County’s $840 million reform plan

The county, which pays millions annually for health care for retirees and their dependents, will save substantially in the years ahead.

In a move expected to save hundreds of millions of dollars in the decades to come, the Los Angeles County Board of Supervisors on Tuesday approved historic reforms in the way it pays for county retirees’ health care insurance.

County officials said the changes could save $840 million over the course of the next 30 years. Under the plan—which applies to those hired after July 1, not to current workers—the county will reduce the subsidies it provides for retirees to purchase health care insurance. The changes approved by the board also require retirees who are eligible for Medicare to enroll in the federal program; the county subsidy will be applied to a Medicare supplement plan.

The savings are projected be considerable. Currently, the county pays up to $1,953.41 a month to subsidize health care benefits for a retiree and his or her family. Under the new plan, a retiree under the age of 65 would receive an individual monthly subsidy of up to $918.46, which will be reduced to $370.89 once the retiree reaches 65 and can be covered under Medicare. The new plan is based only on individual coverage, but retirees can still purchase insurance for their dependents at their own expense.

“This represents one of the most significant improvements to our retiree health care benefit since the 1980s. It reduces our unfunded liability by 20%,” said William T Fujioka, the county’s chief executive officer. “It speaks to our board’s fiscal responsibility and fiscal discipline, and it’s a move that will help ensure our future financial viability.”

Fujioka said the support of county labor groups had helped make the new retiree health plan a reality.

“They were with us 100%,” Fujioka said. “We went to the table and negotiated this change, and they joined us in presenting this change to our L.A. County retirement board. As a consequence, we got a unanimous vote.”

The county currently pays about $487.8 million a year for retiree health care—with that obligation coming off the top of the budget each year, before other programs are funded.

Taking action now ensures the health of the retiree benefit in the years ahead, Supervisor Zev Yaroslavsky said.

“These reforms allow Los Angeles County to continue its leadership role in providing fair and responsible benefits to retirees, in contrast to troubles that have affected many other jurisdictions across the country,” Yaroslavsky said.  “Without these changes, our health care program would have faced severe challenges going forward. As it is, we are doing the right thing for future generations of L.A. County employees and taxpayers.”

Posted 6/17/14