Unprecedented coalition calls for $350M to offset state health benefits rate hike

Matthew Fazelpoor//December 13, 2022

Unprecedented coalition calls for $350M to offset state health benefits rate hike

Matthew Fazelpoor//December 13, 2022

An unprecedented coalition of government unions, elected officials, and county and local groups joined together Dec. 12 to advocate for a solution to impending – and skyrocketing – state health care plan premiums that are set to hit Jan. 1.

The collective called on lawmakers and the governor for a one-time appropriation of $350 million from surplus money to offset increases for 2023.

The hikes follow a Sept. 14 vote by the State Health Benefits Commission approving the 22.8% increase in the state benefit program rates.

While an agreement was reached with unions at the state level to dramatically reduce that change, no such solution has been achieved at the county and local levels, where leaders were caught off-guard by the hikes and have been scrambling since.

Tensions boiled over during a virtual press conference earlier in the fall when local and county leaders sounded off — blaming the Murphy Administration for the huge increase and the short notice. Without a solution, leaders said they would be forced to face make very tough budgetary choices.

Monday’s virtual press conference also convened this rare coalition of groups, including International Brotherhood of Electrical Workers Local 1158, New Jersey League of Municipalities, The New Jersey State Policemen’s Benevolent Association, New Jersey Association of Counties, New Jersey Firefighters Mutual Benevolent Association, Communication Workers of America NJ, New Jersey Fraternal Order of Police, Teamster Local 331, International Federation of Professional and Technical Engineers Local 196, Professional Firefighters Association of NJ, New Jersey Conference of Mayors, NJ Urban Mayors Association, Rutgers AAUP-AFT, American Federation of State, County and Municipal Employees (AFSCME) NJ Council 63, and NJ State AFL-CIO.

“This plan would also guarantee $100 million annually in true cost savings – not cost-shifting onto employees – which would directly result in benefiting taxpayers,” the coalition said of its appropriation proposal in a press release. “If the $100 million does not materialize via the Plan Design Committee (PDC), then the proposal empowers the State Treasurer to implement savings unilaterally. It also provides a brief enrollment period, so union members can accurately assess the impact of their current plan and make informed decisions concerning their health insurance coverage going forward.”

Ripple effects

NJ State AFL-CIO President Charles Wowkanech said that if nothing is done to address this cost increase, much of the work the Legislature has done to stabilize property taxes is going to be marginalized.

It’s not often that unions and local government management see eye-to-eye on an issue, but on this issue we are unified. — NJ State AFL-CIO President Charles Wowkanech

“It is clear to all stakeholders that if nothing is done, not only will our members and taxpayers see a financial hardship, but ‘kicking the can’ down the road on controlling health care costs will continue to plague taxpayers, towns and counties each and every year to come,” Wowkanech continued. “This proposal is an opportunity for significant, meaningful savings that will help to reign in out-of-control health insurance costs.”

East Windsor Mayor Janice Mironov, who is also president of  the NJ Conference of Mayors, spoke at the top of the virtual press conference.

“These types of steep hikes in all of our costs would dramatically upend our municipal and county budgets, the hard work of our public employees, and burden all of our property taxpayers at a time when everyone, including the administration, continues to tout an affordability agenda,” said Mironov.

She noted that these different stakeholders have been working together to reach common ground since mid-September when “when this stunning decision was first announced.”

“We share a common mission about the need to mitigate these dramatic cost burdens,” said Mironov. “And we share the common sense [of] understanding that these enormous and precipitous health care premium hikes are completely unfair to our local towns, to our counties, to our public workers, and to all taxpayers. Towns would pay a steep price. Workers will be harmed, and taxes will go up at all local levels.”

And these local governments are already faced with difficult fiscal challenges heading into 2023, Mironov explained, especially inflationary costs in the wake of COVID.

“Let’s hope that we can all agree that this is not an acceptable situation and it will be fraught with political consequences,” Mironov added. “So let’s together figure out the solution. The stakes for all of us in New Jersey are high, and we all require a fair and equitable solution to resolve this really huge fiscal problem and human problem for all of us.”

Mironov also noted time is short to reach a solution, with the increases set to take at the start of 2023.

“We believe, all of us, in unity, that this proposal is the best option currently available for all parties, for all stakeholders, for all officials in the State of New Jersey,” said Mironov. “We implore all of you to act and to act swiftly for a fair and equitable resolution of this unacceptable cost burden.”

