BILL ANALYSIS
SB 1435
Page 1
SENATE THIRD READING
SB 1435 (Johnston)
As Amended August 30, 2000
Majority vote
SENATE VOTE :34-4
PUBLIC EMPLOYEES 4-0 APPROPRIATIONS 13-7
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|Ayes:|Correa, Pescetti, Briggs, |Ayes:|Migden, Alquist, Aroner, |
| |Honda | |Corbett, Davis, Kuehl, |
| | | |Papan, Romero, Shelley, |
| | | |Thomson, Cardenas, |
| | | |Wiggins, Wright |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Campbell, Ackerman, |
| | | |Ashburn, Brewer, |
| | | |Maldonado, Runner, Zettel |
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SUMMARY : Requires the State Teachers' Retirement System
(CalSTRS) to pay the premium of Medicare Part A for specified
retired members of the Defined Benefit Program. Specifically,
this bill :
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 CalSTRS members.
2)Provides that effective July 1, 2001, CalSTRS shall pay to the
federal Health Care Financing Administration (HCFA) the
premiums of Medicare Part A for retired CalSTRS members who
meet the following requirements:
a) Retired from the CalSTRS Defined Benefit Program prior
to January 1, 2001;
b) Are not eligible for Medicare Part A without payment of
a premium;
c) Are at least 65 years old; and,
SB 1435
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d) Enrolled in Medicare Parts A and B at age 65 or as of
July 1, 2001, whichever is later.
3)Authorizes the CalSTRS board to extend eligibility for the
Medicare payments to members of the Defined Benefit Program
who meet the above requirements and retire after January 1,
2001, within a calendar year specified by the board.
4)Provides, for those members retiring after January 1, 2001,
that in order to be eligible for the Medicare benefit, a
member must retire from a school district that either:
a) Prior to January 1, 2001, elected to allow its employees
to elect Medicare coverage; or,
b) On or after January 1, 2001, completed or is in the
process of conducting such an election and the member
elected to be covered by Medicare, if he or she is less
than 58 years of age at the time of the election.
5)Provides that the amount paid by CalSTRS to HCFA will include
any penalties applicable to enrollment in Medicare Part A or
Part B by members who enroll after the age of 65. This
provision applies only to members who are over the age of 65
on July 1, 2001.
6)Authorizes CalSTRS to require, as a condition of having
CalSTRS pay the Part A premium, a member to authorize CalSTRS
to deduct the Part B premium from the members retirement
allowance.
7)Appropriates $500,000 from the Teachers' Health Benefits Fund
to the Teachers' Retirement Board for administration of the
provisions of this bill.
EXISTING FEDERAL LAW permits, under the Federal Balanced Budget
Act of 1997, retired members of CalSTRS and their beneficiaries
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; and, 2)
they have worked at least 10 years during their career.
EXISTING LAW : CalSTRS does not currently provide health
insurance, nor play any role in securing health care coverage
for its active or retired members.
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FISCAL EFFECT : According to CalSTRS, the total cost of this
benefit is $1.25 billion over 15 years. This bill also
appropriates $500,000 for implementation of the benefit.
CalSTRS estimates ongoing administrative costs at $269,000 per
year.
COMMENTS : The Federal Medicare Program consists of two
different parts: 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. CalSTRS members pay such a payroll tax only if they were
hired into their current job on or after April 1, 1986 or agreed
in an election held by the employer to be covered by the payroll
tax. Other CalSTRS members receive Medicare coverage due to
other employment they may have had or because their spouse is
covered.
CalSTRS estimates that approximately 11,000 retired CalSTRS
members over age 65 are not eligible for Medicare Part A either
from their employment or through a spouse. An additional 18,000
members would not be eligible for Medicare coverage either from
their employment or through their spouse once they reach age 65.
For members who did not qualify for Medicare Part A coverage
due to prior employment or through their spouse, 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.
Every CalSTRS member who was first hired by a district on or
after April 1, 1986, is required to pay Medicare taxes and,
therefore, is earning quarters toward free-premium Medicare Part
A coverage. Thus, SB 1435 would provide assistance for a
limited group of retirees, which will decline in size as more
CalSTRS members are subject to the mandatory Medicare payroll
tax through their employment.
Proponents contend that SB 1435 provides a solution to the
problem of the high costs of Medicare Part A premiums, which can
cause some CalSTRS members to forego health insurance coverage.
They also state that this bill is consistent with good public
policy for coverage expansion of health benefits for members of
CalSTRS.
SB 1435
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Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0007254