Governor Seeks Reforms of State Health Benefits in Anticipation of Rising Costs of Health Care

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At the School Employees’ Health Benefits Commission meeting on May 27th New Jersey Division of Pensions and Benefits Director Fred Beaver reported that he anticipated rate increases for the 2010 plan year to fall somewhere between 12 and 20 percent.

The state last year created a new health insurance plan for school employees that has lower co-pays and covers more out-of-network costs than the base plan for other public employees. By July 1 a total of 254 school districts and more than 115000 school employees will receive health benefits through the state program.

Premium increases have previously been kept in the single digits by using funds reserved for paying larger-than-expected insurance claims. Last year the state used $45 million to reduce premiums for school districts and $28 million for other public employers. On May 27th Beaver said the system has been strained further by higher numbers of insurance claims and late payments from school districts.

The districts facing the higher premiums – including Newark Union Lambertville Elizabeth and Morris – are in the state benefits plan created last year.

The increase could force property tax increases or spending cuts as districts scramble to find money to cover higher premiums and may also signal higher health costs for municipalities. Because many districts have already based their budgets on previous 4 percent increases a double-digit rate increase mid-way through the school budget cycle will present severe budgeting difficulties for the school districts enrolled in the plan. Property tax increases are limited to 4 percent under state law. School districts can apply for waivers to the law but not until next year after higher premiums rates have already kicked in.

The Governor directed the School Employees Health Benefit Commission and the State Health Benefits Commission on May 22nd to review a series of broad-based reforms in light of expected double-digit rate increases in program premiums. The expected increases may hit the State as early as January 2010. The Governor asked the commission to tighten controls on schools and towns including:
• Suspending an employer’s ability to delay premium payments effective immediately.
• Placing surcharge on employers who enter and leave the program within a two year period.
• Terminating employers for non-payment of premiums after a certain number of days.
• Identifying any new cost-saving opportunities that will stabilize the program going forward.

Treasury spokesman Tom Vincz said 21 school districts owe $1.2 million in back payments as of earlier this month. He said the Division of Pensions and Benefits charges districts interest for late payments but can’t punish them with fines.

Beaver on May 27th said it’s important to “treat this like a real insurance plan” and hold districts accountable for late payments.

Other recommendations include pursing pharmacy benefit management.

While contemplated reforms are not expected to impact the 2010 rates they are viewed as providing possible rate stabilization for subsequent years.

The commissions part of the Division of Pensions and Benefits in the New Jersey Department of the Treasury oversee the State’s health insurance plans for state and other government workers the State Health Benefits Program (SHBP) and School Employees’ Health Benefits Program (SEHBP).

Robert Peden acting chairman of the School Employees’ Health Benefits Commission said the actual rate increases for the plan year will be presented by the AON Corporation to each Commission for adoption in July. This is one month earlier than in previous years.

NJPSA will give consideration to allowable proposals which will help to curtail rate increases provided they do not reduce benefits.

Governor’s Press Release