BILL NUMBER: SB 1464 CHAPTERED 09/26/02 CHAPTER 896 FILED WITH SECRETARY OF STATE SEPTEMBER 26, 2002 APPROVED BY GOVERNOR SEPTEMBER 25, 2002 PASSED THE SENATE AUGUST 30, 2002 PASSED THE ASSEMBLY AUGUST 28, 2002 AMENDED IN ASSEMBLY AUGUST 26, 2002 AMENDED IN ASSEMBLY JUNE 20, 2002 AMENDED IN SENATE MAY 24, 2002 INTRODUCED BY Senator Soto FEBRUARY 15, 2002 An act to amend Section 22825 of the Government Code, relating to public employees, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST SB 1464, Soto. Public employees' health care benefits: employer contributions. The Public Employees' Medical and Hospital Care Act provides for health benefits plans and contracts for public employees and sets forth the public employer's contributions to those plans, which contributions are deposited into 2 continuously appropriated funds. Pursuant to these provisions, the public employer's contribution for each employee or annuitant is required to be the amount necessary to pay the cost of enrollment for that employee or annuitant, including any family members enrolled in a health benefit plan, or if less, $16 per month. This bill would increase the above amount to $97 per month over 5 years commencing on January 1, 2004, and would require that amount to be adjusted annually thereafter by the board to reflect any change in the medical care component Consumer Price Index. By increasing the contributions to continuously appropriated funds, the bill would make an appropriation. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares all of the following: (a) Retired public employees live on fixed incomes that have eroded significantly over the last several years due to inflation. (b) In order to meet basic day-to-day living essentials, retirees depend on supplemental benefits, such as health care coverage, and even more so on their pensions, which under the California Public Employees' Retirement System (CalPERS) are subject to a minimum 2 percent cost-of-living adjustment each year. (c) As inflation continues to diminish the real value of a retiree' s pension, the portion of living expenses a retiree depends on from the plan decreases, thereby making retirement planning more difficult and sometimes impossible. (d) Finding affordable quality health care has become virtually impossible in today's challenged market, especially for retirees, as a result of skyrocketing health care costs, including soaring prescription drug fees, the costs of which are increasing several times faster than other healthcare services. (e) The CalPERS board is charged with the administration of the Public Employees' Medical and Hospital Care Act (PEMHCA), which provides health benefits for hundreds of thousands of active and retired public employees whose employers contract with CalPERS for health benefits. (f) Due to consistently high medical inflation rates, CalPERS recently deemed it necessary to approve health care premium increases under PEMHCA. (g) With high medical inflation rates, subsequent health care premium increases and a restricted 2 percent annual inflationary cap on CalPERS pensions, retiree medical costs over time consume, and in some cases exceed, a retired member's pension allowance, leaving nothing for other day-to-day necessities. (h) The minimum amount an employer participating in PEMHCA must pay on behalf of its retirees for health care coverage has not changed since 1962, with no adjustment for inflation since its enactment nearly 40 years ago. (i) It is the intent of the Legislature to increase the existing minimum employer paid PEMHCA contribution, adjusting it annually for future inflation. SEC. 2. Section 22825 of the Government Code is amended to read: 22825. (a) The employer and each employee or annuitant shall contribute a portion of the cost of providing for each employee and annuitant the benefit coverage afforded under any health benefit plan that the board has approved or for which it has executed a contract pursuant to this part, and in which the employee or annuitant may be enrolled. (b) The employer's contribution for each employee or annuitant shall be the amount necessary to pay the cost of his or her enrollment, including the enrollment of his or her family members, in a health benefits plan or plans, or, if less, as follows: (1) Prior to January 1, 2004, sixteen dollars ($16) per month. (2) During calendar year 2004, thirty-two dollars and twenty cents ($32.20) per month. (3) During calendar year 2005, forty-eight dollars and forty cents ($48.40) per month. (4) During calendar year 2006, sixty-four dollars and sixty cents ($64.60) per month. (5) During calendar year 2007, eighty dollars and eighty cents ($80.80) per month. (6) During calendar year 2008, ninety-seven dollars ($97) per month. Commencing January 1, 2009, the employer's contribution shall be adjusted annually by the board to reflect any change in the medical care component of the Consumer Price Index. There shall be only one contribution with respect to all annuitants receiving allowances as survivors of the same employee or annuitant. (c) The contribution of each employee and annuitant shall be the total cost per month of the benefit coverage afforded him or her under the plan or plans less the portion thereof to be contributed by the employer. (d) If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, the provisions may not become effective unless approved by the Legislature in the annual Budget Act.