NJ towns opt for alternatives to contested state health plan

As we enter the second month of 2023, one of the major lingering issues from 2022 remains unresolved: the State Health Benefits Plan and the massive premium hikes of more than 20% that were approved last fall by the State Health Benefits Commission.

The eye-popping number rattled public employees, labor groups, and local and county governments. Those parties also bemoaned the lack of notice for the skyrocketing rates. And then, when the Murphy Administration negotiated a deal to defray the costs at the state level, tensions boiled over.

In December, a joint virtual news conference brought together an unprecedented coalition of local and county governments and labor organizations to call for a one-time $350 million appropriation from surplus funds to offset these costs as well as structural reforms to the plan.

But there has been little movement since then in terms of the negotiations, which are ongoing. However, there has been movement in another sense: towns heading for the exit.

In October, Camden voted to leave the plan and jump to Aetna. Last month, the state’s largest city, Newark, and the capital city, Trenton, also switched to Aetna.

Camden officials estimate a savings of several hundred thousand dollars this year versus the more than $3 million hit it would have faced by staying on the state plan. Newark will reportedly spend between $59 million and $72 million for its plan with Aetna compared to the $87 million price tag for the SHBP. And Trenton officials say their switch will save taxpayers $4.3 million annually with no loss in benefits to city employees.

“I would like to thank Business Administrator Adam Cruz and the Trenton City Council for working together to control city spending on health care amid record-high inflation and the increase in demand for health care services,” said Trenton Mayor Reed Gusciora. “Our teamwork is already paying off for the Capital City.”

“As a state employee, I knew that we needed to protect Trentonians from the rise in health care spending,” said Councilwoman Jenna Figueroa Kettenberg. “We stood up to the State Health Benefits Commission, and we stood with the hardworking city employees in Trenton.”

The exodus from the program comes as no surprise to John Donnadio, executive director of the New Jersey Association of Counties, who told NJBIZ that all parties are seeking to reduce expenses. “We’re going to look at exploring options,” said Donnadio. “We’re disappointed that there hasn’t been any type of immediate relief for local employees. We’re disappointed that there’s been no structural reforms.”

Donnadio said that localities cannot wait and hope for some legislative action or resolution. “There’s been very few talks and negotiations that management has had with the administration,” said Donnadio. “We’re going to explore taking matters into our own hands and creating a county-wide regional health insurance fund.”

“We’re at midnight hour here,” Michael Cerra, executive director, New Jersey State League of Municipalities, told NJBIZ. Cerra stressed that local governments are facing budget deadlines and the current uncertainty is forcing tough decisions, such as a potential combination of tax increases, reduction of services or other cost reductions, without a resolution.

He also pointed out that if local officials continue to believe that leaving the plan is the only way to make ends meet, it will broadly affect state finances because a smaller pool will lead to greater risk, and potentially even higher rates. Cerra said he is concerned about 2024 and beyond.

Despite those concerns, Cerra said he remains hopeful, stressing that the lack of an alternative is what keeps his “last ember of optimism” going. “I still think there’s an option here, a possibility. Everyone loses if there is no resolution here,” he explained. “The alternative is so bad. We have to come up with a solution.”

Eric Richard, spokesperson for the AFL-CIO, which is part of the coalition calling for help from state leaders, told NJBIZ in a statement that the local governments jumping out due to the increase was predictable. “It’s going to have a long-term negative impact on both property taxes and employees,” said Richard. “The provider network/system requires wholesale reform otherwise this trend is only going to continue.”

Following Trenton’s exit, Senate Republicans blamed the Murphy Administration for the situation. “More local governments are likely to realize they can achieve significant savings for both their workers and property taxpayers by shopping for health insurance in the private market,” said Sen. Michael Testa, R-1st District. “Nobody who can avoid it will pay the 23% premium increase pushed through by the Murphy Administration.”

“The Murphy Administration failed to be transparent about the huge increases for months before they were announced and they refused to accept any of the suggestions from towns, counties, and worker unions to cut costs and lessen the blow,” said Sen. Declan O’Scanlon, R-13th District. “We’re now likely witnessing the beginning of a mass exodus of local governments from the SHBP that could lead to a total collapse of the system.”

O’Scanlon echoed the concerns that towns with worse experience ratings might not have the option to leave, and could be hit with massive, snowballing rate increases as others that are more attractive to private insurers are offered lower rates to leave the state plan.

“SHBP rates for towns and counties that remain in the plan will go up so high that nobody will be able to afford them without huge property tax increases,” said O’Scanlon. “It’s a total mess that Gov. Murphy could have and should have prevented.”

Senate Democrats declined to comment.

Murphy maintains that he is committed to finding a resolution. When asked about the situation during a media gaggle last month, he said that he remains optimistic and that talks were continuing with a spirit of goodwill.

“Recognizing the challenges increased rates pose for municipal governments and local government employees on the State Health Benefits Plan, the administration continues to seek feasible solutions to rising health care costs to help more New Jerseyans access the affordable health care they deserve,” Christi Peace, a spokesperson for Murphy, told NJBIZ in a statement. “The governor remains committed to working with partners in government and labor toward our shared goal of providing high-quality health care at a more affordable price.”