Big rate hike for NJ public worker health benefits approved, but late deal eases pain for some

The State Health Benefits Commission on Wednesday approved rate increases of about 21% on state worker health plans and nearly 23% on local government benefits.

But a last-minute deal reached after the meeting could ease a bit of the pain for some public workers.

The new rates will affect the health plans that cover more than 800,000 state and local government workers, and it could have financial implications for millions of New Jersey taxpayers.

After Wednesday’s vote, five labor unions issued a joint-statement saying they had reached an agreement with Gov. Phil Murphy’s administration that will limit the increase on state employee contributions to 3%, shifting the rest of the financial burden to the state.

As part of the compromise, union leaders said they agreed to double co-pays for specialists from $15 to $30 and increase co-pays for urgent care from $15 to $45.

The agreement only applies to plans for state employees, however, and at the moment does not apply to local governments, which can pay as much as 70% of the total premium for employee health benefits.

“We’re hopeful this agreement will be a template for local government employees,” said Steve Tully, executive director of the American Federation of State, County and Municipal Employees Council 63.

Christi Peace, a spokeswoman for Murphy, confirmed the compromise.

“Recognizing the effect a significant rate increase would have on working families, the governor has worked closely with State unions to help mitigate the costs of this increase on state employees,” Peace said. “While the rate increase was largely formulaic, the agreement reached today will lessen the direct impact this year on members in some of our plans.”

Murphy made several comments in recent days indicating that a deal may be imminent and suggesting he was committed to finding a better solution. During his call-in show Tuesday, the Democratic governor acknowledged that a 24% increase “seems too high. No question about.”

“We haven’t given up on trying to find common ground,” he said.

But the vote went ahead as planned Wednesday, and the meeting was chaotic at points as the board acted despite several objections from labor representatives and a long list of questions that remain unanswered. The vote was 3-1.

Commissioner Dudley Burge abstained from voting after raising several concerns that largely wen’t unaddressed, many related to vendors, including the state’s largest insurance carrier, Horizon Blue Cross Blue Shield of New Jersey.

“If these rates go through, we’re going to have a massive exodus from local government,” Burge said during Wednesday’s meeting. “I don’t see any way it can’t happen.”

Burge is one of two board members representing labor on the five-person commission, and local governments have no representation on the board.

The financial burden of Wednesday’s decision will weigh most heavily on local governments, and the agreement for only the state system creates “a lack of parity,” according to Mike Cerra, executive director for the New Jersey League of Municipalities.

“What I think you will see is local governments looking for more cost effective options,” Cerra told NJ Advance Media. “Unless the administration steps in here and offers parity…that’s going to be the outcome. The action today is profoundly shortsighted.”

A vote to approve the proposed rate increases was initially scheduled for late July, but that meeting was canceled after a leaked copy of the proposal sparked public backlash from state lawmakers, labor organizers and local governments.

Union leaders had asked Murphy to delay Wednesday’s vote and continue negotiations that were still in early stages, and labor representatives on the health commission submitted several resolutions on Monday at cutting costs. The unions rallied at the Statehouse on Tuesday.

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.

Ripple effects from the COVID-19 pandemic are causing health insurance rates to rise nationwide in both the public and private sector. But the size of the increase in New Jersey is two to four times larger than average increases seen in other states, and it is about 20 points higher than typical yearly rate adjustments.

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.

Tully said this will continue to be a problem year after year unless state leaders take a closer look at factors that continue to drive health care costs higher.

“I hope the state Legislature starts taking a closer look at Horizon, and starts taking a closer look at these core issues,” Tully said. “Because the lack of transparency and accountability … is ridiculous.”

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Derek Hall may be reached at [email protected]. Follow him on Twitter @dereknhall.