Fran Ehret

Fran Ehret, president of CWA NJ, pointed out that New Jersey is the only state in the country facing such an increase at over 20%.

“This is going to be a tremendous impact to taxpayers throughout the state, and it’s also going to be a tremendous impact to dedicated public workers, who have worked all through the COVID pandemic,” said Ehret. “And so, we’re going to continue to call on the governor, Speaker [Craig] Coughlin, and the Senate President to help us a find a solution.”

Cutting costs

Officials also pointed out that a situation and cost increase like this this affects the ability to recruit, attract and retain public employees.

Paterson Mayor Andre Sayegh highlighted how these rate hikes will affect an already financially distressed city like Paterson, which was incentivized to switch from being self-insured to a state health benefits plan.

“Four years ago, none of us could have ever imagined that we’d be in the midst of a once-in-a-century crisis,” Sayegh explained. “But here we are. And unfortunately, as we still try to turn the page on the pandemic, we still have costs that we have to bear, and we cannot bear this cost.”

Paterson Mayor Andre Sayegh

Sayegh said he and his team have explored potential cost-cutting measures to offset this expense with options including possibly closing a library, a firehouse or cutting back on recreation. He described such options as devastating and unacceptable.

“So, Mayor Mironov, I stand shoulder-to-shoulder with you, labor and all of those that are a part of this united front so that we can agree to something very sensible, something that could mitigate the pain during a very painful last two years,” said Sayegh.

Kevin Lyons, director of member benefits for the New Jersey State PBA and a member of the State Health Benefits Committee since 2012, believes this joint proposal will in time fix the state health benefits plan.

“This unprecedented action shows the importance of the work we must do for not only the public employees, but the taxpayers of New Jersey,” said Lyons. “It should not be forgotten that the drastic rate increase has a magnified impact on public employees as they are taxpayers as well.”

Unlikely collaborators

The overriding message from the coalition was an attempt to help bridge the gap — to avoid tough cuts or tax increases while dealing with structural issues and cost drivers moving forward.

“Help us get through this,” said Lyons. “We’re looking for a short-term mitigation to fix a long-term problem and then fix the long-term problem.”

John Donnadio, executive director, New Jersey Association of Counties, said this proposal is appropriate and timely, and is tied to long-term cost savings — pointing out just how rare this kind of coalition truly is.

“I want to underscore the fact that you have labor and management coming together on a legislative initiative,” said Donnadio. “I think it is unprecedented. I’ve been in Trenton for 25 years, and I don’t recall on a legislative issue where we have come together with a unified voice to advocate for some much-needed relief. So, I think it’s critically important.”

Meanwhile, the administration says it is taking the proposal under advisement.

“Our office is continuing to review the recommendations proposed by the coalition of local government organizations and labor unions,” Christi Peace, a spokesperson for Gov. Phil Murphy, told NJBIZ. “The administration remains committed to our ongoing goal of working with our partners in government and labor to seek feasible solutions that will help us deliver quality health care at a more affordable price.”

Assembly Speaker Craig Coughlin, D-19th District

“It is the responsibility of the plan design committees to create quality, affordable health plans for public workers. We are disappointed that despite knowing of the impending rate increases for nearly seven months, the committees have not come to agreement on a single change to offset unacceptable increases,” Senate President Nick Scutari, D-22nd District, and Assembly Speaker Craig Coughlin, D-19th District, told NJBIZ in a joint statement. “Any solution must achieve sustainable long-term savings and ensure exorbitant surprise rate increases do not happen in the future.”

Senate Republican Leader Steve Oroho, R-24th District

“Everyone except for the Murphy Administration is scrambling to find a solution to the massive health care premium increases that are set to drive up costs by more than 20% for workers, retirees, local governments, and property taxpayers,” Senate Republican Leader Steve Oroho, R-24th District, told NJBIZ in a statement. “Had the governor been transparent this spring about the spike in rates that he knew was coming, stakeholders, legislators and the administration could have worked to find a comprehensive solution to lower costs before it was too late. It’s a huge fail by the Murphy Administration that is guaranteed to cause pain for New Jersey taxpayers in one way or another.”

While the situation remains without a solution as of now, the different sides maintain that dialogue is ongoing to find a path forward.

“I do want to just also give out an appreciation for the willingness of the governor, the administration, and our legislators to continue to engage on this critical issue, to hear us out,” said Mironov. “And most of all, hopefully, to reach an agreeable accord to mitigate this enormous financial burden on towns and counties, on public workers and on taxpayers.”