Lawmakers say bill would lower state health care costs

Top Senate Democrats have proposed reforms to state health plans for public workers that would decentralize plan administration after a year of mammoth rate increases spurred questions over Horizon Blue Cross Blue Shield’s administration of the system.

The bill would allow the State Health Benefits Plan and its schools counterpart, the School Employees Health Benefits Plan, to select more than one firm to administer state health benefits and require they pick at least two.

“The cost of health care benefits for public employees is becoming unaffordable and unsustainable. We can reduce expenses by allowing more competition among the claims administrators,” Senate President Nick Scutari (D-Union) said. “Offering greater choice and allowing more access to claims data will also bring more transparency to the process.”

The move follows staggering premium hikes to the public plans last year, with officials anticipating further increases to public worker health premiums. The State Health Benefits Commission in August approved rate increases of more than 20% for state and local government workers.

While the impact on state employees was defrayed by additional funding in the current year’s state budget — with $25 million more to come in the fiscal year that begins July 1 — local and county governments enrolled in the state plan received no such relief. Local leaders have warned the increases are too high to absorb without tax hikes or service cuts.

Gov. Phil Murphy has proposed $200 million in aid to local governments to offset increased premiums in 2024.

“The goal is that $200 million is partnered with discussions on sustainable cost-saving measures going forward,” Treasurer Liz Muoio told lawmakers Monday.

Scutari said the competition added by requiring public plans to have a second administrator would reduce health benefit costs. There are no more than a handful of insurers with networks expansive enough to administer the state plans.

The state previously contracted multiple firms to administer health benefits to public workers. Horizon has been the sole plan administrator since 2020. Before then, Aetna and Horizon both offered public worker plans.

The bill would also require the plan administrator to provide claims experience data to governments within 90 days of a request. Local and county officials last year charged they were blindsided by the premium hikes partly because they could not obtain that data from Horizon.

More hikes down the pipe

In rate renewal reports submitted last month, the state’s actuaries said they expect state and local government workers to see above-trend increases in their premiums in 2024. Workers on CWA Unity and NJ Direct plans should anticipate those higher increases, they said.

It’s unclear how much premiums will increase, and it will remain unclear until June, when the commissions that must approve public plan rate increases receive new rate proposals. Officials are expected to release more complete data in late May or June.

The treasurer on Monday repeatedly cautioned that reliable conclusions could not be drawn from the mid-year data release, noting health claims tend to spike toward the end of the year as members meet their deductibles.

“The problem is we’re trying to determine rates based on lagging data and predicting it 18 months in the future,” she said.

Those enrolled in the state plan have continued to visit urgent care centers more frequently than they did before the pandemic despite an attempt to direct members to their primary practitioners by raising urgent care copays from $15 to $45, state actuaries said.

The exodus of some local governments from the state plan is also expected to increase rates for the members that remain, though it’s not clear by how much.

It’s regular for municipalities and counties to move in and out of the state’s health plans, but some large municipalities — including Newark, New Jersey’s most populous city — departed following the increases approved last year.

Such departures can be costly for self-insured plans like the ones run by the state, particularly if a departing local government has a young staff that can absorb the risks posed by older members who are more likely to seek medical care.