BILL ANALYSIS Ó
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2015 - 2016 Regular
Bill No: AB 1031 Hearing Date: 6/08/15
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|Author: |Thurmond |
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|Version: |2/26/15 As introduced |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Pamela Schneider |
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Subject: Public Employees' Medical and Hospital Care Act:
contracting entities
SOURCE: California Professional Firefighters
ASSEMBLY VOTES:
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|Assembly Floor: |79 - 0 |
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|Assembly Public Employees, |7 - 0 |
|Retirement/Soc Sec Committee: | |
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DIGEST: This bill requires an employer that contracts with the
California Public Employees' Retirement System (CalPERS) for
health care coverage pursuant to the Public Employees' Medical
and Hospital Care Act (PEMHCA) to meet its obligation to provide
any collectively bargained, statutorily required, or vested
retiree health care contribution, including reimbursement for
Medicare Part B premiums.
ANALYSIS:
Existing law:
1)Establishes PEMHCA under the administration of CalPERS.
AB 1031 (Thurmond) Page 2 of ?
2)Allows a local public employer to contract with CalPERS for
PEMHCA coverage for its employees and retirees and requires
that the contract must provide coverage for both.
3)Provides the following three contract options for the purpose
of setting the employer contribution toward PEMHCA coverage
for retirees:
a) The contracting agency may choose to make the employer
contribution toward PEMHCA premiums equal for both active
employees and retirees. Under this option, an employee who
retires and meets the definition of annuitant (i.e., a
retiree who is receiving a monthly benefit) receives an
employer contribution amount equal to what the active
employees receive.
b) A contracting agency that joins PEMHCA on or after
January 1, 1986, has the option to temporarily pay a lesser
employer contribution for retirees than for active
employees provided the agency increases its contribution
for retirees each year, over a 20-year period, until the
contribution for retirees equals the employer's
contributions for active employees.
c) The contracting agency may opt for a pre-set "vesting
schedule" that establishes specific percentages of employer
contributions based on an employee's credited years of
service. Under this option, an employee must have at
least10 years of CalPERS service, with at least five of
those years performed with the contracting agency, to
qualify for an employer contribution equal to 50% of the
average premium cost of the 4 most highly utilized PEMHCA
health care plans. The employer contribution increases 5%
for each additional year of service until the employee is
eligible for a 100% contribution for 20 or more years of
service. Under this option, the retiree's spouse is
eligible for a contribution equal to 90% of the
contribution for the retiree. This employer contribution
formula is sometimes referred to as the 100/90 formula.
1)Establishes, with regard to specific contracting agencies,
alternative vesting and employer contribution schedules that
have been agreed to in collective bargaining and approved in
statute by the Legislature for those specific agencies.
AB 1031 (Thurmond) Page 3 of ?
2)Allows a covered retiree to choose health care coverage in any
of the PEMHCA health plans available to active employees until
the retiree is eligible for Medicare.
3)Requires the retiree to pay, from his or her retirement
warrant, any PEMHCA premium costs not covered by the employer
contribution.
4)Requires, when a retiree becomes eligible for Medicare, that
he or she enroll in Medicare and elect one of the PEMHCA
coordinated Medicare health plans. In general, these plans,
referred to as Medicare supplement plans, are cheaper than the
full-coverage plans because they are coordinated with Medicare
Part A and Part B benefits. A retiree that is not eligible
remains enrolled in one of the full-coverage health care
plans.
5)Requires, in the case of state retirees who are enrolled in
Medicare supplement plans, that the retirees receive
reimbursement for the personal costs of their Medicare Part B
plans. The total cost of the reimbursement added to the
premium cost of the PEMHCA Medicare supplement plan cannot
result in an employer contribution higher than the maximum
employer contribution the retiree is eligible for.
6)Allows a contracting agency to elect to participate in a
Medicare reimbursement program by amending its PEMHCA contract
to do so.
This bill:
Requires that a local employer that contracts for PEMHCA must
meet its obligation to retirees with respect to the amount of
the employer contribution for health care benefits, including
reimbursement for Medicare Part B premiums, as mutually agreed
upon through collective bargaining or as specified in statute.
