UNPRECEDENTED COALITION OF UNIONS, LOCAL GOV MANAGEMENT & ELECTED OFFICIALS COME TOGETHER TO PROPSOSE SOLUTION TO DEVASTATING IMPENDING HEALTHCARE PREMIUM HIKES
Without Action, Workers Will Be Harmed & Local Taxes Will Rise
(TRENTON, NEW JERSEY) – Today, an unprecedented coalition of government unions, elected officials, the NJ League of Municipalities, NJ Association of Counties, NJ Urban Mayors Association and NJ Conference of Mayors joined to advocate for a solution to impending, dramatic increases to healthcare premium poised to hit January 1st. If these hikes go through, it will be devastating to both workers and property taxpayers.
It is rare that unions and management are completely on the same page. However, the fact that these egregious healthcare premium hikes are so completely unfair to workers, property taxpayers, local municipalities and counties has brought these sides together. For months, the union side of the Plan Design Committee (PDC) has been publicly promoting several significant cost-savings measures that do not involve cost-shifting to the workers. Local governments are now faced with a difficult fiscal challenge mere weeks away – having to pay an additional 20% insurance increase, compounded by an 18% pension increase on top of that. These dual factors will cause property taxes to spike and also pass along significant increases to local and county government workers.
Time is ticking to find a solution to this impending problem. So the unions and local government management are joining together to call for support of a legislative policy proposal consisting of a one-time appropriation to offset increases in the State Health Benefits Plan (SHBP) in 2023. This plan would also guarantee $100 million annually in true cost savings – not cost-shifting onto employees – which would directly result in benefiting taxpayers. If the $100 million does not materialize via the PDC, then the proposal empowers the State Treasurer to implement savings unilaterally. It also provides a brief enrollment period, so union members can accurately assess the impact of their current plan and make informed decisions concerning their health insurance coverage going forward. (Please find the full plan at the bottom of this document)
“Much of the positive work the legislature has done to stabilize property taxes over the last several years is going to be marginalized if nothing is done to address this massive cost increase in local government health care insurance,” said Charles Wowkanech, NJ State AFL-CIO President. “It’s not often that unions and local government management see eye-to-eye on an issue, but on this issue we are unified. It is clear to all stakeholders that if nothing is done, not only will our members and taxpayers see a financial hardship, but ‘kicking the can’ down the road on controlling health care costs will continue to plague taxpayers, towns and counties each and every year to come. This proposal is an opportunity for significant, meaningful savings that will help to reign in out-of-control health insurance costs.”
“Today we have an unprecedented coalition, representing both labor and management, speaking with one voice and offering a solution to an unprecedented and devastating increase in health care contribution for local governments, local employees and property taxpayers,” said Millstone Borough Mayor Raymond Heck, President of NJ League of Municipalities. “We urge the Administration and Legislature to engage with this group of partners, consider and advance this solution to benefit our public servants and our property taxpayers.”
“The fair and equitable recommendations proposed by labor and management to mitigate the staggering health benefit rate increases approved by the State Health Benefits Commission (SHBC) earlier this year, afford state leaders the opportunity to provide both immediate financial relief and long-term cost savings for property taxpayers, local governments, and public employees already struggling to make ends meet,” said John Donnadio, Executive Director, New Jersey Association of Counties.
“This unprecedented coalition between management and labor is offering common sense solutions to avert tremendously negative consequences on taxpayers and public workers,” said Steve Tully, Executive Director, AFSCME NJ Council 63. “These recommendations provide adequate funding to local governments to offset the drastic premium increases for public employees while also addressing the factors that continue to drive health care costs higher. This is a fair solution for taxpayers, local governments and public employees.”
“IFPTE’s locals across New Jersey stand in Solidarity with the larger labor movement in calling for a worker friendly solution to this crisis. Municipal workers across our State, including those represented by IFPTE, take great pride in public service,” said Sean McBride, IFTPE Local 196 President/Atlantic Area Vice President. “To allow them to have to absorb huge and unprecedented increases to their health insurance premiums is unjust, a cost that these workers simply can’t afford, and could lead to tax increases. We must to do what’s right by these public servants and find an acceptable solution to this crisis by year’s end.”
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BELOW PLEASE FIND THE FULL PROPOSAL
State Health Benefits Program (SHBP), Local Government Part Premium Increase Mitigation Program
1. To offset the unanticipated 20% plus SHBP premium increases, $350 million will be
appropriated to the Division of Local Government Services from the General Fund to
administer a Premium Increase Mitigation Program (the Program) to provide grants that
will be proportionately allocated to local government employers participating in the
SHBP.
