authority). Here, however, the State has presented
insufficient evidence that decisions concerning health insurance affect any of the functions that
the State provides to taxpayers. Nor has the State sufficiently shown that those decisions more
specifically impact the services that the Illinois State Police provides.
The State contends that bargaining would require the State to change how it operates by
altering the manner in which the Director designs and procures health plans, but the State
misconstrues the focus of the inquiry. In considering whether a decision concerns a change to
the nature or direction of the employer’s operations, the proper focus is on the proposed change
as compared to the employer’s public service mission. City of Evanston, 29 PERI ¶ 162; see also
City of Chicago, 20 PERI ¶ 183 (basic direction of public employer’s “enterprise” was unrelated
to identity of insurance carrier). Here, the State’s proposed change includes a shift of health
insurance costs to employees and a unilateral selection by the State of benefits that will be
covered under its health plan. These issues do not relate to the State’s assessment of how to
most effectively provide public services because health insurance is not a public service. See
discussion supra; cf. City of Evanston, 29 PERI ¶ 162 (emphasizing the public services of the
employer in assessing burdens of bargaining).
Even if the Board determines that the design of a health plan concerns “the nature or
direction of the employer’s operations,” bargaining would not effect a fundamental change in the
94
way the CMS Director designs plans for health benefits. The Director has historically designed
plans in collaboration with state employee unions. It has negotiated plan design with AFSCME,
it has developed plans with unions through the Joint Labor/Management Advisory Committee,
and it has negotiated fundamental aspects of plan design with the Respondent-Union and the
Trades unions. The State has also negotiated with the Respondent-union over the extent of
health insurance coverage available to that particular union’s members and has added covered
benefits through negotiation. While past bargaining does not alone render health insurance a
mandatory subject, the State cannot claim that bargaining fundamentally changes the way the
Director develops a health insurance plan where the Director previously developed plans through
bargaining.
Similarly, bargaining would not effect a fundamental change in the way the CMS
Director designs plans for health benefits when viewed in light of the CMS Director’s legal
obligations. SEGIA’s provisions acknowledge that bargaining helps develop health insurance
plans. Although Section 6 references solely the Director’s authority to design a plan, Section 5
recognizes that unions participate, noting that if “collective bargaining over employee benefit
programs…remains pending” as of April 15., the State may delay the benefit choice period. 5
ILCS 375/5. It similarly acknowledges that the Director will seek contracts to implement those
bargained-for benefits after bargaining has completed, noting that “portions of any proposed
collective bargaining agreement that would require implementation through contracts entered
into under this Act [SEGIA]” must be submitted by the Director to COGFA. Id. The fact that
these references to collective bargaining appear in the SEGIA’s policy supports the finding that
the CMS Director will design plans for health benefit programs in conjunction with Unions and
that bargaining with the Union represents no fundamental change.
Nor would bargaining change the manner in which the Director of CMS contracts for, or
procures, benefits. The health insurance procurement process is separate from the collective
bargaining process. Unions take no part in any of the processes set forth under the Procurement
Code, which include drafting requests for proposals and evaluating bids. Nor does the Union’s
final offer (or the arbitration award) require the Director of CMS to deviate from the
Procurement Code’s requirements. It does not infringe on the Director’s obligations to ensure
competition among health insurance providers. It does not intrude on the Director’s negotiation
of rates with vendors. And, it does not mandate the award of a contract to a particular carrier; it
95
simply identifies existing carriers and specifies the cost to employees of selecting one carrier
over another.
Notably, the State’s obligation to enter into contracts to effectuate collectively bargained
health benefits is not newly imposed by its current negotiations with the Union. Rather,
SEGIA’s plain language already acknowledges that the Director will seek contracts to implement
those bargained-for benefits after bargaining has completed. Section 5 notes that “portions of
any proposed collective bargaining agreement that would require implementation through
contracts entered into under this Act [SEGIA]” must be submitted by the Director to COGFA. 5
ILCS 375/5.
