Health Benefits Reform Legislation Signed Into Law for School Employees
By Debra Bradley and Robert Murphy
On July 1, 2020 Governor Phil Murphy signed P.L. 2020, c. 44 (S-2273/A-20) into law, in the presence of legislative sponsors and NJEA leaders who brokered an agreement in early March, which ultimately resulted in the new law. Senate President Steve Sweeney and Assembly Speaker Craig Coughlin joined Governor Murphy for the celebratory bill signing.
Chapter 44 modifies the health care plan offerings that will be available under the School Employees Health Benefits Program (SEHBP) and will also impact non-SEHBP school districts and employees. The goal of the legislation is to maintain a high quality of health care benefits for school employees while producing savings for employees, employers and taxpayers. The bill does maintain the platinum level of benefits in all health care plans offered by the SEHBP for school employees. NJPSA did work with NJEA on key amendments to protect our members that placed à contribution “cap” in the legislation so that the highest contribution level required would be linked to a top salary level of $125,000 for all salaries of $125,000 and above.
NJPSA will be offering webinars to discuss the new law in the future, once the actual NJEHP New Jersey Educator Health Plan has been established by the School Employees Health Plan Design Committee. We hope that will occur this summer.
Summary of New Law
As enacted, P.L. 2020, Chapter 44 provides the following:
- Members Impacted
The bill impacts active school employees and retirees who are not-eligible for Medicare. Medicare retirees are not impacted by this legislation in any way. Whether a district participates in the SEHBP or not, effective January 1, 2021, all new employees in a district will ONLY be offered the NJ Educators Health Plan described below. It is our understanding that the term “new” employees include employees who leave one school district to begin employment in a new district.
- SEHBP Plan Offerings
Effective January 1, 2021, the SEHBP can offer only three plans for medical and prescription drug benefits for active employees. All other health benefit plans offered by the SEHBP prior to that date are to be terminated. Any bargaining units with contracts containing other SEHBP plans, that are terminated by this bill, will address their issues through bargaining or contract enforcement. Non-Medicare retirees and
their dependents will be moved into the new NJEHP plan effective January 1, 2021. Amendment to the original bill permits employers that participate in the SEHBP to retain the ability to enter the program for medical plans only and allows them to purchase pharmacy and dental benefits outside of the program without limit or restriction.
- For the plan year beginning January 1, 2021 until December 31, 2021, SEHBP plan offerings will include the current NJ Direct 10 or Direct 15, if available under member contract, at the Chapter 78 contribution level or other locally negotiated premium level, or a new health plan the NJ Educator Health Plan (NJEHP) where member contributions will be based upon a percentage of salary (see Contribution Schedule chart herein). It is our understanding that this is true even if a collective negotiations agreement was in effect on the effective date of this law that provided enrollment in a previously offered plan under the SEHBP. Those prior health plans under the SEHBP terminate effective December 31, 2020 other than Direct 10, Direct 15 or the NJEHP.
- Beginning July 1, 2021 and for each plan year thereafter, a fourth plan will be offered by the SEHBP, the Garden State Health Plan (GSHP), which will provide the same level of benefits as the NJEHP except that members who choose this plan will be limited to the services of a New Jersey health care provider network. Members (active employees and non-Medicare retirees) choosing the GSP will have a contribution that is half the percentage contribution amount listed on the NJEHP contribution chart.
- Guaranteed Plan Savings to State
The plan design of these four plans, NJ Direct 10, NJ Direct 15, NJEHP and GSHP, will remain unchanged for the time period until December 31, 2027 unless federal or state law mandates a change to governmental health care plans or the law fails to achieve the goal of $300 million in savings to the State. In the latter case, within 30 calendar days after June 30, 2023, the State’s actuary for the SEHBP must analyze and report on the annualized savings comparing plan year 2020, 2021, and 2022. If sufficient savings have not been reached, the SEHBP Plan Design Committee has 60 days to make plan design changes or adjustments to employee contributions, or both to any or all plans to make up for the shortfall. If the Plan Design Committee fails to do so, the State Treasurer will have 45 days to make such changes to achieve the State savings level of $300 million.
- Enrollment Period
A special enrollment period will be conducted by the Division of Pensions and Benefits prior to January 1, 2021. The bill provides that the Division, in conjunction with the School Employees Health Benefits Commission (SEHBC), will develop a guidance tool for confidential online consultations to assist members and retirees impacted by the bill in their decision making.
- Important! Possible Financial Penalty if Fail to Choose a Plan!
During the enrollment period, active employees must affirmatively select one of the three options, Direct 10, Direct 15 or the NJEHP if their district is in the School Employees Health Benefits Plan. Employees who fail to affirmatively choose a plan will be placed in the NJEHP for plan year January 1 2021 to December 31, 2021 and if they were paying full cost, the individual will not be eligible for the cost savings available under the NJEHP contribution schedule. Members need to be aware of this financial penalty of lost cost savings for a lack of action in choosing a plan during the upcoming fall enrollment period.
