Health plans bleeding The City amid deficit woes 

The City spends on average more than $12,000 a year on health premiums for each employee and officials say it is another overly generous benefit San Francisco cannot afford.

With an operating budget shortfall of more than a half-billion dollars, city officials say basic services — such as fire, police and road maintenance — are at the mercy of health benefits, pension and salary costs that are skyrocketing each year.

“The escalating costs of employee health care and benefits threaten to squeeze out city services in future years and addressing those costs is critical to the long-term financial health of The City,” said Tony Winnicker, a spokesman for Mayor Gavin Newsom.

On average, The City, which has about 26,000 workers, is paying benefits that amount to 40 percent of an employee’s wage. A city employee with a base salary of $126,048 can cost The City another nearly $40,000 in benefits, including an $11,962 contribution to retirement. In calendar year 2009, workers were paid $2.6 billion out of The City’s overall budget of $6.6 billion. More than 6,400 workers took home $100,000 or more in compensation.

The City’s bill 10 years ago for health insurance for active and retiree workers, retirement contributions and Social Security was $383.7 million. This year, it’s estimated at $890 million; projections have it hitting $1.4 billion in fiscal 2013-2014. 

City officials say one factor is the “generous” benefits offered to city workers’ dependents, such as spouses or children. In the current fiscal year, The City spends an average of $12,067.66 a year, $1,005 a month, on health premiums for each worker, which is expected to increase to $12,211.47, or $1,017 a month, next fiscal year, according to the City Controller’s Office. That includes covering a city worker’s qualified dependents.

Supervisor Sean Elsbernd, one of the most vocal city leaders in dealing with the issue, said, “the promises made on health benefits are simply going to overwhelm the rest of the general fund.”

The solution, Elsbernd said, is “working with our employees to pick up more of the cost.”

“We are extremely generous on dependent care,” he said. “The City pays a significant amount of money for dependent care compared to other public agencies, certainly compared to the private industry.”

Each year The City negotiates rates with health insurance companies for its three health plans offered to employees who are represented by one of the 44 different labor unions. The Board of Supervisors unanimously approved new health rates March 9.
Thirty-seven of the 44 labor unions have negotiated no employee contribution if there are no dependents.

Employee contributions vary depending on which of the three offered benefit plans the worker enrolls, the union the worker belongs to and the number of dependents. An employee’s monthly share of health premiums can range from nothing if there are no dependents to $545.86 for a worker with two or more dependents. The City contribution can range from $593.74 a month to $1,132.54.

The average of what the state’s 10 most populous counties contribute to a single employee’s health premium — a worker without dependents — is $472.85, ranging from $608.44 to $364.

In recent years, city leaders have attempted to reduce some benefit costs. In 2008, voters approved a measure to eliminate for new hires “vesting” after just five years of service. This guaranteed that after five years of employment, The City would fully fund the worker’s retirement benefits.

City leaders are asking voters in June to approve a measure to reduce pension costs over a 25-year period, by reducing the “generous” pension package for new hires.  

Examples of health benefit costs

Worker with no dependents
City pays: $593.74 a month
Employee pays: $0

Worker with one dependent
City pays:
$1,065.68 a month
Employee pays: $120.88

Worker with two or more dependents
City pays: $1,132.54 a month
Employee pays: $545.86

Source: City Controller, Department of Human Resources, Health Service System

City budget facts

26,000: City employees
$6.6B: 2009-2010 budget
6,449: Number of city workers in calendar year 2009 with base salaries in excess of $100,000
$2.6B: Employees’ salaries, overtime, other pay in 2009
$515M: FY2010-11 deficit projection

Source: City Controller

How much

What The City spends on benefits for employees and their dependents:

FY99-00: $148.000M
FY09-10: $313.967M
FY10-11*: $323.116M
FY13-14*: $458.300M


Source: City Controller

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