Background
Medicare is a federal health insurance program that covers
individuals age 65 and older. Medicare also covers some
individuals under age 65 with Social Security-qualified
disabilities and with End-Stage Renal Disease. The Social
Security Administration (SSA) is the federal agency responsible
for Medicare eligibility determination, enrollment and premiums.
AB 1031 (Thurmond) Page 4 of ?
Medicare Part A is hospital insurance that helps pay for
inpatient hospital stays, skilled nursing facilities, hospice
care and some home health care. Retirees and their dependents
may become eligible for premium-free Part A at age 65 with a
work history of 10 years (40 quarters) with Social
Security/Medicare-covered employment, or through the work
history of a current, former or deceased spouse.
Medicare Part B is medical insurance that helps pay for
outpatient health care expenses, including doctor visits.
Individuals are responsible for paying the Part B premiums to
the SSA. If an individual is receiving SSA benefits, the
premiums will be deducted from his or her Social Security
benefits.
CalPERS annuitants must have Medicare Part B in order to
participate in a PEMHCA Medicare supplemental health plan.
Existing statute requires CalPERS to reimburse State of
California and CSU retirees enrolled in a PEMHCA Medicare plan
for all or a portion of the Medicare Part B premiums they pay on
behalf of themselves and their spouses. This reimbursement
appears as a credit on the annuitant's benefit warrant. The
total of the reimbursement added to the supplemental plan
premium cost cannot exceed the maximum employer contribution
amount that the retiree would be eligible for.
Individuals that entered public employment prior to April 1,
1986 and were not subject to Social Security were not initially
subject to the Medicare tax, and are therefore not eligible for
Medicare Part A and B benefits without additional payments.
Prior/Related Legislation
In the FY 2015-16 State budget, the Administration is proposing
trailer bill language (RN 15 09900), to prohibit all state
officers who are eligible to receive benefits who are first
appointed or elected on or after January 1, 2016, and to
prohibit all employees and annuitants first hired on or after
January 1, 2016, by the state or a state entity, including, but
not limited to the Legislature, the judicial branch, and the
California State University, from being reimbursed for the cost
of Medicare Part B premiums for themselves or their enrolled
family members.
AB 1031 (Thurmond) Page 5 of ?
FISCAL EFFECT: Appropriation: No Fiscal
Com.: No Local: No
SUPPORT:
California Professional Firefighters (source)
California State Firefighters Association
Peace Officers Research Association of California
OPPOSITION:
None received
ARGUMENTS IN SUPPORT:
According to the sponsor:
AB 1031 requires an employer that contracts with CalPERS
for health care pursuant to the Public Employees' Medical
and Hospital Care Act (PEMHCA) to continue to meet its
obligation to provide any collectively bargained,
statutorily required or vested post-retirement healthcare
contribution, including reimbursement of Medicare Part B
premiums that are owed to an annuitant when that annuitant
becomes eligible for Medicare.
Some California public agencies currently provide a
guaranteed post-retirement health care contribution to
their retired annuitants through a collectively bargained
agreement, a statutory requirement or a vesting schedule
that has been adopted by the agency. In some cases, that
mutually-agreed upon or statutorily required,
post-retirement health care contribution is intended to pay
for 100% of an annuitant's health care premium costs.
If a firefighter, or any employee, who is not covered by
Social Security or Medicare, but is covered by a statute or
agreement that extends an employer-paid, post-employment
health care contribution, their employer pays their full
premium cost, or proportion thereof, directly to the health
plan, as obligated by that statute or agreement.
However, if a firefighter is Medicare eligible and enrolled
in a Medicare Part A and B plan (as required by PEMHCA),
the Medicare Part B premium must be taken directly out of
AB 1031 (Thurmond) Page 6 of ?
the firefighter's Social Security warrant. Additionally,
in cases where the firefighter is in Medicare only then the
retired firefighter is directly billed for the Part B
premium. In these cases, the firefighter should be
reimbursed by the employer for the amount of the Part B
premium, or whatever amount is consistent with the employer
contribution obligation.
Because some firefighters participate in Medicare and
others do not, a disparity exists in the way that
post-employment healthcare premiums are paid. In instances
where a retiree is promised a post-employment healthcare
contribution from his or her employer that would cover some
or all of their Part B premium, the retiree is entitled to
reimbursement for that obligated amount.