Most government employers that offer retiree health benefits pay as the insurance premiums come due. It’s known as “pay as you go.” As we mentioned above, the bills tend to go up each year as health care costs rise and life expectancy improves.
However, there are some efforts to tackle this long-term debt.
At the state government level, Brown has been moving toward a prefunding approach more like that used for public employee pension funds. He’s negotiated deals with prison guards, engineers, scientists and highway patrol officers.
In late 2016, he struck a deal with the state government’s biggest union, Service Employees International Union 1000, which represents 40 percent of state workers. That agreement calls for phasing in payroll deductions for retiree health care over several years, extending the period to qualify for retiree health benefits and reducing the state’s subsidy for health insurance.
The state controller supports this approach. She estimates that if the state were to fully pre-fund retiree health debt, the state could save more than $26 billion, or 34 percent.