San Francisco’s cost of providing health care benefits for retired workers has skyrocketed from just $17 million in 2000 to $115 million next year.
As the cost of health coverage continues to rise throughout the nation, city officials are trying to come up with a solution as they are faced with a projected $5 billion cost of retiree health benefits alone over the next 30 years.
Next year, San Francisco is going to pay out a total of $401 million in health benefit costs for city workers and retirees, who are entitled to medical, dental and vision coverage, according to a report from the Budget Analyst’s Office. The cost is nearly a $40 million increase from this year.
“That bill [of retirement benefits], if we continue on the path we are on, is going to eat up our entire general fund budget in the future and we can’t wait for that to happen,” said Supervisor Sean Elsbernd, who also sits on The City’s Health Service Board.
The general fund pays for the kinds of services residents expect from city government, including public safety, cleaning and street repairs.
There are about 28,000 active city workers and a total of 109,780 members of The City’s health benefits plan, which includes dependents, according to the report.
Depending on which of the four offered plans a worker selects, an employee, with no dependents, will pay next year between $10.15 and $94.77 per month for health coverage. These plans cost The City between $410 and $623 monthly per employee.
One of the more glaring problems is that a worker who works for San Francisco for just five years is entitled to full medical benefits when the worker reaches retirement age even if that person leaves The City before then.
But removing that five-year eligibility is not alone going to solve the problem, according to Elsbernd. “That is not going to do it. That is literally a drop in the bucket for this $5 billion problem,” he said.
To figure out how The City can afford the increasing costs of retiree benefits, a working group including the Controller’s Office and labor union representatives was formed last year. Any major change in workers’ health benefits requires approval by the voters.
City Controller Ed Harrington said The City is striving to bring before voters on the June 2008 ballot changes to the system. “It’s one of those, ‘we can’t not handle it.’” Harrington said. “So it’s really a matter of how we decide to do it and how do you start setting money aside so you don’t create problems.”
Tim Paulson, executive director of the San Francisco Labor Council, declined to comment on discussions with The City, only saying, “There are various meetings going on.” He added,”We’re hoping The City won’t take any more out of their paychecks.”
The Board of Supervisors Budget and Finance Committee votes today on San Francisco’s $401 million contribution in worker and retiree health benefits for next year.