Contrary to the State’s contention, the prospect of interest arbitration does not bear on the
mandatory or permissive nature of health insurance under the Central City test, even in this case,
where the State claims that the arbitrator’s award would usurp the Director’s authority. Village
of Dixmoor, 33 PERI ¶ 49. Arbitration is simply the mechanism by which employers and
unions of protective service employees resolve their impasse over subjects already deemed
mandatory. The Board’s decisions and the Act itself support this finding. While the Board has
sympathized with the “frustration…[of] … a public employer…compelled to go through the
interest arbitration process,” it has never found that statutory obligation to influence the
balancing test. Id. (noting that employers must “trust…the interest arbitrator to take cognizance
of” its various concerns). Furthermore, the legislature would have would have listed health
insurance as one of a number of other subjects specifically excluded from an arbitrator’s award,
had it sought to foreclose the arbitrator’s consideration of health insurance. Vill. of Oak Lawn
v. Illinois Labor Relations Bd., State Panel, 2011 IL App (1st) 103417, ¶ 18 (a topic that is
excluded from arbitration by section 14(i) cannot be a mandatory bargaining subject, and the
Central City test does not apply); 5 ILCS 315/14(i).
The State’s attempt to shoehorn its interest arbitration obligation into the balancing test is
no more persuasive where it claims that the Director has a competing statutory obligation under
the SEGIA to provide a program of health benefits for the program’s members. The Act’s
interest arbitration provisions already require an interest arbitrator to consider the lawful
authority of the employer, such as the SEGIA, in crafting his award. 5 ILCS 315/14(h)(1) and
(k). The Act also sets forth a mechanism by which an employer may seek review of the award,
if the arbitrator failed to give that lawful authority due consideration. Id.; Village of Dixmoor,
96
33 PERI ¶ 49 (requiring interest arbitration even upon showing of severe financial hardship);
Village of North Riverside, 33 PERI ¶ 33 (IL LRB-SP 2016) (same).
Next, the State provided insufficient evidence to support its claim that bargaining over
health insurance would decrease its ability to effectively provide the public services it is
obligated to provide. The State did not show that any areas of service to tax payers would suffer
from the increased administrative burden of implementing a new health insurance plan or the
financial reporting requirements, which may be rendered more complex with the adoption of
more plans. A review of the facts indicates that there is an incentive for the State to provide
accurate reports to the federal government (SWCAP report), as an inaccurate report can result in
a penalty to the State, but even this potential for a penalty does not relate to the State’s provision
of public services absent any evidence concerning the penalty’s effect. Indeed, the Central City
test requires a clearer link between the subject of bargaining and the employer’s public service
mission to identify a burden. Bd. of Trustees of Univ. of Illinois, 224 Ill. 2d at 105 (addressing
inherent managerial authority); County of Cook, 2017 IL App (1st) 153015, ¶ 59 (requiring
employer to show how the subject of bargaining would diminish its ability to effectuate its
mission as custodian of the jail and keeper of the peace).
The State’s statutory obligation to provide a health insurance program does not
transform the State’s generalized burden into a burden on its inherent managerial authority. The
question of inherent managerial authority focuses not on the source of the obligation, but on the
basic function or the public service mission of the employer in relation to the identified subject
of bargaining. See cases infra. In the public sector, statutes often set forth that mission in
concrete terms and provide context for the analysis, but the existence of a statute by itself does
not establish that the disputed subject of bargaining burdens an employer’s inherent managerial
authority or that unilateral action should prevail. County of Cook, 2017 IL App (1st) 153015;
see also Illinois Department of State Police, 31 PERI ¶ 176 (IL LRB-SP G.C. 2014).
Here, the increased effort required of the State to procure and administer newly
negotiated health plans does not burden its inherent managerial authority because the State’s
public service mission is not the provision of a health insurance program to employees, the
procurement contracts, or the financial reporting related to their procurement. Bd. of Trustees of
Univ. of Illinois, 224 Ill. 2d at 105 (addressing inherent managerial authority); Cnty. of Cook,
2017 IL App (1st) 153015, ¶ 59 (requiring employer to show how the subject of bargaining
97
would diminish its ability to effectuate its mission as custodian of the jail and keeper of the
peace); City of Evanston, 29 PERI ¶ 162 (finding subject permissive where the issue “essentially
concern[ed] the Employer's determination of what is the most effective way to provide public
services”); see also City of Chicago, 20 PERI ¶ 183 (basic direction of public employer’s
“enterprise” was unrelated to identity of insurance carrier).
