New option could cut state retiree medical costs

by John Seiler | March 10, 2015 12:30 pm

geriatricsFairly well known is California’s state and local pension problem, as much as $500 billion according to a 2011 Stanford University study[1].

Less well known is the coming acute shortage in medical care for such retirees. Last December, Controller John Chiang (now the state treasurer) pegged [2]those unfunded liabilities at $72 billion.

That caught Gov. Jerry Brown’s attention. He has proposed a voluntary reform. According to[3], “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.”

State Sen. Richard Pan, D-Sacramento, the chairman of the Public Employee Retirement Committee, announced he will hold hearings on the proposal. He also is a pediatrician.

Pan said, “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.”

A big question will be how many employees actually would take the new “voluntary” option, and how much the overall unfunded liability would be reduced.

Another factor is that new actuarial numbers[4] show retirees living longer, which also could drive up overall costs and negate any new savings.

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