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Breaking Down The Increases

Health Benefits in Retirement for members of PERS and TPAF

Local and county officials want to know what Murphy is doing about the 2023 cost increase under discussion. John Donnadio, executive director of the county association, said the state health plan would rise as much as 26.1% next year for pharmacy benefits for educators taking early retirement. Government workers in early retirement would actually see their prescription benefit cost decline 5.7%. Medical benefits for early retirees would increase 13.6% for educators and 15.6% for government employees.

For the active employees in this plan, medical plan premiums would rise 24% for the government group and 15.6% for educators, according to Donnadio. Their prescription benefits would rise 3.7% and 7.8%, respectively. Information on traditional retirees was not available changes to Medicare plans provided through the system were negligible.

Oroho and others now wonder if this proposed increase is connected to Horizons contract. They point to a recent Bloomberg report that some state officials were displeased with the insurance companys service and sought to recoup $34 million for failing to deliver on certain savings until Murphy intervened. Horizons contract with the state worth $136 million annually expires at the end of December, although the state can renew it for one or two years.

Heres What Gov Murphy Says About Nj Public Worker Health Benefit Rate Increases

A proposal to increase health insurance premiums for public workers in New Jersey is being driven by a post-pandemic surge in demand for health care services, Gov. Phil Murphy said.

Thousands of state and local government workers and educators could face a rate increase of as much as 24% on health benefits in the coming year, and early retirees could see their rates jump by more than 15%, according to a proposal that was leaked last week to government lobbyists.

Weve done more to make healthcare more accessible and affordable than any state in America since weve been in office, Murphy told reporters during an unrelated press conference in Asbury Park on Monday. This is yet another reminder that we have more work to do.

When asked by a reporter, Murphy said the problem is not unique to New Jersey, adding that this is a phenomenon around the country, if not around the world.

The state health benefits commissions were set to approve the rate increase on Monday, but that vote was postponed to provide more time to address questions and concerns, according to New Jersey Treasury spokeswoman Jennifer Sciortino.

Republican leadership in the state Legislature have called for the creation of a special legislative committee to investigate failures by the Murphy administration that they say led to the premium increases.

I dont blame people for having sticker shock. I have it as well, the governor said. Weve done a ton of stuff, but we still need to do more.

When Do Health Care Contributions Become Negotiable

Health care contribution negotiations that result in lesser employee contributions cannot take place until after the fully phased-in employee contributions have been in place for a year. In other words, you cannot pre-negotiate the premium sharing to take effect in the second or third year of a three-year agreement when the Chapter 78 sunsets in the middle of that contract.

Again, quoting:

N.J.S.A. 18A:16-17.2 : parties who are in negotiations for the next collective negotiation agreement to be executed after the employees in that unit have reached full implementation of the premium share set forth in shall conduct negotiations concerning contributions for health care benefits as if the full premium share was included in the prior contract.

Guidance from the state reiterates the non-negotiability of health insurance premiums prior to full implementation. Local Finance Notice 2011-20R, VII- 2 reads: Once the fourth year has been completed , the law provides that: Negotiations for the next contract shall be conducted as if the full contribution was a part of the previous contract remain in place until fully phased in and, Once are fully implemented, the contribution structure is negotiable, starting from the point of full implementation

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The Fate Of New Jerseys Pensions And Health Benefit Funds

Almost a year ago the New Jersey Pension and Health Benefit Study Commission issued their report “to discover a cure for the problems plaguing New Jersey’s public employee pension and health benefits system”. As one of my wealth management partners would say “Very simplistically”, the State wishes to wash its hands of the mess that it created. The State wishes to do this by 1) merging the unfunded state plans with the well-funded local plans 2) passing the cost of teachers’ pensions to local school districts 3) putting the risk of pension performance on government employees through “employee entities” generally meaning unions 4) reducing health benefit costs by having government employees increase their cost of health care expenses 5) “freezing” current pension benefits and 6) implementing “cash balance” retirement programs.

I will not attempt to go into detail trying to dissect the above listed “solutions”. Instead, I think it makes more sense to take a step back and really look at the entire issue and ask the question What really has to happen here?

My answer is not a favorable one we need to compromise and agree on a long-term solution to the pension and health benefits issues.

Full disclosure my wife works in a school district and is enrolled in the Public Employees Retirement System as part of the “other than state” plan. If she retires under the present system she and I would receive health benefits for life.

School Employees Health Benefit Commission Approves 2023 Rates:

Pension Webinar

For those districts who have their Health Benefit Coverage through the School Employees Health Benefit Plan , you will see premiums rise 15.1% beginning January 1, 2023.

The increase is 15.6% for Medical and 10.8% for RX for a combined increase of 15.1%.

For those members enrolled in NJDirect 10 or 15, your cost share will increase based on your contracted percentage of the premium that has been agreed to. Since your Cost share percentage is on the Premium , your cost share should increase by 15.1% based on what you were paying in 2022.