2. Employee contributions to the cost of health care shall increase by the same percentage as
the employer’s increase in healthcare costs after the grant funds are applied to offset the
premium increases. For example, if an employer’s increased premium cost is $2 million
before the grant (an increase from $10 million to $12 million in total premium costs) and
the employer receives a grant of $1.5 million, the actual percent of the employer’s
increase in healthcare costs is 5%. Employee contributions shall also increase by
5%. The premium for purposes of calculating an employee's contribution will be
calculated as follows based on a 2022 premium of $30.000 for a family plan and grant
that results in a 5% increase in the employer's cost of premiums:
a. Without the grant, the health benefit premium in 2022, which was $30,000 (for
purposes of illustration), would increase by $6,000 (20%) to $36,000 in 2023.
b. With the grant, the health care premium that will be used to calculate the
employee's contribution will be $31,500 – a 5% increase or $1,500 more than the
2022 premium of $30,000.
3. Commencing in plan year 2024, there shall an annualized savings of at least $100 million
for the Local Government Part of the SHBP.
a. To achieve an annualized savings of $100 million commencing in plan year 2024,
on or before July 15, 2023, the Plan Design Committee shall vote to implement
measures to be effective January 1, 2024, designed to achieve a net annualized
savings of at least $100 million by reducing the costs of the Local Government
Part of the SHBP, including prescription drugs, without shifting costs to
employees or employers.
b. To assist the PDC in achieving the required savings of $100 million by reducing
the costs of the Local Government Part of the SHBP, $1 million is appropriated
from the general fund to retain an independent healthcare consultant to be selected
by the PDC. The consultant shall analyze cost savings measures proposed by
PDC members and shall issue a report setting forth its analysis and
recommendations on or before March 1, 2023. The consultant’s report shall
include an analysis of the savings to be achieved by the implementation of a
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Medical Specialty Pharmacy, the Navigation Advocacy Program, Referenced
Based Pricing, and by reducing Hospital and other provider costs. The
consultant’s report shall be a public record.
c. Beginning January 1, 2023, and continuing through July 15, 2023, the Plan
Design Committee shall meet bimonthly to review proposals to reduce the cost of
the Local Government Part of the SHBP and shall solicit input from stakeholders
and experts, including public sector unions, municipal and county government
organizations, the Healthcare Advocacy Table, healthcare vendors, the SHBP
actuary, and the independent consultant.
d. On or before July 15, 2023, the PDC, based upon recommendations of the
independent consultant and input from stakeholders and other experts, shall
recommend measures to be implemented in Plan Year 2024 that will achieve a net
annualized savings of $100 million, meaning that the measures to be implemented
are projected to save at least $100 million in healthcare costs during Plan Year
2024, over what the costs would be if the measures are not implemented.
e. Within 30 days of March 30, 2025, the State’s actuary for the SHBP shall issue an
actuarial report validating a net annualized savings of $100 million in Plan Year
2024. In determining whether the measures implemented in Plan Year 2024
saved at least $100 million in healthcare costs during Plan Year 2024, over what
the costs would have been if the measures were not implemented, the actuary
shall credit towards the $100 million, savings realized as the result of the
migration of employees to lower cost plans, and measures implemented to reduce
the in-network charges by hospitals.
d. In the event that the net annualized savings for active employees in the Local
Government Part of the SHBP were less than $100 million in plan year 2024, the
SHBP Plan Design Committee, within 60 days from the issuance of the actuary’s
report, shall propose measures to make up the estimated shortfall.
f. In the event the PDC is unable to agree upon measures within the 60-day period
to make up the shortfall to achieve the $100 million in net annualized savings, on
or before July 15, 2025, the State Treasurer shall implement changes, to take
effect on January 1, 2026, to make up the shortfall. The measures implemented by
the Treasurer and or the PDC shall, to the extent practicable, achieve the
necessary savings through reductions in the cost of medical care and prescription
drugs, rather than by shifting costs on to employees or employers through design
changes or other measures. In the event the Treasurer implements measures to
achieve savings through design changes or other cost-shifting measures, rather
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than by reducing medical care and prescription drug costs, employees and local
government employers shall share equally in the increased costs.
5. There will be a thirty (30) day open period for actives commencing on the date the