The Town Crier - Legislative Backgrounder

This is the second a series of blog posts on recently introduced legislation designed to implement the recommendations of the “Path to Progress” report. 

As noted in the Path to Progress Report, “while major savings have been achieved over the past several 16 years, health benefit costs for employees and retirees are projected to grow by $700 million over the next four years. Because the State self-funds its health care coverage, almost 90 percent of that cost increase will be borne by taxpayers.”  To that end the core recommendation of the working group is to “shift from Platinum-level health care coverage to Gold-level coverage for state employees, state retirees, and teacher retirees with an actuarial value of 80 percent that is comparable to the best private sector corporations in New Jersey after FY2019 when state collective bargaining contracts expire.”

The report estimates that this shift would “save an estimated $587million on employee and retiree health care premiums for the State budget and $69 million for current State workers on their premium cost-sharing payments in FY2020, with savings projected to rise to $675million for the State and $79.7 million for employees in FY2023. County and municipal governments and school districts currently enrolled in the State Health Benefits Plan and School Employees Health Benefits Plan would save at least $600 million per year for property taxpayers and over $100 million for employees by a similar shift when their contracts expire over the next several years. Total local government savings would top $1.4 billion for taxpayers and $230 million for employees if all plans made the same shift.”

Senate President Sweeney and Senators Oroho and O’Scanlon have introduced S-3754, which would terminate the School Employees Health Benefits Program (SEHBP), the State Health Benefits Program (SHBP) Plan Design Committee and transfer coverage from SEHBP to SHBP as well as require that certain plans are offered with no employee or retiree contributions and impose limits on health care benefits for public employees. The bill is part of the Path to Progress bill package.

S-3754 would transfer all SEHBP beneficiaries to the SHBP and requires the State Health Benefits Commission and Division of Pensions and Benefits to provide for the transition and ensure that coverage is continued without interruption for eligible employees, retirees and dependents under the SEHBP.

After the effective date of the law, local units of government, boards of education, and the State will be prohibited from entering into a contract to provide any group health care benefit plan that exceeds an actuarial value of 80%. In addition, they cannot include a health care benefit plan, regardless if it offered by Health Insurance Fund, self-insured or SHBP, that has an actuarial value of at least 60% but not greater than 62%.  For employees that select such a plan that has an actuarial value of at least 60%, but not greater than 62%, the employee would not be allowed to contribute towards the annual cost of the premium.  The only exception will be if the required contribution was part of a collective bargaining agreement entered into prior to the effective date of the bill. Furthermore, local units of government or local boards of education will not be able to offer any health benefit plan that exceeds the level of benefits provided by plans in the SHBP.

The bill will also eliminate the State Health Benefits Plan Design Committee but expand the State Health Benefits Commission from five members to eleven members. The new members will include:

• A member who is qualified by experience, education or training in the review, administration, or design of health insurance plans for self-insured employers appointed by the Governor from among 3 persons nominated by the League of Municipalities
• A member who is qualified by experience, education or training in the review, administration, or design of health insurance plans for self-insured employers appointed by the Governor from among 3 persons nominated by the New Jersey School Board Association
• A member appointed by the Governor from among 3 persons nominated by the PBA
• A member appointed by the Governor from among 3 persons nominated by the NJEA
• A member appointed by the Governor from among 3 persons nominated by the education section of the NJ State AFL-CIO
• A member who is a New Jersey resident who is qualified by experience, education or training in the field of actuarial science appointed by the Governor.

The bill will also require local units of government and local boards of education to use any savings realized as a result of implementing provisions of this bill to reduce the amount that is required to be raised by taxation for their purpose. The savings realized will be deducted from the adjusted tax levy for the previous budget year and the difference will serve as the basis for calculating the adjusted tax levy for the next year.

This bill would take effect on January 1, 2020 but the Treasury and the State Health Benefits Commission would be permitted to take such anticipatory administrative action before that time as may be necessary to effectuate the purposes of this act.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njlm.org, 609-695-3481 x112.