Proposed Changes to Retiree Health Benefits

The Post-Employment Benefits Task Force recommended that UC change eligibility rules for retiree health benefits, and that the university also reduce the amount it contributes to the cost of health insurance premiums for its retirees.

Under the proposed changes, those who retire between ages 50 and 56 with 10 years of service would still be eligible for UC-sponsored group health insurance plans, but would pay the full premium cost.

Eligibility for a UC contribution would be determined by a graduated formula based on years of service and employee age at retirement, beginning with UC offering a 5 percent contribution to those who retire at age 56 with 10 years of service.

An employee who retires at age 65 with 20 years of service would be eligible for 100 percent of the UC contribution.

Under current and future eligibility rules, employees must be enrolled in UC-sponsored health insurance at the time of retirement to be eligible to continue participation as a retiree.

The task force recommends that UCRP members with at least five years of service be grandfathered in under current eligibility rules if their age plus years of service is equal to 50 or greater. Under those guidelines, roughly 40 percent of all UCRP members would fall under the current eligibility rules.

Gradual increase in cost-sharing
Current and future retirees would gradually pay more for retiree health insurance, while UC would reduce its share by about 3 percent per year under a task force proposal for predictable, phased-in changes.

Under the task force proposal, UC’s contribution would level off at 70 percent of the total premium. UC currently contributes about 89 percent of the cost of retiree health insurance premiums.

This recommendation does not need approval from the regents, and UC likely will begin reducing its share of retiree health premiums in 2011. Retirees would be notified of increased premiums this fall during Open Enrollment.

Protections for retirees without Medicare
UC would moderate the effects of reduced contributions for retirees who are not eligible for Medicare.

Premiums for retirees over age 65 who are not covered by Social Security and are not otherwise eligible for Medicare would be the same as the rates for employees who earn between $46,001 to $92,000 per year. UC has typically contributed about 88 percent of the cost of premiums for employees in that salary band.

“Retirees over 65 not eligible for Medicare have saved the university money over the years because UC did not pay into Social Security for them,” said Scott. “The retiree health work group and the task force feel strongly that we should make every effort to mitigate the impact of reduced contributions on these retirees.”

For retirees under the age of 65 who are not yet eligible for Medicare, the task force recommends that their health premiums be blended with those paid by active employees.

Because retirees tend to use their health benefits more than employees, the cost of health insurance for this group is more expensive. By including early retirees in the larger pool of UC employees, the university would be able to pass along a lower premium.