Hundreds of thousands of government employees are on the march in New Jersey as a battle over health care premiums reaches a breaking point, and the fallout could have financial implications for millions of Garden State taxpayers.
A coalition of at least 14 labor unions will rally Tuesday at the Statehouse in Trenton, delivering what could be the final salvo before state health boards vote on proposed rate increases of more than 20% for health plans that cover more than 800,000 state and local government workers, including more than 100,000 teachers.
The vote initially was scheduled for late July, but a leaked copy of the proposal ignited a firestorm, and the meeting was cancelled following public backlash from local governments and state lawmakers.
The State Health Benefits Commission, chaired by New Jersey Treasurer Elizabeth Muoio, is now set to meet Wednesday for a vote on the proposal. If approved, it would lift premiums by about 21% for state workers, and rates for local governments would rise by roughly 24%.
Employees would see their annual premiums rise by about $1,500 to $1,800 on a typical family plan, amounting to a pay cut of up to 1.5%, according to union leaders, who spoke to reporters on Friday during a virtual press briefing.
But the financial burden would weigh most heavily on local governments and school boards, which can pay as much 70% of the total premium on employee benefits. Many are just beginning to grapple with soaring costs and diminishing federal aid, and they only have one source to tap when revenues run dry: property taxes.
“This has significant ramifications for local budgets and for our employees because this is a shared obligation,” New Jersey League of Municipalities Director Mike Cerra told NJ Advance Media. “This affects every property taxpayer as well as every employee. If you’re an employee who pays property taxes, it’s a double whammy.”
Union leaders say they have better solutions to help mitigate rising costs, and they’ve asked state leaders to postpone Wednesday’s vote and continue negotiations that just started in earnest last week.
But state leaders say time is running out before open enrollment begins in October. And the months-long saga has strained political ties between Democratic Gov. Phil Murphy and the labor unions that helped put him in office.
A post-pandemic surge in demand for health care services and record-high inflation are the two primary forces driving the massive increases, according to AON, the risk management firm Treasury hired to conduct this year’s rate analysis.
COVID-19 sent shockwaves through the global economy in 2020, and the ripple effects have created unexpected financial challenges for government leaders. The pandemic coupled with widespread shutdowns pushed America’s troubled health care system to its breaking point.
State leaders anticipated medical claims to rise in 2021, but the rebound was much larger than expected, and insurance premiums are rising nationwide for both private and public plans.
But the magnitude of this year’s increase places New Jersey in a league of its own among states, and the rate hikes are about 20 points higher than typical yearly adjustments, which have hovered around 3-5% in recent years. Premiums were lifted about 2.9% for the 2021 plan year, and state employees saw a bump of about 2.4% in 2022.
Labor representatives want to know why New Jersey is an outlier, and they have urged the Murphy administration to use a portion of the $1 billion in federal COVID relief money the state still has at its disposal.
“If this is a COVID-related crisis, then use COVID money for God’s sake,” Jim McAsey, mobilization coordinator for the Communications Workers of America, the largest state workers union, told NJ Advance Media. “Don’t increase rates on workers. Don’t increase taxes on New Jersey residents. Work with us on actually lowering costs.”
The entire rate adjustment process this year has left workers and local government leaders scratching their heads, and several questions remain unanswered even as the administration pushes ahead with Wednesday’s vote.
State lawmakers, labor representatives and local government leaders were blindsided by the proposal in July and only learned of the rate increases when they were leaked just days before health boards were set to approve them.
“There really hasn’t been a public engagement on this,” Cerra said. “If the state is right and this is a one-year hiccup, it might be appropriate to allocate some (American Rescue Plan) funding toward this to give us time to come up with a better long-term solution.”
“It’s a serious issue, and it needs to be addressed. Passing an increase of over 20% should not be an option at all.”
Public workers in New Jersey have other options for benefits, but the state’s programs are widely considered to be among the most generous in the nation. Some argue the plans are overly generous and public workers don’t pay enough for the benefits.
Cerra acknowledges that there is some truth to that when it comes to legacy plans — those for older workers that are grandfathered in — but government leaders are making progress.
“The plans being offered now are not as generous as people think they are,” he said.
Workers also have the ability to make cost-saving adjustments to their benefits through labor representation on the committees responsible for setting and approving changes to the design of state health plans, State Treasury spokeswoman Danielle Currie told NJ Advance Media.
Currie added that the design committees must pass annual resolutions to contain costs on things like out-of-network benefits and mandatory use of generic drugs.
“These measures have produced substantial savings in recent years and without them the rate increases will be even higher than already projected,” Currie said. “But so far this year, the labor members of PDCs have yet to agree to approve them.”
The next design committee meeting is scheduled for Wednesday morning, but “a lot could change between now and then,” McAsey said, adding that labor is preparing a package of proposals to decrease costs.
“I think health care is a human right,” McAsey said. “Instead of pointing the finger at a specific group of workers who have been able to secure reasonable health benefits at a reasonable price, I would point the finger at the people who are actively profiting off the healthcare system.”
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Derek Hall may be reached at [email protected]. Follow him on Twitter @dereknhall.
