Another fight brewing over public health benefits

Unions in revolt as actuary floats changes that would increase member costs

By: - June 6, 2023 7:05 am

Public sector unions have raised alarms over suggested changes to state health plans, warning they would raise costs for members. (Getty Images)

Another fight over state health benefits looms after state actuaries suggested a raft of changes for public workers like higher deductibles and copays opposed by the workers’ unions.

In a report sent to legislators mid-May, state actuary AON said New Jersey health benefit plans for teachers and other public workers laid a greater share of their costs on the state than comparable health plans, a claim 10 public-sector unions are now challenging.

“The report is simply sloppy — as it doesn’t even compare apples-to-apples in terms of comparing New Jersey’s numbers to northeastern, neighboring, or even similar states,” said Fran Ehret, state director for the Communication Workers of America, the largest union of state workers. “In fact, the report is flawed because it doesn’t provide any data to back up their claims.”

AON’s report says the state annually paid $22,000 per employer enrolled in the plan, or about 60% higher than the national average of $14,000 across all employer-sponsored plans.

It also says New Jersey paid between 96.4% and 98.3% of plan costs, noting that number was as low as 82.3% for large private insurers in the country’s southeast. Union officials said the state’s costs were in line with other public worker health plans in the mid-Atlantic region, which averaged between 95.3% and 96.9%, according to the AON report.

“Once again, AON seems to be more concerned with allowing the vendors and providers to run around with no accountability while shifting more costs onto the backs of the employees,” said Pat Colligan, president of the New Jersey State Policemen’s Benevolent Association.

The actuary suggested the state immediately adopt higher copays for prescription drugs, higher deductibles, and a $50 monthly surcharge for public worker spouses who enroll in the plans.

It said the state should tweak its reimbursement schedule for out-of-network providers, tie reimbursements for some procedures to Medicare rates, require members to replace certain prescription drugs with comparable biosimilars, and institute other changes to drive workers to cheaper health care providers.

New Jersey Education Association President Sean Spiller charged the proposed changes would do little to ease overall costs and warned it would worsen existing staffing shortages in education.

“The report itself contains nothing to point toward authentic cost savings. It only talks about how to shift costs to already-struggling working families,” he said. “Cost shifting has no net benefits and many, many downsides. It will undoubtedly exacerbate the current educator shortage by driving out talented educators and deterring promising students from entering the profession.”

A spokesperson for the Treasury said the report, drafted to present data to regulators ahead of this year’s rate setting, was non-binding and meant to address legislators’ questions about rising state health care costs.

“The report  does not purport to provide the entire story of how and why health care costs nationally have increased significantly in recent years,” said Darryl Isherwood, the spokesperson. “Nothing in the report precludes the Legislature or PDCs from taking, or refraining from taking, any action it deems in the best interest of the plans’ members or the State.”

Communications concerns

Union officials re-aired familiar complaints about communication, alleging that union members of the state committees charged with approving changes like those AON suggested were cut out of the process.

“That makes no sense unless your goal from the start was to have a one-sided report that puts the burden of higher costs on the backs of workers,” said Steve Tully, executive director of AFSCME NJ Council 63.

Union officials made similar complaints last year, claiming they were cut out of the conversation before AON suggested sharp increases to public worker health premiums.

The saga has driven unions’ faith in AON and Horizon, which administers the public worker plans, to a nadir.

Ehret on Monday said the state should put AON’s contract out for bid and called for audits of Horizon and hospitals over alleged price gouging.

Last year’s battle

The looming fight over state health benefits comes a year after the state approved voluminous premiums increases for the public-sector plans.

AON last year suggested premium increases of more than 20% for local and state public worker health plans. While the state increases were defrayed as part of an agreement between Murphy and public-sector unions, local and county government workers reached no such accommodation.

In his February budget address, Murphy proposed setting aside $200 million to combat locals’ rising health costs, but dozens of New Jersey school districts and municipalities — including Newark, the state’s most populous city — have since pulled out of the state health plans because of rising costs.


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Nikita Biryukov
Nikita Biryukov

Nikita Biryukov most recently covered state government and politics for the New Jersey Globe. His tenure there included revelatory stories on marijuana legalization, voting reform and Rep. Jeff Van Drew's decamp to the Republican Party. Earlier, he worked as a freelancer for The Home News Tribune and The Press of Atlantic City.