Pay Cut

By Ed Mendel
Monday, March 9, 2015

Something that rarely happens in California could result from Gov. Brown’s proposal to contain growing state worker retiree health care costs — benefits received by current government retirees might be reduced.

Part of the governor’s proposal allows state workers to choose a new low-cost health plan, increasing take-home pay. If enough choose the new option, the average cost of four health plans used to set retiree health care insurance payments would be lowered.

How many would choose the option is unknown. But the low-cost plan may have the potential to soon slow some of the rapid growth in health care costs, unlike other parts of the proposal that have delayed impact and require bargaining with labor unions.

Last week at a Senate and Assembly public retirement committee orientation, the new Senate chairman, Richard Pan, D-Sacramento, told a Brown administration official his committee will hold a hearing on the low-cost health plan proposal.

He did not mention “vested rights,” which under California court decisions protects public pensions from cuts. It’s been the central issue in attempts by local governments to cut retiree health care benefits in recent years.

Pan, a pediatrician and former chairman of the Assembly health committee, said “there are some policy concerns” about whether the low-cost options ensures state workers have access to adequate health care when they retire.

“I realize it’s voluntary but, having been a former health committee chair, voluntary still has certain implications on choices people make, and so forth, and how that can impact other employees,” Pan said.

The senator said his committee hearing on the low-cost health plan would be separate from budget committee action on the plan. Some past decisions on key budget issues have emerged from leadership meetings.

Odd as it may seem, the health care subsidy state workers receive when retired, often 100 percent of the insurance premium, is more generous than the subsidy on the job, usually 80 to 85 percent of the premium, depending on labor bargaining.

Active state workers once had the same full health care subsidy as retirees. Then in a state budget crunch in the early 1990s, the state saved money when workers agreed in labor contract bargaining to pick up some of the health care cost.

There is no labor bargaining for retirees. So retirees continue to receive the average payment of the four health plans with the largest state worker enrollment, which can cover 100 percent of the premium for retirees and 90 percent for their dependents.

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