In addition, the State’s claim of burden is diminished by the fact that it has not shown
any burdens to be significant compared to the burdens imposed by its own proposed changes.
For example, the State notes that it must train group insurance field representatives on new
health insurance plans, and that this new training takes considerable man hours. Yet, if the State
moves forward with the health insurance plan it proposed to the Union, it must undertake the
same type of training. Indeed, the State’s proposed expansion of each of its existing contracts to
include three new plans poses an even greater training burden than the single set of terms
proposed by the Union. The State seeks to develop three new plans for six existing contracts and
obtain them through sole-source procurement. It also intends to undertake a full procurement to
provide another three plans to supplement its Blue Cross Blue Shield product. Certainly, if the
State moves forward with the Union’s plan, while simultaneously pursuing its own plan
expansions, the State’s administrative burdens increase on the whole. However, it is difficult to
accept the State’s claim of overwhelming administrative burden where it pales in comparison to
the burden the State voluntarily assumes for its own plans.
This reasoning applies with equal force to the State’s reporting requirements. Currently,
the State reports to COGFA on each plan administered by its 11 vendors and it also completes an
annual Comprehensive Annual Financial Report (CAFR), which takes into account every
insurance plan used by the State. The State’s proposal to add three additional plans to its each
of its existing vendor contracts expands the State’s reporting requirements far more than
implementing the health insurance terms awarded by the arbitrator, which do not require the
creation of numerous new plans. It is true that reporting for both the State’s proposed expansion
and the arbitrated health insurance terms represent an increased reporting burden from that
incurred by the State’s expansion, standing alone. But the relative reporting burden imposed by
the arbitrated terms are small compared to the burdens that the State wishes to undertake in
expanding its health insurance program to include three additional plans (gold, silver, and
bronze) under each existing contract.
98
Moreover, the State’s claim of burden regarding its obligations to provide reports to
COGFA is additionally specious because COGFA may waive them “upon the written request by
the Director.” 59 5 ILCS 375/5(i). For this reason too, the State’s related statutory obligation to
set a benefit choice period would not impact the State’s COGFA reporting requirements, where
COGFA, another arm of the State, can simply grant a waiver.60
The State’s obligation to develop health insurance rates is also not significantly burdened
by bargaining with the Union over health insurance. The State admits on brief that its rate
setting methodology remains consistent, regardless of plan design and that the State renegotiates
health insurance rates yearly, irrespective of collective bargaining. The collection and
compilation of data required for rate setting might be more complex with additional plans, but is
one that the State already is well-equipped to handle.
Similarly, bargaining over health insurance would not appreciably burden the State’s
obligation to offer a benefit choice period. The State has the flexibility to delay the benefit
choice period if “collective bargaining over employee benefit programs for the next fiscal year
remains pending on April 15.” 5 ILCS 375/5(v). In such cases of delay, the timing of the benefit
choice period is fixed with respect to the date on which the collective bargaining agreement is
ratified, and the delayed benefit choice period would not violate the SEGIA. Id. In addition, the
59 SEGIA provides the following:
(i) By April 1 of each year, the Director must report and provide information to the Commission
concerning the status of the employee benefits program to be offered for the next fiscal year. Information
includes, but is not limited to, documents, reports of negotiations, bid invitations, requests for proposals,
specifications, copies of proposed and final contracts or agreements, and any other materials concerning
contracts or agreements for the employee benefits program. By the first of each month thereafter, the
Director must provide updated, and any new, information to the Commission until the employee benefits
program for the next fiscal year is determined. In addition to these monthly reporting requirements, at any
time the Commission makes a written request, the Director must promptly, but in no event later than 5
business days after receipt of the request, provide to the Commission any additional requested
information in the possession of the Director concerning employee benefits programs. The Commission
may waive any of the reporting requirements of this item (i) upon the written request by the Director.
Any waiver granted under this item (i) must be in writing. Nothing in this item is intended to abrogate any
attorney-client privilege.
