BILL ANALYSIS
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UNFINISHED BUSINES
Bill No: SB 1435
Author: Johnston (D)
Amended: 8/30/00
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE : 3-0, 4/24/00
AYES: Ortiz, Karnette, Soto
SENATE APPROPRIATIONS COMMITTEE : 7-0, 6/12/00
AYES: Johnston, Bowen, Burton, Karnette, Kelley, Leslie,
Perata
SENATE FLOOR : 34-4, 6/15/00
AYES: Alarcon, Alpert, Bowen, Brulte, Burton, Chesbro,
Costa, Dunn, Escutia, Figueroa, Hayden, Hughes,
Johannessen, Johnston, Karnette, Kelley, Leslie,
McPherson, Monteith, Mountjoy, Murray, O'Connell, Ortiz,
Perata, Polanco, Poochigian, Rainey, Schiff, Sher, Solis,
Soto, Speier, Vasconcellos, Wright
NOES: Haynes, Johnson, Lewis, Morrow
ASSEMBLY FLOOR : Not available
SUBJECT : Teachers' health benefits: Medicare premiums
SOURCE : State Teachers Retirement System Board of
Administration
California Retired Teachers Association
DIGEST : This bill:
CONTINUED
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1.Establishes a special trust fund known as the Teachers'
Health Benefits Fund into which an amount from the
employer contributions will be transferred to pay the
Medicare Part A premium for specified retired State
Teachers' Retirement System members.
2.Provides that, effective July 1, 2001, the State
Teachers' Retirement System shall pay to the federal
Health Care Financing Administration the Medicare Part A
premium for State Teachers' Retirement System members who
retired prior to January 1, 2001, and are not eligible
for Medicare Part A without payment of a premium.
ANALYSIS :
Background
Chapter 991, Statutes of 1985 (AB 528 - Elder) required
school districts which provide health insurance to permit
enrollment of State Teachers' Retirement System (STRS)
retirees in district health plans at the retirees' expense.
Chapter 1006, Statutes of 1989 (AB 265 - Elder) authorized
school districts to conduct elections for active STRS
members, allowing them to choose to join Medicare at their
own expense.
Resolution Chapter 100, 1990 (AJR 71 - Elder) memorialized
Congress to establish a process for STRS retirees to
purchase the "quarters" needed to meet Medicare Part
eligibility.
Chapter 968, Statutes of 1998 (SB 1528 - Schiff) required
STRS to conduct a study on the feasibility of a health care
program, including vision and dental, for active and
retired STRS members, and their beneficiaries, children and
dependent parents.
Chapter 740, Statutes of 1999 (SB 159 - Johnson) required
STRS to develop such a health care program, but provided
that the Legislature must approve implementation.
Federal Balanced Budget Act (BBA) of 1997, Public Law
105-33 permits retired STRS members and their beneficiaries
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to participate in Medicare Part A without payment of a
premium under the following conditions:
1.They have paid for Medicare Part A premiums on their own
for seven years in a row.
2.They have worked at least ten years during their careers.
Existing Federal Medicare Program
Medicare has two different programs: Part A covers
hospitalization costs, while Part B covers physician
visits.
Most employees pay a Medicare payroll tax equal to 1.45% of
salary and become eligible for Part A coverage at age 65 if
that payroll tax is paid for ten years (40 "quarters").
STRS members pay such a payroll tax only if they were hired
on or after April 1, 1986 or agreed, in an election held by
the employer, to be covered by the payroll tax. Other STRS
members receive Medicare coverage due to other
(non-teaching) employment, or because their spouses are
covered.
20% of STRS Retirees are not Covered by Medicare Part A
STRS estimates 23,000 (20%) of the retired STRS members
over age 65 are not eligible for Medicare Part A either
from their employment or through their spouses.
For members who did not qualify for Medicare Part A
coverage due to prior employment or through their spouses,
the cost of the Medicare Part A premium for the year 2000
is $301 per month. The Medicare Part B premium for the
year 2000 is $45.50 per month.
Federal Budget Balancing Act Permits STRS Retirees to
Participate in Medicare at Reduced Cost after 1/1/98
Effective January 1998, the Federal BBA permits retired
STRS members and their beneficiaries to participate in
Medicare Part A without payment of a premium if
1.They have paid for Medicare Part A premiums on their own
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for seven years in a row.
2.They have worked at least 10 years during their careers.
Individuals who are 65 or older who have earned 30 or more
quarters (but less than 40 quarters) are entitled to a 45%
reduction in their Medicare Part A premiums.
If the person pays the reduced premium for seven years and
meets all other qualifying conditions, he or she also
becomes eligible for 100% free Medicare Part A coverage.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to STRS, the total cost of this benefit is $1.25
billion over 15 years. (The Teachers Retirement Fund
presently has an actuarial surplus of approximately $8.5
billion.)
This bill appropriates $500,000 from the Teachers' Health
Benefits Fund to the Teachers' Retirement Board for
administration of the provisions of this bill.
SUPPORT : (Verified 6/13/00)
State Teachers' Retirement System Board of Administration
(co-source)
California Retired Teachers Association (co-source)
California Federation of Teachers
California Medical Association
Congress of California Teachers
Los Angeles Community College District
Yuba College District (if amended)
TSM:cm 8/31/00 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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