Local officials say the proposed rate hikes could push towns and counties off state-run health plans, risking yet higher increases. (Dana DiFilippo | New Jersey Monitor)
A set of looming double-digit rate hikes proposed for New Jersey’s state-run health plans risks redoubling municipal flight toward other options and pushing rates up yet further.
State actuaries in July recommended increasing health premiums by an average of 17% for local government workers and retirees and by 11% for their counterparts at the state level. Premiums under the School Employee Health Benefits Program should increase by 14% on average, they said.
The hikes, compounded with rate hikes of more than 20% in 2022 and more moderate ones last year, have worried local officials who fear the increased costs will further strain already tight municipal budgets.
“The state health benefit plans are seeing double-digit increases while health insurance funds which some of our towns are in … are only seeing like 8%, 9% increases, so what’s the difference? What’s the driving factor?” said Lori Buckelew, assistant executive director at the New Jersey League of Municipalities.
Local government enrollments for active employees in the State Health Benefits Program declined by roughly 18% in the two years after the double-digit rate increases in 2022 , with similar drops for plan retirees, according to actuarial reports.
More towns may leave if faced with another round of rate shock.
“We have members that are absolutely looking to see what other plans are out there and to see how they can control the cost,” Buckelew said.
Maggie Garbarino, a spokesperson for Gov. Phil Murphy, said his administration is “always concerned about increased costs and what they mean for families across New Jersey.”
“The Governor remains committed to working with partners in government and labor to make meaningful progress in delivering affordable health care to the State’s public workforce,” Garbarino said.
Towns and counties regularly move off and onto state health plans, but a large-scale exodus could lock the state plans in a vicious cycle where high rates lead to a smaller subscriber pool, which leads to yet higher rates.
Some small municipalities with too few workers to self-insure and no access to cooperative health insurance procurement could have no choice but to remain on state plans even as costs rise, Buckelew said.
Enrollment among other sectors of public workers has proven more resilient. Policy changes that in 2021 began basing school employees’ insurance obligations off their compensation instead of a portion of premiums have insulated those workers from the direst effects of the steep swings, but those increases still drive up costs for school districts.
Active employee enrollment in the School Employee Health Benefits Program fell by just under 3% over the two-year period. State units cannot move to other health benefit providers, and enrollment under state plans has remained largely static despite the cost increases.
Commissions charged with setting rates for the public health plans were due to approve the premium increases in late July but scrubbed those meetings to allow a separate committee to approve a pilot program that would allow public workers to seek certain procedures at select well-performing hospitals without copayments.
The effect the pilot program and other plan design changes, including reduced specialist copays, will have on premiums remains unclear.
“We’re optimistic that it’ll be a reduction of the increase, but will it be a significant reduction of the increase? That’s the unknown,” said Buckelew.
Also unclear is whether the commissions intend to approve the rate hikes at their regular September meetings or whether they’ll convene for the vote outside of their normal schedule.
The state intends to begin open enrollment for the public health plans on Oct. 1, and a spokesperson for the Treasury warned that delaying rate-setting would leave officials less time to coordinate with vendors and other tasks to ensure a smooth transition to a new plan year.
“In the past, when rates have been approved later and there has been less time to prepare for the October 1 open enrollment, there were numerous issues during the open enrollment process that negatively impacted members,” said Danielle Currie, a Treasury spokesperson.
Delaying the open enrollment period would also create problems, she said, because officials must complete their work before the new plan year begins on Jan. 1.
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