5 ILCS 375/5(i) (emphasis added). 60 If the State contends that COGFA is independent of CMS, and might not grant the waiver, then it
cannot simultaneously argue that bargaining would burden COGFA’s reporting requirements. If COGFA
cannot grant a waiver because it is independent of CMS, then the burdens on COGFA’s reporting
obligations are not relevant to the employer’s alleged inherent managerial authority because only CMS is
the employer.
99
State’s administrative task of setting forth available benefits in a booklet is a purely clerical one,
and the obligation to produce additional, or more complex booklets with additional health
insurance options is not, on its face, significant.
Likewise, the State does not explain how the general burden of undertaking even a full
procurement to implement the Union’s proposal constitutes a burden more specifically on its
inherent managerial authority. The SEGIA already contemplates that the Director will enter
contracts to implement collectively bargained benefits. 5 ILCS 375/5. Moreover, the
procurement process is a necessary vehicle by which the State obtains contracts for health
insurance. Certainly, there are circumstances in which the State may shortcut the full
procurement process, but there is no guarantee that the existing vendor will be interested in
expanding/modifying its services or that the independent CPO will grant permission for a sole-
source procurement over a competing vendors’ objections. Notably, these risk apply equally to
plans designed unilaterally by the State and plans negotiated between the State and its unions.
For example, one health insurance provider rejected the State’s recent request that it expand its
services to include three additional plans, and the State will therefore need to conduct a full
procurement to supplement that vendor’s services. In addition, the possibility remains that the
CPO will not approve sole source procurement for the States remaining proposed plan
expansions if competing vendors object.61
The remaining burdens that the State identifies are likewise merely administrative
burdens rather than burdens on any inherent managerial authority. The State contends that
bargaining would be burdensome because it would multiply the insurance procurement and
implementation process by the number of unions with which it must bargain and would
undermine the State’s ability to provide affordable and adequate coverage. However, both the
Board and the Courts have rejected such arguments.
In County of Cook, the court found that employees’ significant interest bargaining over
the subject of residency outweighed any burden stemming from the employer’s obligation of
bargaining with many different unions and its interests in maintaining consistency it its residency
requirements. County of Cook, 347 Ill. App. 3d at 553. It reasoned that employers are required
to bargain with unions over mandatory subjects “irrespective of their plurality,” and it reasoned
61 Although the State did receive approval for sole source procurement for its remaining plan expansions,
it never finalized that approval. Accordingly, it must re-post its notice of intent to obtain sole source
procurement, to allow interested vendors to object.
100
that whether the employer could secure consistency was matter left to the parties in negotiations.
Id.
The Board in Kankakee applied the same rationale when addressing the employer’s
obligation to bargain over the identity of its health insurance carrier. City of Kankakee, 9 PERI ¶
2034. There, the Board rejected the dual claims that the rising insurance costs were best
mitigated through the employer’s unilateral selection of insurance carrier and the employer
would have difficulty in achieving the agreement of all the unions on the choice of the insurance
carrier where it negotiated with more than one union. Id.
Former General Counsel Jacalyn Zimmerman similarly noted that the difficulty of
reaching consensus among the bargaining units over the selection of health insurance carrier did
not implicate inherent managerial rights as contemplated by Section 4 of the Act. City of
Chicago, 20 PERI ¶ 183. Even if it did, employees’ concerns over health insurance benefits “far
outweigh[ed] any administrative inconvenience that the [employer] could or very well might
experience.”
The complex implementation and procurement process emphasized by the State in this
case is similarly not a burden on its inherent managerial authority, as the legislature has defined
that term in Section 4 of the Act, even where bargaining might multiply that process. The
legitimacy of the State’s concern over increased costs and potentially balkanized health plans,
standing alone, does not show that bargaining burdens the employer’s inherent managerial
authority, absent some connection to those managerial rights outlined in Section 4. County of
Cook, 347 Ill. App. 3d at 553; City of Kankakee, 9 PERI ¶ 2034 (difficulty of reaching
consensus among many unions on insurance carrier and employer’s concern over rising
insurance costs were not unique to employer); see also City of Chicago, 20 PERI ¶ 183.