- Non-Medicare Retirees- NJ Educator Health Plan Only
All current and future retirees that are not-Medicare eligible will be enrolled in the NJ Educator Health Plan for the time period January 1, 2021 through June 30, 2027, unless they choose to move to the Garden State Health Plan when it becomes available. Thereafter, such retirees may select any plan offered by the School Employees Health Plan. If as a non-Medicare retiree, you currently do not contribute toward your health care premium, this will not change. If you do, your cost will stay the same or, may decrease because you will contribute based upon the contribution schedule set forth in the legislation as a percentage of your pension.
- “New” employees’ Choices
The bill treats any employees who commence employment on or after July 1, 2020, the effective date of Chapter 44, but before January 1, 2028, who do not waive health coverage, as new employees eligible for only the NJEHP or GSHP. Employees of the district who began employment prior to July 1, 2020, will have the option to choose among the initial three plan offerings (Direct 10, 15 or NJEHP) during the enrollment period. After January 1, 2028, an employee may select any plan offered by the SEHBP during open enrollment.
- Member Contributions
An important component of the bill is the change in employee/retiree contribution rates toward health care from a percentage of premium model to a percentage of salary or percentage of retirement allowance model. The bill provides the following contribution schedule whereby the employee or non-Medicare retiree contribution is deducted from one’s pay or pension payment:
Amendments to the bill provide that the retiree’s contribution is based upon the retiree’s annual retirement allowance, including any cost of living adjustments to that allowance.
The Garden State Health Plan, to be developed next year, will provide the same level of benefits as the NJEHP, with a New Jersey only provider network at one half of these percentages. The bill does contain language that employees and non-Medicare retirees enrolled in the NJEHP or GSP cannot be required to pay more than the contribution levels set forth in the bill for their health benefits depending upon the plan selected.
Active employees not enrolled in these plans (NJEHP or GSP) will contribute toward their health benefits based either upon contractually-negotiated rates, Chapter 78 contribution levels under that law (Direct 10 or 15) or employer discretion (non- bargaining unit employees).
- Wellness Options and Cost Reduction Efforts
The bill contains provisions including comprehensive health and wellness plans focused on health screenings, coaching services, and smoking cessation services and ensures
that all school employees have access to these services. Other provisions promote the use of patient-centered medical homes within the SEHBP and efforts to support expanded population health arrangements to manage costs.
- Non-SEHBP Districts Employees in districts that do not participate in the SEHBP will be able to keep their existing negotiated health insurance at the Chapter 78 contribution level or other locally-negotiated premium sharing levels, but all districts must also offer the NJEHP or its equivalent plans through their private carriers at the statutory premium sharing level based on a percentage of salary. As noted, all new employees will only be offered the NJEHP whether the district is in the SEHBP or not. After July 1, 2021 and thereafter, all districts, including non-SEHBP districts, must also offer employees the Garden State Plan (GSP) whether through the SEHBP or a private carrier during open enrollment periods.
- Collective Bargaining The bill defines the plans available and contribution levels for districts participating in the SEHBP for the 7 years this law would be in effect from the law’s effective date of July 1, 2020 through June 30, 2027; thereafter, the parties may negotiate the contribution levels of employees enrolled in the NJEHP or GSP. Negotiations shall be conducted as if the contribution levels contained in this bill were part of the parties’ prior contract. The parties can negotiate a new contribution schedule or method other than a percentage of salary at that time.
For districts not participating in the SEHBP, those districts are prohibited from adding any new health care benefit plans other than Direct 10, Direct 15, the NJEHP, and the GSP for the 7 year time period until June 30, 2027 except that these employers may continue to offer health benefits plans that result in additional premium cost reductions beyond those in the bill. In such cases, final statutory language states that where the net cost to the employer is lower than the cost to the employer under the NJEHP, the employer and the majority representative must engage in collective negotiations over the financial impact of the difference.
Also, health benefits plans that were in place prior to the effective date of the bill becoming law (July 1, 2020) may continue to be offered, (probably until the contract expires -clarification needed). Beginning July 1, 2027, non-SEHBP districts can negotiate other health benefits plans and contributions with its employee bargaining units. Similar to SEHBP districts, negotiations shall be conducted as if the contribution levels of the bill, with any modifications adopted by the Plan Design Committee or State Treasurer to address a shortfall in state savings (no later than October 1, 2023), were part of the parties’ prior contract. These provisions also apply when health benefits coverage is provided through an insurance fund or joint insurance fund.
Use of Savings The savings realized by school districts that are spending at or above their adequacy level calculated under the School Funding Reform Act must be exclusively used for property tax relief. Districts spending below adequacy can spend the savings to support their educational program or other budget purposes. Each district must annually submit a data sheet to the NJDOE, the Division of Pensions and Benefits and the Legislature to track health care cost savings.
Details of the New Plans The following charts detail the provisions of the NJ Educators Health Plan and provide a Comparison of Plans to be available under the School Employees Health Plan effective January 1, 2021:
More Information to Come In order to provide you with more information, NJPSA will be conducting several webinars this summer on Chapter 44. We will send a special notice with the dates and times for these programs as we finalize them. In the interim, please contact Robert Murphy, NJPSA Assistant Executive Director, email@example.com or Debra Bradley, NJPSA Director of Government Relations, firstname.lastname@example.org if you have questions on the new law.