Proposed double-digit increases in health insurance premiums for public workers have state and local officials fearful of the impact on the workers and taxpayers. (Getty Images)
Surging inflation and a sharp rise in the use of health services are behind a proposed double-digit increase in health insurance premiums for public workers that have state and local officials fearful of the impact on the workers and taxpayers, officials said Thursday.
Speaking to the State Health Benefits Plan Design Committee, which oversees public worker health plans, officials from Aon Hewitt — the health plans’ actuary — said a rebound in health care visits in 2021 is the main driver of the proposed increases. Visits doubled or, in some cases, tripled expectations set in 2020, they said.
Becky Searles, a senior vice president at Aon Hewitt, said actuaries had predicted claims would rise by no more than 10% as the virus’s impact on health visits receded in 2021.
“We’re seeing much higher bounce-backs, some services up 20 to 30% over 2020,” Searles said.
The pandemic appears to have driven many of the utilization trends that underpin the actuarial recommendations. Health care visits plummeted in 2020 amid fears of COVID-19, then rebounded in 2021. But inflation is also a factor: Actuaries said premiums for public workers would need to increase roughly an additional 7.6% to account for rising prices.
State actuaries have recommended the state boost premiums by 20% for active state workers to account for trends moving into the 2023 plan year. Active workers in local government should see a 21.6% increase, while early retirees should see increases of about 13%, they said.
The proposed increases for some workers may be higher or lower, depending on their specific health care plan, but in each case, they far exceed typical rate hikes, which rarely fall above 5%.
The recommendations have set off a bipartisan firestorm in New Jersey as lawmakers rush to urge the State Health Benefits Commission to head off the increases. Republicans want a committee to probe the planned rate hikes, while Democrats have proposed adding local government representatives to the board that sets plan rates.
“The rate increase proposal is very troubling and not only raises a number of questions, but it also underscores the need for greater transparency,” Sen. Shirley Turner (D-Mercer) said in a statement.
The commission has a short runway to finalize rate increases for the coming year, as the enrollment period for local government workers who wish to sign up for a state plan opens in October. That means plan changes would likely have to be finalized by mid-September.
It’s not likely officials will reach a long-term solution to rising health benefit costs under that timeline, though members of the Plan Design Committee signaled they might seek to enact measures to lend public workers some relief in the short run while exploring broader reforms further down the line.
The increases could also become a bargaining chip in negotiations with public unions. Rate changes could trigger contract provisions that allow unions to renegotiate portions of their collective bargaining agreements immediately. Unions are already poised to seek larger salary increases in upcoming negotiations to account for a drop in purchasing power created by the surge in inflation.
On Thursday, actuaries said cost-saving measures enacted in recent years — like a Horizon Blue Cross Blue Shield care navigation program that was forecast to cut costs by up to 3.5% but failed to deliver — delivered slimmer-than-expected savings in 2021, and actuaries have largely removed those estimates from projections for the coming year.
“A lot of it goes back to the fact that our members have so much choice. They can go anywhere they want instead of going to the [primary care practitioner],” said Joyce Malerba, acting assistant director of health benefits operations at the state Treasury.
Plans for local government and state workers operated at a loss in 2020 and 2021, losing more than $280 million in the latter year.
A rush of reactions
Thursday’s meeting wasn’t the first planned on the increase. The commission was scheduled to meet to consider the rate hikes on July 25, but pulled the proposal after an outcry from the New Jersey Association of Counties and the New Jersey League of Municipalities.
Republican lawmakers have urged for the creation of a select committee to probe the proposed rate hikes. Assemblyman Christopher DePhillips (R-Bergen) called on the state to adopt reforms listed in a 2015 report drafted by the New Jersey Pension and Health Benefit Study Commission.
“The state spends nearly triple what a private employer contributes for health benefits. Neither taxpayers nor public sector workers can sustain this,” DePhillips said.
Sen. Teresa Ruiz (D-Essex) and Sen. Paul Sarlo (D-Bergen), who chairs the Senate Budget Committee, have lodged a bill that would expand membership of the State Health Benefits Commission, which actually sets plan rates, and its schools equivalent — in hopes that a larger membership would also expand deliberations.
Turner has launched bills that would require the two commissions to annually publish rate recommendation reports prepared by actuaries and use federal aid to head off this year’s increase.
Assembly Speaker Craig Coughlin (D-Middlesex), Assemblyman Lou Greenwald (D-Camden), and Assemblywoman Eliana Pintor Marin (D-Essex), the budget chair in her chamber, also called the proposed increases a “major concern.”
But that discord has not reached the Plan Design Committee, where union members stressed cooperation with administration officials to reach a deal that would avoid overburdening public workers.
“We have to allow this process to play out so we can work together and find solutions collaboratively,” said Jim McAsey, the committee’s representative for labor union the Communication Workers of America. “We must not give up on resolving this amicably.”
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