Hidden health care costs of Adachi’s pension reform measure


New information about the health care costs associated with a pension reform measure backed by Public Defender Jeff Adachi suggests that the highest cost burden would fall to parents at the lowest end of the pay scale.

An analysis of the Adachi measure estimates that city employees with two or more dependents could face monthly healthcare cost increases of $220 a month, which would bring their total monthly contributions to $448, $765, or $1,630, depending on the health care plan. Dental care would bring those costs up an additional $82 per month.

Rael & Letson, an actuary firm hired to calculate premium contributions, completed the analysis on behalf of the Public Employees Committee of the San Francisco Labor Council. The city has not done a formal analysis of employee contribution increases to date.

Rael & Letson’s report estimates that for employees with a single dependent, the monthly employee contribution would go up an additional $240 under Kaiser, $352 under Blue Shield, and $419 under the city plan -- bringing the total monthly contributions to $249, $473, and $1,098, respectively. Dental benefits would bring each of those costs up another $50 per month. That’s compared with current contribution levels of $8.84, $120, and $679 for employees in that category.

The analysis found that if approved, the policy change would result in “a relatively modest monthly out-of-pocket increase for Kaiser participants without dependents, but a significant shift in ... costs paid by employees enrolled in other plans ... especially those with employee + 1 dependent coverage. These increases could make covering dependents unaffordable for lower income employees.”
According to StateHealthFacts.org, a website run by the Kaiser Family Foundation, the average employee contribution to a family health insurance premium in the state of California amounted to about $290 per month in 2009.

Whether or not these proposed increases are manageable depends of course on an employee’s salary, whether or not they have assistance from a spouse or family members, and other personal circumstances. In the case of a single mother with two or more children at the lower end of the pay scale, the spike in health care costs could force some very difficult choices.

Meanwhile, an analysis of the pension reform measure written by the director of San Francisco’s Health Service System (HSS) at the request of the city’s Department of Elections suggests that the measure could jeopardize an estimated $23 million in federal funding that is expected to be awarded annually for the next four years under the new federal healthcare reform bill. HSS administers healthcare benefits to city employees.

A new program created under federal healthcare reform -- the Early Retiree Reinsurance Program (ERRP) -- is designed to ease employers’ financial burden of healthcare costs for retirees not eligible for Medicare. ERRP funds can be used reimburse 80 percent of claims between $15,000 and $90,000 for each retiree over 55 who isn’t eligible for Medicare. In San Francisco, this new federal subsidy amounts to an estimated $23 million annually over the next four years, which would be deposited into the city’s HSS trust fund and used to lower premium requirements.

The HSS memo warns that since Adachi’s measure proposes increasing employee healthcare contributions, “This proposed Charter amendment will therefore eliminate this anticipated subsidy of premium contributions not only for the City and County but also for City College and the Unified School District who are also employers within the San Francisco Health Service System."

The memo also points out that just $53 million out of the $83 million in savings that the Adachi measure is expected to generate will go into the city’s General Fund, because more than a third of employees work for non-General Fund supported departments.

“If this Charter amendment becomes law, the balance of the contributions required to fully fund the HSS benefits will ultimately have to shift to the employees,” according to the HSS memo. “This Charter amendment does not address the underlying factors that will continue to drive increases in the cost of providing healthcare benefits.”

The recession has brought a recent spate of finger pointing at public-sector workers, and some might consider sharp healthcare cost increases to be a worthwhile tradeoff when it comes to the anticipated savings. Yet the decision to take more money out of the pockets of working people comes with its own set of consequences, which might be felt most acutely at the individual level but will also have a ripple effect on a broader economic scale.

Gabriel Haaland, an organizer with SEIU Local 1021, told the Guardian he believes that Adachi’s measure has been misrepresented as a pension-reform measure and ought to be discussed in the context of health care. “It’s a wolf in sheep’s clothing,” he said. Haaland added that he thought the sharp contribution increases would lead to more people opting out of healthcare benefits altogether, which could in turn place more of a strain on the city’s public healthcare system.

We contacted Adachi for comments, and we’ll be sure to post his response if and when we receive it.