Unions: Freeze contributions, use Covid relief funds to offset proposed hikes in public workers' health care premiums

Seth Wenig/AP Photo
·6 min read

Some of the state’s top union leaders are requesting that public employees' health care contributions be frozen at current levels and that federal Covid relief funds be used to help offset proposed rate increases for those workers' health insurance.

In a letter to Gov. Phil Murphy obtained by POLITICO, the leaders of the New Jersey State AFL-CIO, Communications Workers of America, New Jersey State Policemen's Benevolent Association and other public employee unions say the steep proposed rate increases to the State Health Benefits Program would “cause a financial crisis for New Jersey workers, the public and State and local governments.”

The union leaders also criticized top officials from the the Department of Treasury, which oversees the public employee health insurance program, and Horizon Blue Cross Blue Shield of New Jersey, which administers the health insurance plans.

“These increases will strike a blow against your efforts to make a ‘stronger fairer’ New Jersey that is more affordable for middle class families, and they may even set the stage for creating a higher market rate for healthcare overall in the State,” the letter to Murphy reads. “These increases cannot be allowed to go into effect.”

The letter, sent Wednesday, comes as the State Health Benefits Program faces proposed rate increases for current state and local employees of around 20 percent. Across various plans, increases range from 12 to 20 percent. The program is paid for by contributions from governments and workers, with governments — and by extension taxpayers — picking up much of the cost.

Aon, an actuary hired by the state, has recommended the rate hikes largely due to increased health care utilization patterns as a result of the pandemic. Murphy and Treasury officials have cited that, along with inflationary pressures, as the main factors driving the proposed rate hikes.

“ARP and surplus money should be appropriated for increases attributable to COVID. Increases in costs to Local and County Governments will result in property tax increases, again wiping out the relief provided by the Anchor [property tax relief] program,” the letter reads. “(Permanent property tax increases are a poor solution to what may be a temporary trend.)”

It is unclear whether Murphy or the Legislature would be willing to use federal American Rescue Plan funds — of which New Jersey still has about $1 billion left to spend — to offset any rate increases. There is no shortage of requests on how to use the money. During a public hearing earlier this week, ideas for the federal funds ranged from investing in higher education, NJ Transit and anti-violence groups, as well allocating more money to provide direct financial relief for undocumented immigrants.

Under new budget language for fiscal year 2023, the governor can spend $300 million in Covid relief funds unilaterally, in increments of one $60 million project and other projects in increments of $20 million. The rest of the money must be approved in partnership with the Legislature’s Joint Budget and Oversight Committee.

Murphy was noncommittal when asked about using ARP money during an unrelated event in East Rutherford on Wednesday, saying he had “no news to make” on how to lower premiums.

Christi Peace, a Murphy spokesperson, said in a statement that, “Our office has received this letter and is reviewing the proposed recommendations.”

In their letter, the unions reserved some of their harshest criticism for the Department of Treasury, under which the public employee program is housed. Union leaders questioned why the Division of Pensions & Benefits, which is within the department, did not request more money for the health insurance program during the budget process. They also accused management of being less cooperative than in years past.

Treasury spokesperson Jennifer Sciortino said in a statement the unions presented “inaccuracies” in their letter.

“Treasury shares the concerns regarding recommended rate increases expressed by union leaders,” Sciortino said. “However, there are a number of inaccuracies contained within their letter. We have always been, and remain, ready and willing to continue to work with labor representatives, the state’s vendors, and the Legislature to reduce the rate increases for the coming plan year … It is important to note that the recommended rates for plan year 2023 set out in the Aon report are just that — recommendations. It is now up to the health benefits commissions, which include labor representatives, to set the rates. If the commissions decide not to accept Aon’s recommendations, they must have an actuarially-sound basis for any rates they do approve.”

The unions also took aim at Horizon and allegations the insurer failed to generate savings for a money-saving program the state paid extra for, saying that money should be "Claw[ed] back" from the insurer. Aon initially estimated savings at 3 percent to 3.5 percent, but later had no evidence those savings materialized. The efficacy of the program is the subject of a state complaint, which Bloomberg reported Murphy’s office allegedly interfered with.

Horizon has maintained it has achieved the savings it is contracted for.

“As the State has acknowledged, Horizon has no role in the rate setting process [for the State Health Benefits Program],” Horizon spokesperson Tom Wilson said in a statement. “Horizon’s bid for the State contract promised to deliver $200 million in savings achieved by managing the total cost of care and we are fulfilling our promise and our contractual obligations. Our contract includes specific claims cost benchmarks backed by performance guarantees. According to the State and its consultants, Horizon has met those cost benchmarks.”

The unions also said they “do not believe that there is actual justification” for the steep rate increases, although Sciortino said department staffers vetted Aon’s projections for weeks before they were released.

While cuts could be made to the program to achieve savings, union leaders worry that doing so would decimate the health benefits provided to current and former public employees.

The Legislature could step in to make changes to the program, but it is unclear whether there is an appetite among lawmakers to do that.

Local government lobbyists from the New Jersey Association of Counties and the state League of Municipalities, who have raised alarms over the proposed increases, told POLITICO they welcomed the consideration of using federal Covid-19 relief funds and even freezing worker contributions — as long as the state and not local governments pick up the tab for frozen contributions.

“I think we’d be ok with that, but the state would have to then have to subsidize the counties and municipalities for the difference,” said John G. Donnadio, executive director of the New Jersey Association of Counties. “… If the state is going to use ARPA monies or its surplus to make counties an municipalities whole, we’d have no problem with that.”