For those members in the New Jersey Educators Health Plan or Garden State Health Plan , your cost share should remain flat since under Ch44 you are paying a percentage of your salary

For Retirees, Early Retirees who are enrolled in the NJEHP, if you are cost sharing, your cost share under Ch 44 should not change since it is a percentage of your pension.

The link to the Complete Rate Renewal report is below for those who want to gain a more in-depth understanding on how the new rates were determined.

As always, if you have questions on the new rates, please contact us.

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When Will We Know

While decisions made by the respective plan-design committees can impact premium rates because they are empowered to set things like co-pays and deductibles, the committees do not have the legal authority to set or approve the premium rates. Instead, that responsibility is legally granted to members of the State Health Benefits Commission and the School Employees Health Benefits Commission. Those two panels are comprised of both government officials and worker-union representatives. Its not clear when they will be meeting to consider final approval of the 2023 premium rates.

We stand ready and willing to continue to work with labor representatives and the Legislature to answer their questions and identify ways to lower the costs of health benefits for public employers and plan members. Jennifer Sciortino, Department of Treasury

For its part, the Murphy administration has expressed concern about the proposed rate increases, but it has no legal authority to act unilaterally to blunt the cost.

A fact sheet prepared by the Department of Treasury indicated the states recently enacted fiscal year 2023 budget included enough resources to absorb the increased rates, but also warned increased appropriations for worker health care may be required for fiscal year 2024, which begins July 1, 2023.

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What Will Happen Next

What happens next remains in question. A benefits committee meeting initially set for Friday has since been cancelled. In Essex County, DiVincenzo said he is working with budget staff to sort through the various increases they face next year a 10% hike in pension expenses, a 3% salary increase and budget for gas, fuel and other rising costs. If the health plan comes in at $20 million more than expected, he said, the only option is raising taxes or laying off people.

Cerra, with the League of Municipalities, said he worried how this all trickles down to New Jersey taxpayers. You kind of have a perfect storm here, he said.

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Negotiating Beyond The Sunset

When the parties are negotiating the next collective negotiations agreement to be executed after Chapter 78 sunsets, the board and the union are legally permitted, but in no way obligated, to negotiate some other cost-sharing arrangement. Remember, to reduce employee contributions below those required under Chapter 78 requires the approval of the board. The board can say no. In considering the inevitable proposal from the union to reduce employee health insurance contributions, the board should think long and hard. Prior to Chapter 78 unions were very, very reluctant to open the door to employees sharing of premium costs. In fact, in 2009-2010, the last school year before Chapter 78 was adopted, only 13 percent of the contracts analyzed by NJSBA had any employee contribution at all.

As the sun sets on Chapter 78, boards need to remember three important points.

  • The fully phased in employee contributions are the status quo for negotiations purposes in order for the employee contributions to be reduced, the board must agree to do so
  • A reduction in employee health care contributions is not negotiable until the next contract executed after Chapter 78 is fully implemented and
  • Once, employee contributions become negotiable, boards need to carefully consider the long term implications of moving away from the cost structure dictated by Chapter 78.

Good luck with your negotiations. If you have questions, contact NJSBAs labor relations professionals at 278-5219.

Officials Blame Inflation Post

NJ PFRS Retired Health Benefits
By: Nikita Biryukovâ August 12, 2022 7:04 am

Proposed double-digit increases in health insurance premiums for public workers have state and local officials fearful of the impact on the workers and taxpayers.

Surging inflation and a sharp rise in the use of health services are behind a proposed double-digit increase in health insurance premiums for public workers that have state and local officials fearful of the impact on the workers and taxpayers, officials said Thursday.

Speaking to the State Health Benefits Plan Design Committee, which oversees public worker health plans, officials from Aon Hewitt the health plans actuary said a rebound in health care visits in 2021 is the main driver of the proposed increases. Visits doubled or, in some cases, tripled expectations set in 2020, they said.

Becky Searles, a senior vice president at Aon Hewitt, said actuaries had predicted claims would rise by no more than 10% as the viruss impact on health visits receded in 2021.

Were seeing much higher bounce-backs, some services up 20 to 30% over 2020, Searles said.

The pandemic appears to have driven many of the utilization trends that underpin the actuarial recommendations. Health care visits plummeted in 2020 amid fears of COVID-19, then rebounded in 2021. But inflation is also a factor: Actuaries said premiums for public workers would need to increase roughly an additional 7.6% to account for rising prices.

A rush of reactions


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Pensions & Health Benefits

NJEA believes that the mainstay of a secure retirement is the defined benefit pension plan. In New Jersey, teachers and educational support professionals contribute a percentage of their salary and receive credit for the time they serve public school students in a pension plan that provides a guaranteed income in retirement. This is deferred compensation that members earn as part of their compensation package.

Providing quality health benefits for public school employees does not just benefit the employee and their families they are also critical to protecting students health.

Post-retirement medical benefits are another element of an employees deferred compensation.

On July 1, 2020, Governor Murphy signed NJEAs long-sought Ch. 78 relief plan into law. P.L. 2020, ch. 44, will lower the cost of health insurance for school employees while also lowering costs for school districts.