The Board and the courts have also rejected the other generalized burdens of bargaining
referenced by the State on brief. The State contends that bargaining over health insurance is
time-consuming, labor intensive, and might cause an impasse. However, the Appellate Court has
held that “the possibility of increased tensions between the parties, or for that matter even an
impasse, is not unique to negotiations over a reduction in force, but applies to any issue subject
to bargaining,” and is not a burden that weighs against bargaining. Am. Fed’n of State County &
Mun. Employees, 274 Ill. App. 3d at 333.
101
The State’s attempt to link this burden to its statutory obligation under the SEGIA and the
Procurement Code is unavailing. The statutory deadlines for COGFA reporting may be waived,
and the statutory deadline for the benefit choice period can be changed to accommodate
collective bargaining over health insurance benefit programs. 5 ILCS 375/5. Finally, the
inherent costs of bargaining are ones that the legislature found fit to impose and they do not
change the State’s obligation to bargain over a subject that would otherwise be mandatory.
Even if the Board finds that the State’s provision of health insurance is part of its public
service mission or that the quality of health insurance relates to its standards of service, the
significant benefits of bargaining outweigh the burdens that bargaining imposes on the State’s
inherent managerial authority. The economic nature of health insurance weighs heavily in favor
of bargaining. The employer’s concerns over alleged standards of service do not justify
unilateral action where the Union can add value to the decision-making process by offering both
economic and non-economic suggestions. St. Clair and Sheriff of St. Clair County, 28 PERI ¶
18.
The State’s desire to save money is commendable, but bargaining does not burden the
State’s inherent managerial authority even if the State could achieve greater taxpayer savings by
unilaterally setting health insurance terms and taking advantage of economies of scale. Vill. of
Westchester, 16 PERI ¶ 2034 (desire to save taxpayer money did not show bargaining would
burden employer’s inherent managerial authority). That outcome is even more warranted in this
case where the State concedes that its primary concerns about health insurance relate to the value
it receives from the vendor, which may be largely addressed outside the collective bargaining
context, through negotiations with the vendor.
Most importantly, decisions regarding health insurance costs and benefits strike at the
very heart of the employment relationship. The Board has traditionally viewed these benefits as
wages, and courts have acknowledged that health insurance is a “typical” term and condition of
employment. Bd. of Educ. of City of Chicago, 2015 IL 118043, ¶ 26; Bd. of Educ. of Sesser-
Valier Cmty. Unit Sch. Dist. No. 196 v. Illinois Educ. Labor Relations Bd., 250 Ill. App. 3d 878,
882 (4th Dist. 1993) (finding violation of the IELRA based on employer’s side agreement with
unit employee on mandatory subject of health insurance contributions); City of Blue Island, 7
PERI ¶ 2038. They are “among the most basic of fringe benefits employees enjoy.” City of
102
Chicago, 20 PERI ¶ 183. Moreover, the Board’s decisions,62 the decisions issued by its General
Counsels that address the balancing test,63 the non-precedential decisions issued by its ALJs,64
and the decisions of the Illinois Educational Labor Relations Board65 express a consensus that
health insurance is mandatory subject of bargaining. This is the case even where bargaining
could, or does, impose a burden on the employer’s inherent managerial authority. City of
Kankakee (Kankakee Metro. Wastewater Util.), 9 PERI ¶ 2034 (IL SLRB 1993); Peoria School
District 150, 22 PERI ¶ 180 (IELRB ALJ 2006), aff’d, 24 PERI ¶ 105 (IELRB 2007); see also
City of Chicago, 20 PERI ¶ 183.
In sum, health insurance is a mandatory subject of bargaining.
3. Sanctions
The Union contends that the State made allegations or denials without reasonable cause
when it claimed, in its opening statement and through Marcia Armstrong’s testimony, that it had
never bargained with any union but AFSCME over health insurance. The Union further asserts
that the State’s claims to this effect spurred frivolous litigation because they required the Union
to expend resources in refuting these false statements. For the reasons set forth below, the
Union’s motion for sanctions is denied in part and granted in part.
