Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

Health and Dental Benefits for Annuitants (9650)

This appropriation provides for the state's contribution toward health and dental insurance premiums for annuitants of the Judges', Legislators', District Agricultural Employees', and Public Employees' Retirement Systems, as well as specified annuitants of the State Teachers' Retirement System. The program provides annuitants the option of selecting from 18 state-approved health plans (depending on where an annuitant lives).

Budget-Year Costs Are Uncertain

We withhold recommendation on the $430.7 million General Fund request for annuitant benefits pending final determination of health insurance premium rates for calendar year 2002.

The budget proposes total expenditures of $430.7 million from the General Fund for health and dental benefits for annuitants in 2001-02. This is $20.5 million, or 5 percent, more than estimated expenditures for this purpose in the current year. This increase reflects expected growth in the number of annuitants. It does not include any changes in health insurance premiums that would go into effect January 1, 2002. Figure 1 displays General Fund expenditures for annuitant health and dental benefits for the three fiscal years starting with 1999-00. Although these costs are initially paid from the General Fund, the state recovers a portion of these costs (about 33 percent) from special funds through pro rata charges.

The actual amounts needed in the budget year are dependent on negotiations over health insurance premiums currently underway between the Public Employees' Retirement System and providers. These negotiated premium rates which will cover the 2002 calendar year should be available for review during legislative budget hearings. Pending receipt of the new rates, we withhold recommendation on the amount requested under this item.