Hundreds Of Thousands Of Workers Retirees

While the specific impacts vary, hundreds of thousands of workers and retirees from state government, municipalities, county governments and school boards are among those facing the increases.

A bounce back in the number of people using services was projected for 2021. But the actual use of services turned out to be two to three times what was expected, according to a consultant.

Meanwhile, the proposed new rates which have yet to get final approval are also being closely watched by government employers who, by law, cover a significant share of the annual cost of providing public workers with health insurance and pension benefits in New Jersey.

It remains to be seen if the increased costs will get passed along at least to some degree to taxpayers, including property owners, who already pay some of the highest levies in the country.

According to the reports outlined during last weeks meetings, there was a significant deferral of care during the first year of the pandemic.

A bounce back in the number of people using services was projected for 2021. But the actual use of services turned out to be two to three times what was expected, according to consultant Aons presentations.

In addition to 2021 utilization playing a key role, the rates are also being affected by rising inflation, according to the consultant. The latest data from the federal Bureau of Labor Statistics shows overall U.S. inflation held steady in July, but was up by 8.5% year-over-year.

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State Vs Local Pensions

Due to the states shoddy pension-funding history, the pensioners whose retirement funds rely on the state to cover employer obligations are in the worst shape and will take the longest to reach the 80% benchmark. Some of these funds are not projected to get there until the 2040s, Muoio said.

The outlook is a little better for retirees who worked for local governments that have a better track record funding their employer obligations. The restoration of COLAs for those funds is expected in roughly a decade, the treasurer said.

We would see an increased payment by the state of an additional $2 billion, and for the locals it would be an additional $1.6 billion.

But Muoio also quickly added what it would mean for taxpayers if lawmakers were to require a more immediate restoration of COLAs.

Just for awareness . . . we would see an increased payment by the state of an additional $2 billion, and for the locals it would be an additional $1.6 billion, she said.

I realize thats substantial money, Thompson said in response. But he also noted that, for retirees, some may have to face 30 years of inflation before seeing an adjustment. And other Republicans on the panel suggested a new round of pension reforms should be enacted.

We need to work something better out for this, Thompson said.

Restoring The Pension System

State of NJ

Despite the funding commitments made in the 2011 law, it took until the current fiscal year for the state to finally meet the requirement of making a full annual employer payment as calculated by actuaries. And it will take decades of similar payments to fully restore the pension system to good health, according to Department of Treasury projections.

Thompson noted that government retirees have already gone roughly a decade with no cost-of-living adjustments, and he appeared taken aback when Muoio said it may take up to another two decades before some retirees could have their COLAs restored under the current funding trends.

It will take another 20 years to get there? Thompson asked in response. By God, 30 years of inflation.

New Jersey maintains separate pension funds for different groups of workers, ranging from teachers to police officers and firefighters to judges. Under the current law, the COLA suspensions must remain in effect for individual pension funds until they are deemed to be 80% funded by the states actuaries.

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How Inflation Could Impact Retirees

But as inflation has surged amid the COVID-19 pandemic the 12-month rate reached nearly 8% as of the end of February, according to the latest data collected by the federal government lawmakers have begun taking a new look at how frozen COLAs are affecting state pensioners.

The bipartisan legislation that calls for undoing the freeze on cost-of-living increases suggests that retirees facing inflation in a high-cost state like New Jersey may find it more prudent, or perhaps necessary, to leave this State for other states with a comparably lower cost of living.

New Jerseys fiscal outlook may be further strained by the retirees and beneficiaries who remain. These persons will continue to slip further downward on the socioeconomic scale.

The measure goes on to say such outmigration may come with a cost for the state as it loses the tax revenue of pensioners who choose to leave.

In addition, New Jerseys fiscal outlook may be further strained by the retirees and beneficiaries who remain. These persons will continue to slip further downward on the socioeconomic scale, the bill says.

One of the more lively exchanges during Muoios recent appearance before the Senate Budget and Appropriations Committee came when Sen. Sam Thompson , who is a co-sponsor of the legislation, asked about restoring COLAs in the broader context of the states efforts to maintain robust pension funding.

Pandemic Inflation Are Factors

Treasury officials said last week that the rate increase proposed for 2023 reflects the growing cost of care, although it may not continue at this level in the years to come. The expense is heavily influenced by the COVID-19 pandemic, they said, which increased the need for costly treatment and led to pent-up demand for routine care, which people are now flocking to receive. Inflation is also a factor.

While there is significant volatility in health care trends, the rate increases for the State plans are in line with rate increases that our consultants other clients are experiencing and are also being reported nationwide, said Treasury spokeswoman Jennifer Sciortino, noting that the process is working the same as in past years.

Assemblyman John DiMaio: Its time we peel back the onion to find out exactly how we got to where we are with the health care premiums so we can hold those responsible accountable.

We believe that these circumstances are an anomaly, rather than the norm, and we believe that it is more likely than not that utilization and costs will normalize, she said.

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