By Marty Richman
The problems between San Benito County and its employees, especially the lower earning members of SEIU Local 521, boil down to money, as do so many things. However, in this case we can keep the pot on the stove; the money problem boils down to healthcare costs and the healthcare costs boil down to uncapped commitments and lifetime medical care for county retirees. Both the county and its active employees are insurance poor – they are struggling to support themselves and generations of retirees forever against uncapped costs using only current income and it cannot be done.
The problem was summed up on two sheets of the 50 presented by the county to detail their miserable financial condition. The retiree healthcare trust has $81 million in it and it is still $37 million in the red. Worse, the county has not been able to put a single dollar aside to pay for the lifetime healthcare for about 400 active employees. Your sons and daughters will be paying that bill for generations unless there are drastic changes.
The retiree lifetime medical benefit has been costing $1,214 a month – $14,568 a year – for each retiree, ten times more than Monterey, seven times more than San Luis Obispo, and more than twice Santa Cruz County, all of which are many times richer than San Benito County. Those costs have been uncapped, meaning the county has responsible to pay for all increases.
Signing on for uncapped lifetime retiree medical care was a horrendous error and both the county and its current employees are paying the price daily. The truth is that the current employees need money now when they are trying to pay their mortgages and send their kids to camp or college a lot more than they or the retirees need post-retirement medical care because many of them will have second careers, decent retirements, and/or Medicare.
Just look at the costs for employee insurance. The least expensive employee only plan generally available had an annual premium of $7,368 of which the county paid 100%. An employee plus one-person plan had an annual premium of $14,735 of which the county paid $12,502 (85%) and the employee paid $2,234 (15%). For the employee plus family plan, the figures were $19,156, $14,566 (75%), and $4,590 (24%). Depending on the plan and number of people covered, the county was paying 61% for the most expensive family plans to 100% for the least expensive employee-only plans. City employees pay much smaller employee shares because they are not funding a gold-plated lifetime retiree plans.
In July of 2011, the county and its 433 active employees were paying for their health healthcare and trying to fund healthcare for 146 retirees – that is the same as having 579 employees, 34% more than were actually on the job. I do not have the current figures for retirees but the employees have dropped to about 400 in the budget. Given the drop in employees and the number of retirements, it is likely that the retiree to active employee ratio has gotten significantly worse in the last two and a half years and it will continue to do so unless there is a change in this unsustainable program. Just think about what the county could have done with the $81 million now in the retiree trust fund and the $37 million yet to be deposited and this is on top of some of the world’s best retirement plans.
The military healthcare and retirement systems are in the same boat, so they are making changes for millions of active duty and retired service members.
Every expensive guaranteed benefit becomes the new “floor” for the next level of benefits. At least some local politicians who put this in place have admitted they made a terrible mistake, but other politicians who are retired and reaping the benefit checks and combative union leaders just keep saying don’t worry about it. Well, they are not carrying home empty paychecks, the current employees are. My advice is don’t remain insurance poor in favor of retirees, it’s a very bad bet for you and that is why insurance companies love it, support politicians and union leaders who will face reality and change the system.