The State Worker

Bills flesh out Jerry Brown’s plans for retiree health benefits

Even as Gov. Jerry Brown bargains changes to retiree health benefits with four state-employee unions, his administration has drawn up some unnumbered bills that reveal the governor’s thinking on how to cut those costs long-term.

Here’s a summary of the current benefits and policies and how the bills would change them. Keep in mind that all these are “placeholder” measures pending the outcome of negotiations with the unions. Some apply only to future hires. Others apply to both current and future employees and retirees.

The status quo: The state sets the maximum subsidy for retirees’ health insurance premiums to equal the weighted average of premiums for the four plans with the most active employees enrolled. The state also subsidizes coverage for retirees’ dependents at a lower percentage.

What the bill would do to future employees: Cut the maximum subsidy for retirees and their dependents to 80 percent of the weighted average when employees first hired after Jan. 1, 2016 eventually retire.


The status quo: The state’s retiree medical subsidy kicks in at half the maximum after 10 years of state service and rises incrementally to 100 percent for 20 years of state employment and beyond.

What the bill would do: Adds five years to the service time threshold to qualify for the minimum subsidy for retirees who start state service Jan. 1, 2016 and later. In other words, state employees hired next year and beyond would have to work 15 years for half the subsidy and 25 years for 100 percent.


The status quo: The state reimburses state retirees’ Medicare Part B premium share. In most cases it’s about $105 each month, but the figure will rise over time with inflation. The state Department of Finance figures Part B reimbursements to retirees for fiscal 2014-15 will total nearly $200 million. That’s almost 12 percent of the $1.7 billion in medical bills the state will pay for this year.

Generally speaking, the federal government deducts Part B payments from retirees’ Social Security checks. CalPERS then reimburses them through pension payments. The Brown administration says that only three other states pay this premium for their retirees.

What the bill would do: Eliminates the retiree reimbursement for retirees hired on or after Jan. 1, 2016.


The status quo: Although increasingly common in the private sector, the state does not currently offer employees a health savings account program to set aside money for medical expenses. The savings accounts enjoy tax advantages and, when paired with a certain types of high-deductible health insurance plans that the state also does not offer, can be tapped to cover out-of-pocket medical expenses.

What the bill would do: Authorizes the Department of Human Resources to set up and administer health savings accounts for state employees. The new savings accounts would go with a new high-deductible medical plan that Brown wants CalPERS to offer.


The status quo: Current law says that a state employee’s “family member” can qualify for dependent medical coverage within the boundaries set by CalPERS board. It defines “family member” as “an employee’s or annuitant’s spouse or domestic partner and any child, including an adopted child, a stepchild, or recognized natural child.”

What the bill would do: Adds this line to the law: “‘Family member’ does not include a former spouse or former domestic partner of an employee or an annuitant.”

The measure also would require state departments collect documentation at least once every three years to verify coverage eligibility for spouses, domestic partners, stepchildren, domestic partner children.

State employers would have to collect proof of eligibility “at least once annually for other children for whom the state employee or state annuitant has assumed a parent-child relationship.”

The added language follows an extensive audit by CalPERS to clear its health insurance rolls of unqualified beneficiaries.


The status quo: The law says that employees or retirees hired in 1985 and later who qualify for Medicare Part A and Part B “may not be enrolled” in a basic state health-benefit plan. Those who qualify for Medicare Part D prescription coverage also “may not” be in a health plan with different drug coverage.

What the bill would do: Changes the law’s wording from “may not” to “shall not” to ensure everyone who qualifies for federal Medicare benefits is off the state’s insurance rolls. It also prohibits the CalPERS board from making exceptions to the law as of July 1, 2015.