Massive health care premium hike prompts unlikely alliance

Nearly three years after the COVID pandemic and New Jersey’s skyrocketing health care bills for its public workers met without rapid action from Trenton, local governments eye cuts to essential services and warn of significant property tax hikes amid near-record inflation.

Back in September, the NJ State Health Benefit Commission voted for a 20 percent increase in premiums collected for state, local and county workers for health care. Under the terms of the civil servants’ contract, which triggered mandatory negotiations with the Murphy administration, the one-year increase in civil servants was scaled back to just 3 percent.

Meanwhile, local and county governments and their workers got no relief from what unions insisted there would be a pay cut at a time when retaining first responder titles like police officers was already problematic.

Paterson Mayor Andre Sayegh said during a Dec. 13 phone interview that a 20 percent increase in the health premium for his 1,500 employees blew a $17 million hole in his municipal budget in a matter of months.

At a Dec. 11 virtual news conference convened by city and county officials and the state’s public sector unions, Sayegh said the options he would be presented with to fill this gap would have serious implications for his community, which still struggling to recover from the pandemic and one of eight cities that qualify as a stressed city for special government assistance.

“We’ve been talking about closing a library – now one of the unfortunate aspects of the pandemic is that our students have suffered learning losses across the state and across the country – so closing a library in Paterson would be quite devastating and wouldn’t help us students to make up for the learning loss they have suffered as a result of this pandemic,” Sayegh said. “Another option that was put on the table was the closure of one of our fire stations, which would be totally unacceptable as we have received the third highest volume of calls to emergency services in the country. Our paramedics worked intensively around the clock before the pandemic. It has only been exacerbated by this crisis [COVID].”

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Sayegh’s comments came during the Dec. 11 introduction of a plan being pushed by New Jersey’s League of Municipalities, the New Jersey Association of Counties, the New Jersey Conference of Mayors, as well as a broad coalition of public unions that has pledged $350 million from Trenton along with stakeholders’ commitment to find $100 million in future healthcare savings.

Kevin Lyons is a retired Long Beach Community Police Officer who is also the Director of Membership Benefits for the NJ PBA and serves on the NJ State Benefit Committee. He told the virtual joint management and union summit their strategy will “fix NJ’s state healthcare plan in a timely manner.”

Lyons reminded the panel that any increase in the health premium for local public servants “will have an amplified effect on public servants because they are also taxpayers.”

“This proposal will not only moderate the rate hike in the short term, but will also provide a mandate to curb future hikes,” he predicted. Lyons stressed that the state must end the practice of “cost shifting” to public employers and their workforces, as the only way to contain costs is to control the paid providers. “A recent white paper from the Hospital Pricing Transparency Coalition found that hospitals alone were overpaid by $1.2 billion — about 20 percent of total annual spending [for the program] Year after year,” he said.

Under the management-labour coalition plan, the $350 million would be allocated from the general fund to the Department of Local Government Services to administer the premium increase reduction program, which would generate grants that would be prorated to local government employers participating in the state plan.

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“Employee contributions to health care costs will increase by the same percentage as the employer increase in health care costs, after the subsidy funds have been used to offset premium increases,” the coalition press release said. “Starting in the 2024 plan year, there will be annual savings of at least $100 million for the local government portion of the state healthcare plan.”

According to the draft, the state’s Plan Design Committee will receive $1 million “to hire an independent healthcare consultant to conduct an analysis of the savings that may be realized through the implementation of a specialty medical pharmacy, Navigation Advocacy Program, Reference Based Pricing.” and by reducing costs for hospitals and other providers. The consultant’s report is publicly available.”

The bottom line of the joint management-union proposal is that the state “achieves the necessary savings by lowering the cost of medical care and prescription drugs, rather than passing the cost on to workers or employers through design changes or other measures.”

“Much of the positive work that lawmakers have done in recent years to stabilize property taxes will be sidelined if nothing is done to address this massive spike in community health insurance costs,” said Charles Wowkanech, NJ State AFL – CIO President. “It’s not often that unions and local government officials see eye to eye on an issue, but on this we agree. It is clear to all stakeholders that if nothing is done, not only will our members and taxpayers be in dire financial straits, but taxpayers, cities and counties will continue to be plagued by the need to control health care costs every year to come.”

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“Today we have an unprecedented coalition representing both workers and management, speaking with one voice and offering a solution to an unprecedented and devastating increase in health contributions for local government, local workers and property taxpayers,” said Raymond Heck, Mayor of Millstone Borough. President of the NJ League of Municipalities.

“The fair and equitable recommendations proposed by workers and management to mitigate the staggering increases in health benefits approved by the State Health Benefits Commission (SHBC) earlier this year offer heads of state the opportunity to seek both immediate financial relief as well as long-term cost savings for property taxpayers, local governments and public employees who are already struggling to make ends meetsaid John Donnadio, executive director, New Jersey Association of Countiesit.

“These recommendations provide local governments with adequate resources to offset the drastic increases in public sector premiums, while also addressing the factors that continue to drive up healthcare costs,” said Steve Tully, executive director, AFSCME NJ Council 63. “That is fair solution for taxpayers, local governments and public employees.”

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