Legislative Analyst's Office Analysis of the 2003-04 Budget Bill

Health and Dental Benefits For Annuitants (9650)

The state contributes 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. Annuitants have the option of selecting from up to eight state-approved health plans depending on where an annuitant lives.

Budget-Year Costs Not Yet Completely Determined

We withhold recommendation on the $660 million General Fund request for annuitant benefits pending final determination of health insurance premium rates for calendar year 2004.

The budget proposes total expenditures of $660 million from the General Fund for health and dental benefits for annuitants in 2003-04. This is $84 million, or 15 percent, more than estimated expenditures for this purpose in the current year. This increase mainly reflects 2003 health insurance premium increases that topped 25 percent. It does not include any changes in health insurance premiums that would go into effect January 1, 2004. Figure 1 displays General Fund expenditures for annuitant health and dental benefits for the three fiscal years starting with 2001-02. 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 amount needed in the budget year is 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 2004 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.