BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 2383
Deborah V. Ortiz, Chair Hearing date: August 7, 2000
AB 2383 (Keeley) as amended 6/22/00 FISCAL: YES
PERS AND STRS: HEALTH BENEFIT MODIFICATIONS
HISTORY :
Sponsor: PERS Board of Administration
Prior legislation: none
ASSEMBLY VOTES :
PER & SS 7 - 0 4/12/00
Appropriations 21 - 0 5/24/00
Assembly Floor 78 - 0 6/01/00
SUMMARY :
Would:
a) make various changes in the Public Employees' Medical
and Hospital Care Act (PEMHCA) with regard to public
employee health benefits,
b) appropriate $2 billion from the STRS Fund to provide
health care coverage to retired teachers, and
c) permit the STRS Board of Administration to be
considered a local contracting agency for the purpose of
providing health care coverage through the
PERS-administered PEMHCA plan.
ANALYSIS :
1) PEMHCA COVERAGE
Existing PEMHCA law requires that employees work at least
half time (50%) in order to be eligible for health benefits
coverage. This bill :
a) allows employees of PERS local contracting agencies and
school districts who work less than half time to
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participate in the PERS-administered PEMHCA health plan, at
the option of the employer or school district,
b) permits the STRS Board to contract with the PERS Board
for health care coverage of retired STRS members under the
PEMHCA plan, and
c) permits survivors of all deceased STRS retirees to
obtain health care coverage under PEMHCA, under specified
circumstances, until January 1, 2003.
2) $2 BILLION APPROPRIATION FROM THE STRS FUND TO PROVIDE
HEALTH BENEFITS FOR RETIRED STRS MEMBERS
Existing law does not provide health benefits for active or
retired teachers. Health benefits for both active and
retired teachers are provided by the employing school
district. Active teachers will often have superior and/or
less expensive district-provided health benefits than retired
teachers from the same district. Many school districts do
not contribute to the health care benefits for their retired
teachers. Even if these retirees are permitted to stay in
the health plan offered by their former employee, in many
instances they must pay the full cost for the plan.
This bill :
a) requires that the STRS Board, on or before March 31,
2001, estimate the amount needed (up to $2
billion) to provide specified health care benefits to
retired STRS members,
b) specifies that beginning July 1, 2001, a STRS employer
will be credited with the amount estimated for each retired
member the employer certifies is enrolled in one or
more of the following:
i) catastrophic health care program for retired members
who are less than 65 years old,
ii) Medicare supplemental health care program,
iii) prescription drug program, and
iiii) the PERS-administered PEMHCA program.
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d) authorizes STRS to establish regulations to administer
the program,
e) specifies that the amount credited to each STRS
employer cannot exceed the employer's average health care
costs, and
f) specifies that the STRS provisions become inoperative
on July 1, 2011, and is repealed as of January 1, 2012,
unless extended by subsequent legislation.
3) STRS BOARD CONSIDERED CONTRACTING AGENCY TO BUY PEMHCA
COVERAGE FOR RETIRED STRS MEMBERS
Existing PEMHCA law permits local governmental entities to
enter into a contract with the PERS Board (which administers
PEMHCA) to provide health care for their employees and
retirees.
This bill would permit the STRS Board to contract with the
PERS Board to provide health care coverage to STRS retirees.
FISCAL EFFECT :
PEMHCA coverage for part-time employees would be a locally
negotiable benefit.
The STRS provisions in this bill would provide $2 billion,
paid out of the existing STRS surplus, and would not affect
existing statutory employer (8.25%) or employee (8%)
contribution rates.
COMMENTS :
1) TEACHER HEALTH BENEFITS TASK FORCE
The committee is advised that, currently, there is no
affordable health benefit program for STRS members, unlike
PERS members, who are covered by PEMHCA.
As mentioned above, health benefits are provided for teachers
on a district-by-district basis, subject to collective
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bargaining. (However, school employers contract with PERS for
retirement and health benefits for their classified
employees; i.e., non-teaching maintenance, food service and
administrative workers).
Only a few school districts offer health insurance benefits
to retired STRS members. Some districts make benefits
available, but only subsidize the premium until the retiree
reaches age 65 and becomes eligible for Medicare coverage.
Some STRS members were hired before Social Security coverage
became mandatory in 1986 and are not eligible for Medicare
coverage.
To address these gaps in health coverage for STRS members,
PERS and STRS convened a Health Benefits Task Force. This
bill is a product of the Task Force.
2) STATEMENTS BY SUPPORTERS AND THE AUTHOR
Supporters point out that, "While school district employees
comprise the largest percentage of the PERS eligible groups,
they make up the smallest percentage enrolling in PEMHCA.
Currently, just over 100 of more than 1,100 school districts
are enrolled in PEMHCA. One reason for the low school
district participation is that PEMHCA does not cover less
than half time employees, limiting the ability of school
districts to provide coverage for all employees."
Supporters also state that the goal of this bill is to
increase participation in the program.
According to the author, "AB 2383 seeks to provide greater
flexibility in PEMHCA enrollment eligibility for employers,
employees, retirees, and dependents. "
3) CALIFORNIA TEACHER ASSOCIATION LETTER (DATED AUGUST 1,
2000) REQUESTING SUBSTANTIAL AMENDMENTS TO THIS BILL
"We are asking that AB 2383 (Keeley), regarding health
insurance, be amended.
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As a member of the Retirement Coalition, CTA supported the
inclusion of health insurance for STRS members within the
package. At the time, it was understood that the amount of
the STRS surplus reserved for health insurance would be up
to but not exceeding $2 billion. Health insurance was to
expend any money not otherwise spent by other retirement
priorities. The STRS surplus was sufficient to fund health
insurance and the other proposals within the package.
Since that time, with passage of AB 1509 (Machado) this
month, a new annuity for STRS members was enacted, reducing
the amount of the available STRS surplus by $2.9 billion.
We now question if there is sufficient money for health
insurance until STRS completes another valuation.
In addition, several organizations are concerned whether
the process for health insurance proposed in AB 2383 is the
best approach. The amendment to the bill was developed
without widespread participation of the members comprising
the Retirement Coalition, and there are alternative
approaches, which need to be considered.
We are concerned that in some districts, AB 2383 will not
necessarily increase health insurance at all, because
districts may use the money provided under this bill to
merely supplant their current health expenditures. There
is no assurance that any money freed up will even be
available for employee benefits.
At the July 2000 STRS Board meeting, organizations
representing most members of STRS advocated deferring the
health insurance section added to AB 2383 a month ago, in
order to continue work on health insurance while enacting
the original PEMHCA section which is widely supported and
not controversial.
In lieu of the expenditure and authorization for health
insurance section of AB 2383, we recommend substituting
language which would direct STRS to develop options for
health insurance and report back to the Legislature by next
Spring - in time for enactment of another bill next year.
By that time, the funding matter may also have been settled
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if a new STRS valuation shows that sufficient funds are
again available from the increases in the STRS surplus.
CTA remains committed to health insurance, and will
continue working for enactment of any elements of the STRS
package not enacted this year."
3) SUPPORT :
AFT College Faculty Guild
California School Employees Association
Faculty Attempting to Improve Retirement (F.A.I.R.)
Los Angeles Community College District
Riverside Community College
San Jose - Evergreen Community College District
Yuba Community College District
4) OPPOSITION :
California Professional Firefighters
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