Health care rates to rise for NJ public workers

by JULIET FLETCHER
Wednesday, October 12th, 2011
reprinted from NorthJersey.com.

State, local and public school employees will see their existing health premium costs increase by at least 9 percent next year, as benefits reform shifts more of that burden to workers’ paychecks.

Two state commissions confirmed Wednesday that next year’s prices for the current health plans familiar to employees will jump, but at the same time approved rates for newly designed plans that officials hope employees will choose to save money in the long term.

Overall, New Jersey will spend $5.2 billion to cover 850,000 current and retired state and local workers and their dependents in 2012, state actuaries estimated Wednesday.

The state’s bill to cover government workers had risen 7 percent over last year, said Ed Fox, senior vice-president of Aon Hewitt actuarial consultants, an increase he said was in line with current trends.

But as even workers face paying a larger share of their health care costs starting next July, state officials acknowledged that most will stick with the insurance plans they know. Unions leaders have said workers are right to be concerned about switching to the lower-cost plans.

Governor Christie ordered cheaper choices for health care plans as part of his successful change to public pension and benefits laws enacted in June.

But just two percent of employees and retirees are expected to make the switch to any of the new plans ordered by Christie, advisers from Aon told the state and school employees benefits commissions Wednesday. As a result, anticipated savings total just $10 million.

Among the new options, employees now have access to cheaper, high-deductible plans, which make patients pay more out-of-pocket before reaching the threshold where insurers will cover treatment. The total cost for those premiums start at around $400 a month for a single employee, compared to around $550 under the state’s traditional Direct15 plan. But opponents say the plans offer very narrow coverage.

Workers sticking with the more familiar state plans will see costs rise in January.

For current employees, rates for 2012 health insurance plans will rise by an average of 9 percent for state employees, 10.3 percent for municipal workers and 10.1 percent for those employed by a school district.

Among retirees under 65, those who worked for the state see 3-percent raises, those from local government see costs rise 10.5 percent, and former school employees see increases of between 6 and 11.6 percent, depending on their plan.
State and school retirees over the age of 65, who are eligible for Medicare, will see their rates freeze at 2011 levels. Only retirees from local government jobs face raises, amounting to 2 percent.

In total, the state offers 15 health plans in 2012, compared with three choices for workers last year. While initial enrollment in the new plans will be “limited,” Fox said Wednesday, Treasury officials say that may change once new contribution requirements come into effect next summer.

Currently, state employees are required to pay 1.5 percent of their salary toward their healthcare premium.

A sliding scale takes effect in July, which means current workers will pay between 2.25 percent and 17.5 percent of their premiums. By 2014, high-paid workers will be required to pay 35 percent of their premiums.

Under the Christie’s reforms, public-worker unions are blocked from bargaining the terms of their health care until that step-by-step transition is completed.

Current state health care costs would be higher without a large injection of federal help.

Treasury officials announced last week that the state would take $90 million in federal dollars to pay towards retiree prescription costs, through an Employee Group Waiver Plan. The money is available as a result of federal health care reform proposed by President Obama and passed by Congress.

The timing of that program’s availability this year is coincidental, and unrelated to Christie’s reforms.
The plan requires Medco, the prescription provider, to change how it applies for reimbursements for patients under Medicare Part D.

Part of that $90 million, around $20 million, will be used this year to offset rises in health care costs for retired workers. The amount capped costs and co-pays for some state retirees in plans at 2011 levels.
Wednesday’s votes mark the end of a slow and at times acrimonious process to design and approve the new plans in time for scheduled open enrollment by union members.

Workers will be offered the new choices at enrollment starting Oct. 17.