Attorneys for both the State and labor representatives on the School Employees Health Benefit Plan Commission (SEHPBC) faced off in court September 7, with each accusing the other of manipulating the commission that governs the state health plans for teachers in favor of their own political interests. The current court battle stems from a State Attorney General filing last week seeking to compel members of the Commission who are appointed by the NJEA to attend meetings of the health benefits commission. The three labor representatives haven’t shown up to the past two meetings because of a disagreement over the body’s authority to make substantive changes to health benefits. The commission has not been able to make quorum in light of the representatives’ absence.
Background
P.L. 2011 Chapter 78 made significant changes to school employees’ pensions and health benefits. One of the protections for members under this law was the creation of the School Employees’ Health Benefit Plan Design Committee. The Committee took over the role of benefit review for ALL plans offered in the SEHBP from the School Employees Health Benefits Commission. The law included a requirement of equal representation of labor and management on the committee (3 union representatives and 3 state/management representatives).
After the passage of Chapter 78, any benefit modification would have to be approved by the Committee. The six members of the Committee meet approximately once a month to discuss proposals. The role of the Committee, according to P.L. 2011 Chapter 78, is as follows:
“The committee shall have the responsibility for and authority over the various plans and components of those plans, including for medical benefits, prescription benefits, dental, vision, and any other health care benefits, offered and administered by the program. The committee shall have the authority to create, modify, or terminate any plan or component, at its sole discretion. Any reference in law to the School Employees’ Health Benefits Commission in the context of the creation, modification, or termination of a plan or plan component shall be deemed to apply to the committee.”
Current Issue
Recently, State representatives on the Committee proposed moving eligible retired members receiving healthcare from the SEHBP from their current retiree health benefit program to a Medicare Advantage program. Currently 12% of retired members already selected a Medicare Advantage program through Aetna so they would see little to no change in their benefit. But the 88% that chose Medicare as their primary insurance (with Horizon supplementing that coverage) would be forced into a Medicare Advantage program.
According to The Henry J. Kaiser Family Foundation, the percentage of former State of New Jersey enrollees in Medicare Advantage (as part of the total Medicare population) is around 15%. The three union representatives have declined to accept this proposal until they have the ability to do a thorough analysis of the plan and determine if such a change would be in the best interests of retired members.
Since the Plan Design Committee needs a majority of its members to implement any change, at least one union representative would have to vote with the state representatives to mandate this change. In light of this, the Governor called on the Commission to decide the matter.
The Commission is composed of nine members: four union representatives and five executive branch representatives, but a spot on the panel for an AFL-CIO member has been vacant since last year. The chair position is also vacant because the current members have not been able to agree on who they would like to recommend. The only way to fill the union representative seat is through the Office of Appointments in the Governor’s office. Names have been provided but no action has been forthcoming from the Administration.
The Administration’s position is that the Medicare Advantage change is a contractual change, so the authority rests with the Commission. The Governor also argues that the union representatives haven’t shown up because they don’t want to trim $250 million from the health care costs of teachers and state workers that he has demanded. The Christie administration said that shifting retired members of the state plan into Medicare Advantage plans could save the state around $47 million. The union argues that he is attempting to effectuate the change through the commission because he currently holds a majority there.
Yesterday’s Hearing
While the Governor’s name wasn’t mentioned during yesterday’s Superior Court hearing the basis of order to show cause filing was ever present.
“You are allowing them to negatively control the vote to result in a rejection of Medicare Advantage,” assistant state attorney general Jean Reilly argued Wednesday before Judge Mary Jacobson.
“Allegations of manipulation for political reasons are something the court really shouldn’t get into,” Jacobson responded. “You have to assume that the objections are reasonable.”
“A minority block cannot force a negative vote like that and exercise control over the commission,” Reilly said.
“[The state’s] goal is to lure these folks to come to a meeting in which there is an imbalance in the statutory make up,” NJEA counsel Bob Fagella said.
Reilly said the solution would be for the NJEA to attend an open public meeting so both sides can air their concerns.
“There’s no predetermined result here your honor,” Reilly said.
But, unless one of the executive branch members of the commission were to make the unprecedented move of voting against the interests of the administration, the result, for the most part, is predetermined. The NJEA members will be outnumbered by the executive branch members and the change will be ushered through. This is what happened at the recent State Health Benefits Commission meeting, when the Medicare Advantage changes for that plan were approved by a vote of 3-2, with both union members of the commission opposed.
Lawyers for the NJEA also argued that the switch to Medicare Advantage is a plan design change and needs to first be approved by the plan design committee before going before the commission.
Regardless of intent, past precedent is instructive here. Unfortunately, this is not the first time the State has tried to bypass the design committee. In 2015, the State unilaterally imposed higher retiree prescription co-pays when an agreement could not be reached at the Design Committee level. Ultimately the New Jersey Superior Court Appellate Division ruled in favor of the unions and said that the State had no authority to impose higher co-pays and the matter should be addressed by the Design Committee
The School Employees’ Health Benefits Program is a self-funded plan, in which the employer – in this case the state – assumes the risk but the benefits are administered by Horizon and Aetna. Medicare Advantage is a fully-insured plan in which Horizon or Aetna will assume the risk. The state says while the funding mechanism would change, members would not see benefits changes.
“The plan remains the same but the back scenes method of funding it changes, it switches from self-insured to insured,” Reilly said.
But NJEA representatives believe otherwise.
“You don’t save $75 million and flip a switch,” Fagella said. “It’s a change.”
Judge Jacobsen did not render a decision September 7, instead ordering that several matters be briefed and that a subsequent hearing take place this coming Monday, September 12 at 2:30pm.
NJPSA Position
NJPSA has expressed concern with the process, urging the appointments be made as soon as possible and that the Committee, not the Commission, review the proposal first.