New Jersey

N.J. public worker premium hikes, Murphy deal with unions will cost taxpayers. Leaders are baffled.

Recently approved increases in health-care premiums for New Jersey public workers hit cities and counties at a difficult time, and Gov. Phil Murphy’s handling of the process has left worker representatives and local government leaders angered and perplexed.

Premium rates for state health insurance plans are set to rise more than 20% in 2023 after a state health committee chaired by New Jersey Treasurer Elizabeth Muoio voted 3-2 in September to approve the increases.

Murphy struck a deal with several state labor unions to mitigate their costs, infuriating local leaders and unions representing city and county workers, who are warning of higher property taxes and layoffs.

In the end, New Jersey taxpayers will bear the lion’s share of the cost increase, but exactly how much remains a mystery. The Murphy administration did not provide an exact amount and did not answer questions from lawmakers during budget negotiations.

The governor had hints back in February that this year’s rate hikes would be much higher than normal, according to the governor’s proposed spending plan and an analysis by the state’s bipartisan Office of Legislative Services.

Murphy’s budget proposal for the current year, unveiled in early March, included $3.68 billion to cover the state’s share of health care premiums for active and retired public employees. That was $459 million, or about 14%, up year over year. When Murphy signed the budget in June, the amount swelled to $3.79 billion.

Since public employees pay a percentage of total bonuses (based on salary scales), their costs would also increase if the state paid that much more.

Murphy announced that healthcare costs were virtually unchanged in last year’s budget. In his 2021 budget, he briefly said it was an achievement “made through collaboration with stakeholders, initiatives to prevent overbilling, and better oversight by our providers.”

This year’s budget message made no mention of the higher costs.

The government did not release details of the sharp rise in healthcare costs until a copy of the tariff increases was leaked in July, blinding worker representatives, state legislators and local government leaders.

The Murphy government says it has handled the tariff-setting process this year the same as in previous years, which means it will not share information with local governments or the legislature until the new tariffs are already finalized.

And administration officials argue that back in February they had a semi-annual report that included only part of the data needed to determine new premium rates for 2023.

“The information in this report is a ‘check-in’ reflecting a specific point in time,” Treasury Department spokeswoman Danielle Currie told NJ Advance Media. “No rates are projected.”

But state lawmakers say they have been left in the dark, and the Chair of the Assembly’s Budgets Committee, Eliana Pintor Marin, D-Essex, recently said she believes the government was dishonest during the spring budget negotiations.

State Sen. Paul Sarlo, D-Bergen, chair of the Senate Budget Committee, said during a hearing Thursday that the committee “was not aware of or made aware of the potential increase in healthcare costs.”

And the Office of Legislative Services, an arm of the legislature that keeps a close eye on budgets, noted the potential increase in the number of public employees once the budget was first proposed. According to a report released in May, the administration did not answer questions from OLS regarding the significant increase.

“In the past two months, the Executive Branch has not responded to repeated requests for additional information or issued a public report or explanation as to the causes of the increased claims experience, particularly for active state and college employees. ‘ the OLS said in a budget analysis released in May.

The most notable increase has been in health care costs for active government employees, which rose more than 20% year over year to about $1.7 billion, according to the OLS.

Shortly after the rate increases were approved in September, Murphy struck a deal with state employees that capped increases in their premium contributions to 3%, shifting the lion’s share of that burden to New Jersey taxpayers.

This deal has not yet been extended to local governments and is expected to benefit a small portion — fewer than 100,000 — of the more than 800,000 public sector workers covered by New Jersey’s health program.

As part of the compromise, federal employee copayments for specialists will be doubled from $15 to $30 and urgent care copayments will increase from $15 to $45.

During a press conference last week, John Donnadio, executive director of the New Jersey Association of Counties, said the higher copayments would save “maybe a percent or two.”

“The huge reduction for state employees was because the state is now covering the cost,” Donnadio said.

The state Treasury Department has not provided an estimate of what the deal will cost taxpayers, and it’s unclear if a cost analysis was ever completed before Murphy approved the deal.

Currie said any increase in costs would only affect state finances in fiscal 2024, which begins next July, and that the budgetary impact depended “on the outcome of next spring’s contract negotiations” with unions.

Local governments still face a 22.8% tax increase, which could lead to higher property taxes. Cities and counties participating in the state health benefits program have asked Murphy to provide immediate assistance consistent with agreements made with state employees.

Murphy has repeatedly said over the past four months that the rate increases are largely formulaic and a problem states across the country are facing, but federal data and estimates on worker-sponsored plans for 2023 paint a different picture.

A surge in post-pandemic demand for healthcare services and record-high inflation are the two main reasons for the massive increases, according to Aon, the risk management firm that the Murphy administration hired to conduct this year’s interest rate analysis.

But in an independent report released in August, the same firm said the average cost for US employers to pay for employee health care will rise 6.5%. That’s more than double the 3 percent increase that US employers saw from 2021 to 2022, Aon said in its report, but well below inflation.

“In complete contrast to the last few decades, we are measuring that healthcare budgets for US employers this calendar year will be nearly three times lower than the CPI,” said Debbie Ashford, North America’s principal healthcare solutions actuary at Aon. said in a statement announcing the company’s finding.

According to the US Office of Personnel Management, health premiums for federal employees and retirees will increase by an average of 8.7% in 2023.

Health care premium increases for public workers in New Jersey are more than double inflation and in some cases three times that of other states.

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Derek Hall can be contacted at [email protected]. Follow him on Twitter @derekhall.

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