62 City of Kankakee (Kankakee Metro. Wastewater Util.), 9 PERI ¶ 2034 (IL SLRB 1993); City of Blue
Island, 7 PERI ¶ 2038. 63 Illinois State Police, 32 PERI ¶ 162; Illinois Department of State Police, 31 PERI 176 (IL LRB-SP
G.C. 2014); County of Peoria and Sheriff of Peoria County, 31 PERI ¶ 166 (IL LRB-SP G.C.
2013)(addressing proposal allegedly seeking waiver of mid-term right to bargain over changes to health
insurance); City of Danville (Police Department), 31 PERI ¶ 165 (IL LRB-SP G.C. 2013)(addressing
proposal allegedly seeking waiver of mid-term right to bargain over changes to health insurance); City of
Taylorville, 31 PERI ¶ 162 (IL LRB-SP G.C. 2012) (addressing proposal allegedly seeking waiver of
mid-term right to bargain over changes to health insurance); City of Danville, 26 PERI ¶ 32 (IL LRB-SP
G.C. 2010) ( addressing proposal allegedly seeking waiver of mid-term right to bargain over changes to
health insurance); City of Hickory Hills, 18 PERI ¶ 2044 (IL LRB-SP G.C. 2002) (health insurance
retirement benefits for current unit members was mandatory subject). The Acting General Counsel in
Case No. S-DR-17-001 did not apply the balancing test. 64 County of Jackson, 8 PERI ¶ 2006 (IL SLRB H.O. 1992) (health insurance was mandatory subject of
bargaining, but finding waiver). 65 Peoria Federation of Support Staff/ Cafeteria/ Clerical/ Paraprofessional, Local 6099 v. Peoria School
District 150, 22 PERI ¶ 180 (IELRB ALJ 2006), aff’d, 24 PERI ¶ 105 (IELRB 2007); Georgetown-Ridge
Farm Comm. Unit Dist. 4, 10 PERI ¶ 1044 (IELRB 1994) (impact of a reduction in force on health
insurance was mandatory subject of bargaining).
103
Section 11 (c) of the Act provides that the Board has discretion to include an appropriate
sanction in its order if a party has made allegations or denials without reasonable cause and
found to be untrue, or has engaged in frivolous litigation for the purposes of delay or needless
increase in the cost of litigation. 5 ILCS 315/11(c). The test for determining whether a party has
made factual assertions which were untrue and made without reasonable cause is an objective
one of reasonableness under the circumstances. Chicago Transit Auth., 16 PERI ¶ 3021 (IL
LLRB 1999); Chicago Transit Auth., 15 PERI ¶ 3018 (IL LLRB 1999); Cnty. of Rock Island, 14
PERI ¶ 2029 (IL SLRB 1998), aff’d, 315 Ill. App. 3d 459 (3rd Dist. 2000). The test for
determining whether a party has engaged in frivolous litigation is whether the party’s defenses to
the charge were not made in good faith or did not represent a “debatable” position. Chicago
Transit Auth., 16 PERI ¶ 3021; Cnty. of Cook, 15 PERI ¶ 3001 (IL LLRB 1998); Cnty. of Cook
and Sheriff of Cook Cnty., 12 PERI ¶ 3008 (IL LLRB 1996); City of Markham, 11 PERI ¶ 2019
(IL SLRB 1995). The courts view a party’s legal arguments in the context of all its submissions.
Wood Dale Fire Protection Dist. v. Ill. Labor Rel. Bd., State Panel, 395 Ill. App. 3d 523, 535-36
(2nd Dist. 2009). They have held the imposition of sanctions to be inappropriate, even where the
Respondent has taken a legal position that is incorrect in the face of non-debatable black letter
law, as long as the Respondent’s remaining arguments and submissions to the Board are
supportable. Wood Dale Fire Protection Dist., 395 Ill. App. 3d at 535-36.
The Union’s motion is denied to the extent that it is based on alleged frivolous litigation
because there is insufficient evidence that the State advanced the disputed claim for the purpose
of delay or to needlessly increase costs. At the time the State claimed that it had never bargained
health insurance with unions other than AFSCME, it already knew that Union planned to call at
least one witness on the issue of the State’s bargaining history. From the State’s perspective, its
claim would not have changed the course of the hearing and it is therefore difficult to find that
the State made the claim for purposes of delay or to increase the Union’s costs.
