BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1031|
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THIRD READING
Bill No: AB 1031
Author: Thurmond (D)
Amended: 6/22/15 in Senate
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 3-1, 6/8/15
AYES: Pan, Beall, Hall
NOES: Morrell
NO VOTE RECORDED: Fuller
ASSEMBLY FLOOR: 79-0, 5/11/15 - See last page for vote
SUBJECT: Public Employees Medical and Hospital Care Act:
contracting entities
SOURCE: California Professional Firefighters
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, which may include
reimbursement for Medicare Part B premiums.
ANALYSIS:
Existing law:
1)Establishes PEMHCA under the administration of CalPERS.
2)Allows a local public employer to contract with CalPERS for
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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 least
10 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.
4)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.
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5)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.
6)Requires the retiree to pay, from his or her retirement
warrant, any PEMHCA premium costs not covered by the employer
contribution.
7)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.
8)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.
9)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,
which may include 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.
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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 California State University 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified6/23/15)
California Professional Firefighters (source)
California State Firefighters Association
Peace Officers Research Association of California
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OPPOSITION: (Verified6/23/15)
None received
ARGUMENTS IN SUPPORT:
According to the sponsor, the California Professional
Firefighters:
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 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
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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.
ASSEMBLY FLOOR: 79-0, 5/11/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood
NO VOTE RECORDED: Atkins
Prepared by:Pamela Schneider / P.E. & R. / (916) 651-1519
6/24/15 15:30:50
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