Treasurer Says State Sees No Savings from Benefit Reform

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According to testimony by the State Treasurer Andrew Sidamon-Eristoff May 9 New Jersey won’t see the savings the Governor predicted benefit reforms would bring this year because public workers are not buying into lower-cost/lower-benefit plans.

Moving workers to lower-cost health plans was key in Christie's vision for reforming public-worker pensions and health care benefits to reduce massive state deficits. Selling the policy at town hall-style events Christie originally argued that his changes could save the state at least $10 million in the first year alone. Last-minute negotiation led to a phase-in of the changes however with employees paying not less than 1.5 percent of salary or 25 percent of a portion of benefit cost (as based on their salary) this year. The portion of the benefit cost paid by public workers which is based on an individual’s salary and tops off at 35 percent of the total benefit plan cost is expected to increase in quarters over the next three year. Given the phase in and the reality that employees would pay not less than 1.5 percent of salary led many to eschew any high-deductible option this year when enrolling for health benefits.

Treasurer Andrew Sidamon-Eristoff told the Assembly Budget Committee May 9 that final savings for this fiscal year amounted to $1.2 million. He also claimed that the larger savings Christie predicted are now projected forward into 2013.

“Although the new coverage options were available to plan members in last fall's open enrollment only a small number of plan members made a switch” Eristoff told the Assembly Budget Committee on Wednesday morning.

Treasury spokesman Andrew Pratt said the overall effect of the reforms was to reduce future costs to the State in the face of a $121 billion combined deficit in pension and benefits funds.

“To anyone who understands math there is no question that the reforms save money” he said Wednesday.

Under Christie's full reform plan which he has called “the third rail in politics” public workers would pay an increased share of their health insurance premiums by 2014.

The state expects to spend another $48.5 million to cover active and retired workers in fiscal 2013's budget while anticipating savings of $36.2 million.

But actual health care costs are expected to rise at least 9 percent in 2012 state actuaries reported last October. This would bring the state's total cost for covering those workers to an estimated $5.2 billion.

Union leaders however have repeatedly faulted Christie's policy for offering high-deductible health plans plans that cost less in premiums upfront but in some cases cost enrollees thousands of dollars in out-of-pocket health services. In fact many organizations including NJPSA urged members not to opt into the high deductible plan.

Eristoff said Wednesday that he anticipates the tide will turn. State savings should rise to $34 million in 2014 he said as more public workers see “incentives” to move to high-deductible plans.

Christie's policy has been controversial because it also blocks unions from making changes to health care benefits through collective bargaining until 2014 when public workers' contributions will have fully phased in.

Critics of the plan have also argued that the Governor’s insistence on taking health benefits off the bargaining table is not about saving money but about marginalizing collective bargaining.


Eristoff also said in his testimony that the state has a series of initiatives to privatize certain functions of government including the state lottery but when asked he said the state had not yet saved money through them. Most are still being set up he said.

Mum on Revenue Projections

The treasurer also declined to give any preview of April's state revenue collection figures saying the full report will come next week. A May 3 memo from Office of Legislative Services warned of potential low collections (NJ Revenue Falls Short of Projections May 9 2012).