The Union’s motion for sanctions based on the State’s opening statements is also denied
because the Board has never before awarded sanctions based on opening statements made in a
hearing on an unfair labor practice complaint.66 Although ALJs have issued sanctions in such
cases, they have done so only where the opening statement contradicted an earlier pleading, and
66 The Board has issued sanctions for false claims made in opening statements that were presented in
compliance hearings. City of Markham, 28 PERI ¶ 124 (IL LRB-SP 2012).
104
the Union here has made no such claim. City of Waukegan, 30 PERI ¶ 33 (IL LRB-SP ALJ
2013) (denial in opening statement that contradicted pleading was sanctionable).
Finally, the Union’s related argument for sanctions based on Marcia Armstrong’s
testimony is granted, but the sanction is limited to an admonishment. The State made denials
through Armstrong’s testimony without reasonable cause, which were found to be untrue.
Armstrong testified that the State had never bargained over health insurance with any union other
than AFSCME, but the evidence without a doubt proved the contrary. The State repeatedly
bargained over health insurance with many unions other than AFSCME, most notably, the
Respondent-Union in this case. Contrary to the State’s assertion, the details of the State’s
negotiation with those unions, as compared to its negotiations with AFSCME, are irrelevant
where Armstrong did not qualify her blanket denial that negotiation with other unions on this
subject simply never occurred. Although Marcia Armstrong may have had no specific intent to
deceive, such intent is not necessary to find sanctions appropriate. Chicago Transit Auth., 15
PERI ¶ 3018 (finding sanctions appropriate where witness testimony was substantially
impeached).
However, sanctions are limited to an admonishment rather than an award of attorneys’
fees and costs because an award of fees for 10 days of hearing is excessive when the sanction
relates to a matter critical to the Union’s defense, which the Union already planned to address
through its own witnesses. City of Harvey, 18 PERI ¶2032 (IL LRB-SP 2002)(party’s denial did
not warrant sanctions where it concerned a critical element of opposing party’s case).67
Thus, the Union’s motion for sanctions is denied in part and granted in part.
II. CONCLUSIONS OF LAW
1. The Union did not violate Section 10(b)(4) of the Act when it submitted its
proposal on health insurance to the interest arbitrator.
2. Health insurance is a mandatory subject of bargaining.
3. The Union’s motion for sanctions is denied in part and granted in part.
67 In City of Harvey, the Board applied this principle to a respondent’s denial of a critical element of the
alleged violation, but the rationale reasonably extends to a charging party’s denials of a respondent’s
critical defense of the charged allegation.
105
III. RECOMMENDED ORDER
The complaint is dismissed.
IV. EXCEPTIONS
Pursuant to Section 1200.135 of the Board’s Rules, parties may file exceptions to the
Administrative Law Judge’s Recommended Decision and Order and briefs in support of those
exceptions no later than 30 days after service of this Recommendation. Parties may file
responses to exceptions and briefs in support of the responses no later than 15 days after service
of the exceptions. In such responses, parties that have not previously filed exceptions may
include cross-exceptions to any portion of the Administrative Law Judge’s Recommendation.
Within seven days from the filing of cross-exceptions, parties may file cross-responses to the
cross-exceptions. Exceptions, responses, cross-exceptions and cross responses must be filed
with the Board’s General Counsel, at 160 North LaSalle Street, Suite S-400, Chicago, Illinois
60601-3103, or to the Board's designated email address for electronic filings, at
[email protected]. All filing must be served on all other parties. Exceptions, responses,
cross-exceptions and cross-responses will not be accepted at the Board’s Springfield office. The
exceptions and/or cross-exceptions sent to the Board must contain a statement of listing the other
parties to the case and verifying that the exceptions and/or cross-exceptions have been provided
to them. The exceptions and/or cross-exceptions will not be considered without this statement.
If no exceptions have been filed within the 30-day period, the parties will be deemed to have
waived their exceptions.
106
Issued at Chicago, Illinois this 31st day of March, 2017
STATE OF ILLINOIS
ILLINOIS LABOR RELATIONS BOARD
STATE PANEL
/S/ Anna Hamburg-Gal
Anna Hamburg-Gal
Administrative Law Judge