Health care coverage for retired workers could drain nearly $5 billion from The City’s operating budget over the next 30 years, pushing city officials to modify the benefits package and change how it is funded.
Burgeoning health care costs and The City’s aging work force are to blame for this skyrocketing price tag, which was detailed in a recent report from the Controller’s Office.
Also, San Francisco offers one of the most generous retiree health benefits packages, with city workers qualifying for the benefit after just five years of service. City workers also receive the same benefits as when actively working for The City.
“We can’t ignore this problem. This is by far the biggest issue that needs to be addressed,” said Supervisor Sean Elsbernd, who sits on the Health Service System, the agency overseeing health benefits for city workers. “It’s a 30-yearproblem. We need to begin implementing the changes that will have an effect over the next 30 years.”
Increasing the years required for city workers to qualify for retirement benefits from five years to as many as 20 years and requiring city workers to undergo annual checkups were changes Elsbernd suggested on Monday.
City retirees are entitled to the same health benefits as they were when employed by The City. A retired city worker, with no dependents, pays $46.50 a month for medical coverage, while The City pays between $733.70 and $934.51 a month. Costs vary depending on which health plan the worker signed up for.
Mayor Gavin Newsom has said The City must change the way it funds retiree health benefits. For a solution, Newsom pointed to a provision in recently approved labor contracts requiring labor unions to negotiate changes to retiree health care.
Elsbernd said he has yet to see a schedule for those meetings, and worried the provision was mere “puff.” He will call for hearings on the matter at today’s Board of Supervisors meeting.
One idea gathering the most steam for cutting city retiree health care costs is a funding structure similar to pension benefits. The city worker and The City would pay into a retiree health benefit fund, which could then be invested. If this happened, The City could save about $2 billion over the 30-year period, the report said. The City currently funds retiree health care costs on a “pay as you go” basis. In 2000, The City doled out $17.4 million in retiree health care costs. Six years later, The City’s retiree health care costs will have increased by $82.6 million.