How The University of California Can Save $1 Billion

Last year the University of California spent $1.3 billion unnecessarily to subsidize health insurance for retired employees (dollars in millions):

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The subsidy redirects money from current UC services to retired UC employees who already have access to Medicare, Medicaid, the Affordable Care Act, a new state subsidy enacted into law last year, or employer insurance in the case of UC retirees who have taken other jobs. The subsidy also raises health insurance premiums for active UC employees:

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As confirmed in UC’s 2018/19 Comprehensive Annual Financial Report, the subsidy may be cancelled or modified at any time:

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In 2015, the City of Glendale modified a similar subsidy to require retired employees to make full use of Medicare and other programs and cancelling subsidies for retirees earning more than $50,000 per year. By doing so the city cut its recorded liability for the subsidies by 90 percent, lowered premium costs for active employees, and freed up money for current services and employees while protecting lower income retirees.

Adopting a Glendale-style reform could reduce UC’s retiree health liability by ~$18 billion, lower active employee premium costs, and free up ~$1 billion per year with which to preserve UC jobs and student services while protecting lower income retirees.

UC is not alone in providing this unnecessary subsidy. As examples, similar subsidies last year cost the City of Los Angeles, Fresno Unified School District, San Francisco Unified, and the State General Fund $322 million, $47 million, $36 million, and $2.5 billion.

Govern For California supports lawmakers who legislate in the general interest.

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