California Faces $48.2B In Unfunded Health Benefits For Retirees

Main Category: Health Insurance / Medical Insurance
Also Included In: Dentistry;  Seniors / Aging
Article Date: 02 Mar 2009 - 0:00 PDT

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California faces $48.2 billion in unfunded health and dental benefits for retired state workers, according to a state comptroller report released on Wednesday, the Sacramento Bee reports. The state currently does not prefund retiree health care benefits, but pays what is due each year. According to the report, the state will pay about $3.7 billion to the California Public Employee Retirement System for retiree health care benefits for fiscal year 2008-2009 and will pay about $5.3 billion by FY 2017-2018 if the state does not begin prefunding retiree benefits and using investment income to offset the actual cost of benefits.

Without changes, retiree health benefit costs will jump to $71 billion in 10 years, the report projected (Ortiz, Sacramento Bee, 2/25). The report projects that by prefunding retiree health benefits, the state could save $17 billion over the next 28 years.

California Controller John Chiang in a statement wrote, "Even as the state grapples with a decline in revenues during difficult economic times, it is important for other lawmakers to begin crafting long-range plans ... that will have the smallest impact on the state's pocketbook." Chiang has called on lawmakers to nearly double the state's annual contributions to retiree health care benefits to build an investment fund that would help offset the long-term cost of the benefits (Buchanan, San Francisco Chronicle, 2/26).

The report is available online (.pdf).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2009 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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