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O.C. raises current retirees' healthcare costs

Some will see premiums nearly double as supervisors seek to cut a projected shortfall.

August 15, 2007|Christian Berthelsen | Times Staff Writer

Orange County took another step toward shoring up its frayed finances Tuesday as county supervisors approved new rates for retiree medical coverage that will pare down a $1.4-billion shortfall but nearly double monthly premiums for some former employees.

Retirees decried the move as unfair, saying they spent decades as county workers with the promise of affordable medical coverage in retirement. It was the second time this month that supervisors agreed to reduce benefits of retired employees; two weeks ago, they voted to move forward with plans to roll back pensions for retired sheriff's deputies.

Much like the battle over deputies' pensions, the fight over retiree medical care appears likely to wind up in court. The county has taken the position that healthcare coverage for retirees is not a legally protected benefit; an association representing retired employees has hired a lawyer and plans to file a lawsuit.

The board listened to more than an hour of testimony from retirees about debilitating medical conditions and strapped household finances. Some retirees said they would be forced into healthcare plans for the indigent or have to forgo medical coverage altogether.

"I want to beg you not to do this," said Rita Nicolosi of Orange, who receives a pension of $700 a month after working in the County Jail for 20 years. "As of 2008, I will no longer be able to afford medical insurance. I hope you can live with your conscience."

The board voted 4 to 0 to approve the rates, although it asked county staff to try to find cheaper alternatives. Board Chairman Chris Norby was absent.

The moves come as the county battles a combined $3.7-billion deficit in funding for retiree pensions and medical care over the next 30 years -- an amount that dwarfs the county's $1.7-billion bankruptcy in 1994. Fiscal conservatives have portrayed the shortfall as the next potential municipal finance meltdown because of the benefits' growing cost, which is due to generous pension packages, spiraling medical expenses and retirees' increased longevity.

The reductions to retiree medical coverage are expected to slash the deficit in funding by about $815 million, to $600 million. The county is achieving the savings in medical costs by splitting the pool of people it covers between retirees and active employees, who were historically lumped into one group, and requiring the retirees to pay more for their continued healthcare. Officials say Orange County is the first municipality to try this approach, at least in the region.

Overall, costs for active employees -- who are generally in better health and therefore better risks -- are expected to dip 18%, but rates for retirees are expected to increase 34%. Their rates will increase much more if they are members of health maintenance organizations such as Kaiser and Cigna. Of the county's 6,000 former employees, about 2,000 enrolled in those plans will see rate increases of between 72% and 95%, according to a county staff report.

For some, that could mean additional costs of as much as $7,000 a year -- with most of the county's retirees living on annual pensions of less than $25,000. One retiree, Norma Roberts of Costa Mesa, said her monthly out-of-pocket expense would increase from $286 to $783 under the new rates.

Chuck Hulse, a retiree from Lake Forest, said: "You have commitments to us that are long-established. We ask you to keep those commitments."

Supervisor Bill Campbell said that the rate increases were painful but necessary to save the program, and that they were better than doing away with retiree medical care altogether, which had been under consideration.

"It was busted," Campbell said of the program.

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christian.berthelsen @latimes.com

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