Recently approved rate hikes on health care premiums for public workers in New Jersey are hitting towns and counties at a difficult time, and Gov. Phil Murphys handling of the process has left labor representatives and local government leaders angry and perplexed.
Rates on premiums for state health benefits plans are set to rise by more than 20% in 2023 after a state health board, chaired by New Jersey Treasurer Elizabeth Muoio, voted 3-2 in September to approve the increases.
Murphy did strike a deal with several state worker unions to mitigate their costs, enraging local leaders and unions representing town and county workers who warn of higher property taxes and layoffs.
In the end, New Jersey taxpayers will shoulder the lions share of the rise in costs, but exactly how much remains a mystery. The Murphy administration hasnt provided an exact amount and did not answer questions from legislative officials during budget negotiations. Get politics news like this right to your inbox with the N.J. Politics newsletter. Add your email below and hit “subscribe”
The governor had indications as early as February that this years rate hikes would be much higher than normal, according to the governors proposed spending plan and an analysis by the states nonpartisan Office of Legislative Services.
Murphys budget proposal for the current year, unveiled in early March, included $3.68 billion to cover the states share of health care premiums for active and retired public employees. That was $459 million, or about 14%, higher than the previous year. By the time Murphy signed the budget in June, the amount swelled to $3.79 billion.
Since public workers pay a percentage of the total premiums (based on sliding scales tied to salary), their costs would also go up if the state was paying so much more.
Murphy did tout that health care costs were virtually unchanged in last years budget. He said in his 2021 budget in brief that it was an achievement accomplished through collaboration with stakeholders, initiatives aimed at preventing excessive billing, and greater oversight from our vendors.
This years budget message made no mention of the higher costs.
The administration didnt release any details on the substantial rise in health care costs until a copy of the rate increases was leaked in July, blindsiding labor representatives, state lawmakers and local government leaders.
The Murphy administration says it handled the rate setting process this year in the same way its been handled in previous years, which includes not sharing information with local governments or the Legislature until the new rates are already finalized.
And administration officials argue that, back in February, they had a mid-year report that provided only a portion of the data needed to determine the new premium rates for 2023.
The information in this report is a check-in that reflects a point in time, Treasury spokeswoman Danielle Currie told NJ Advance Media. It does not project rates.
But state lawmakers say they were left in the dark, and Assembly Budget Committee Chairwoman Eliana Pintor Marin, D-Essex, recently said she believes the administration was being dishonest during budget negotiations in the spring.
State Sen. Paul Sarlo, D-Bergen, chairman of the Senate Budget Committee, said during a hearing on Thursday that the committee was not aware or made aware of the potential increase in health care costs.
And the Office of Legislative Services, an arm of the Legislature that keeps a sharp eye on budgets, took notice of the potential increase to public workers as soon the budget was first proposed. The administration didnt answer questions from OLS regarding the significant increase, according to a report released in May.
Over the last two months, the Executive has not responded to repeated requests for additional information, or made any public report or statement, on the causes of the increased claims experience, especially for active employees of the State and the institutions of higher education, The OLS said in a budget analysis released in May.
The increase was most pronounced in the health benefits costs for active state employees, which rose more than 20% over the previous year to about $1.7 billion, according to OLS.
Shortly after the rate increases were approved in September, Murphy struck a deal with state employees that will limit the increase on their premium contributions to 3%, shifting the lions share of that burden to New Jersey taxpayers.
That deal so far hasnt been extended to local governments and is expected to benefit a small portion fewer than 100,000 of the more than 800,000 public sector employees covered by New Jerseys health benefits program.
As part of the compromise, state employee co-pays for specialists will double from $15 to $30 and co-pays for urgent care will increase from $15 to $45.
During a press conference last week, New Jersey Association of Counties Executive Director John Donnadio said the higher co-pays would save maybe one or two percent.
The vast reduction for the state employees was because the state is now absorbing the cost, Donnadio said.
The state Treasury Department hasnt provided an estimate on what the deal is going to cost taxpayers, and it is unclear if a cost analysis was ever completed before Murphy agreed to the deal.
Currie said any increase in cost will not affect the states finances until fiscal year 2024, which begins next July, and the budgetary impact will be dependent on the outcome of next springs contract negotiations with the labor unions.
Local governments are still facing a rate increase of 22.8%, which could lead to higher property taxes. Towns and counties participating in the state health benefits program have asked Murphy to provide immediate relief on par with the deal reached with state employees.
Murphy over the past four months has repeatedly said the rate increases are largely formulaic and a problem that states across the country are facing, but federal data and estimates on employee-sponsored plans for 2023 paint a different picture.
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 the Murphy administration hired to conduct this years rate analysis.
But in an unrelated report published in August, the same firm said average costs for U.S. employers that pay for employee health benefits will increase 6.5%. That is more than double the 3% increase U.S. employers saw from 2021 to 2022, Aon said in its report, but significantly below inflation.
In complete contrast over the last decades, we are measuring that health care budgets for U.S. employers will come in nearly three times lower than the Consumer Price Index this calendar year, Debbie Ashford, the North America chief actuary for health solutions at Aon, said in a statement announcing the firms finding.
Health care premiums for federal employees and retirees will increase an average of 8.7% in 2023, according to the U.S. Office of Personnel Management.
Premium increases for public worker health benefits in New Jersey are coming in more than two times higher than inflation and, in some cases, three times higher than increases seen in other states.
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Derek Hall may be reached at dhall@njadvancemedia.com. Follow him on Twitter @dereknhall.