Unfunded Liability for Retiree Health Care Hits Nearly $60B
California's 30-year unfunded liability for providing future health and dental benefits to retired state workers has increased by $8.1 billion over the last year to a total of $59.9 billion, according to an actuarial report released by State Controller John Chiang (D), the AP/San Francisco Chronicle reports.
California state employees receive health and dental coverage for life under a plan administered by CalPERS (AP/San Francisco Chronicle, 3/14).
Reason for the Increase
Less than half of the $8.1 billion increase over the last year reflects an additional year of costs, interest and payments.
The bulk of the increase comes from a change in CalPERS' assumptions after the pension fund determined that employees are retiring earlier and living longer and that premiums have increased more than previously projected (Robertson, Sacramento Business Journal, 3/14).
In addition, California's budget for the current fiscal year has added to the unfunded liability. It allocates only $1.4 billion of the $4.2 billion that the actuarial report found is owed by the state for an additional year of costs, interest and payments.
In a statement, Chiang warned that California should take action quickly to reduce its long-term liability for retiree health care. He added that paying more into the fund now would be less expensive over time because the investments would grow with the obligation.
Chiang also urged CalPERS to pursue wellness programs, prevention initiatives and other strategies that could help reduce state retirees' health care costs.
In addition, the controller recommended that the pension fund switch from a fee-for-service model to a model that pays health care providers based on patient outcomes (AP/San Francisco Chronicle, 3/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.