Nothing to Celebrate: No Hike in State-Employee Healthcare Premiums

Cost-cutting measures expected to deliver $1.6B in savings to state over next three years

A push to reduce the cost of health benefits to the state and its employees has actually worked, so much so that the state is expected to see $1.6 billion in savings over the next three years, and employees will not see a healthcare premium price hike in 2018.

The cost-trimming effort, which is also delivering slight savings on premiums for local-government employees next year, has been met with praise from the Communications Workers of America, the union that represents both state and local government workers.

But not all of the measures that are driving the savings for those workers have been embraced by the New Jersey Education Association, the state’s largest teachers union, which has suggested some amount to cost-shifting and could reduce access to doctors.

Accounting for good news

Officials with the state Department of Treasury attribute the good news on next year’s premiums to plan-design changes to prescription-drug policies and some potential reductions in costly out-of-network services. The state also used a “reverse-auction” to choose its pharmacy-benefits manager, a process that forced the companies providing these services to compete with one another to offer the lowest price for prescription drugs.

With the latest open-enrollment period now underway, the new healthcare premiums for 2018 are expected to provide some much-needed relief for workers, many of whom haven’t seen any form of a raise in years even as their premiums have risen by as much as 9 percent and 10 percent in some years.

“I think it’s a big deal for people,” said Hetty Rosenstein, state director of the Communications Workers of America labor union. “For our members, a healthcare increase is a decrease in pay.”

Teachers to pay more

The relief, however, will not be shared by public-school teachers represented by the NJEA, who will see a 13 percent rise in premiums next year. Still, the union — which has been locked in a public war this year with Senate President Stephen Sweeney, who has championed employee-benefits reform — pointed to other healthcare policy changes, like the new prescription-drug bidding procedures, that it has played a role in adopting.

“Ultimately, we believe those efforts to reduce premiums through continual cost-shifting are unsustainable, temporary, and not an effective way to reduce the cost of care,” NJEA said in a message posted on its website.

Healthcare coverage is a one of the biggest costs for both state and local-government employers in New Jersey, with the price of premiums for all local and state employees rising by as much as 9 percent in recent years. School employees, meanwhile, have faced increases above 10 percent in three out of the past six years.

Making changes

Union officials who serve alongside government representatives on a joint panel that designs coverage plans for the State Health Benefits Program agreed to make several changes to address the cost issue in recent years, modifications that have come as Gov. Chris Christie has also attempted to force savings by baking healthcare-spending cuts into the annual state budget. The plan-design changes have included increasing copayments for emergency room visits, limiting reimbursements for chiropractic and acupuncture services, and adopting a tiered-network system. (Tiered-network plans trade some level of patient choice for lower costs; insurance companies contract with certain groups, or tiers, of preferred providers and offer their services at a discount, while care at other lower tiers can cost more.)

The union officials have also driven an effort to create a pilot program with cooperation from Sweeney (D-Gloucester) that is testing out so-called “patient-centered healthcare,” which involves doctors working for an annual salary instead of a fee-for-service structure. Under such a system, providers are able to focus on the best care for each patient — and devote more time to each appointment — instead of feeling economic pressure to see more patients and offer more treatments.

The process the state had used to solicit bids for prescription drugs was also overhauled, a change that is expected to save $350 million in 2018, and an estimated $1.6 billion over the next three years.

Rosenstein, who serves on the plan-design panel for state and local-government workers, said union officials deserve credit for spearheading these initiatives, which ultimately drew approval from government representatives as well.

“The state is spending $1.6 billion less,” Rosenstein said. “That’s a huge savings for taxpayers.”

At the local-government level, where cost increases are typically covered by property owners through their local property tax bills, there will be a slight savings on premium spending in 2018 thanks to the plan-design changes. And while it’s unlikely to take a big chunk out of property tax bills that now average $8,549 statewide it’s one less line-item that will be increasing.

Big and small

“In the big picture, it’s a small achievement, but it’s a savings to the taxpayers,” said Michael Cerra, assistant executive director of the New Jersey State League of Municipalities.

Sweeney pointed to the healthcare savings when asked recently by reporters about an ongoing dispute between labor and government appointees who serve on a panel that is reviewing the success of a cap on salary increases that can be awarded to police officers and professional firefighters through interest arbitration. Sweeney is the author of the legislation that set up the joint labor-management structure of the healthcare plan-design committees.

“Labor-management boards work best when they work together,” Sweeney said.

Unable to reach accord

But the joint committee for teacher-healthcare coverage has been unable to find full agreement on plan-design changes in recent years, something treasury officials have pointed to amid the rising cost of teacher premiums. The 13 percent increase in 2018 follows an 8.4 percent increase this year.

Taken together, the premium increases pose “a substantial financial challenge to school districts,” according to a statement from the New Jersey School Boards Association.

“While several factors contribute to the difference in costs and premium levels, the one that stands out is the failure of the school employee program’s Plan Design Committee to adopt reforms similar to those made by the State Health Benefits Program,” NJSBA said. “The New Jersey School Boards Association strongly supports these plan design changes.”

But in the message posted on the NJEA website, union officials suggested that differences between the two insurance pools meant teachers would have been facing a premium increase of at least 8 percent next year even if the changes that were adopted by the other plan-design committee were also incorporated into the school-employees’ healthcare coverage.

The union — which has been locked in a bitter feud with the Republican governor over pension funding, as well as its fight with Sweeney in this year’s legislative election – also called the modifications made to the state and local workers’ healthcare plans “drastic changes” that would have resulted in more “cost-shifting to the employee.”

“NJEA believes such choices about health care coverage should be made by the individual employees, not mandated for everyone,” the union said. “NJEA does not believe in cost shifting health insurance benefits.”

— Lilo H. Stainton contributed to this story.