NEW JERSEY – After taxpayers and government employees were hit with double-digit rate spikes last year, a new report from the actuary hired by the state to assess its health insurance plans recommends immediate and long-term ways to cut premium expenses.
“Anything the state can do to lower costs instead of spending more to cover up the problem is an absolute must,” said Assemblyman Hal Wirths (R-Sussex, Warren, Morris), the Assembly Republican budget officer. “And the recommendations must be implemented immediately.”
The analysis was prepared by AON and released on Wednesday by the state Treasury Department. It emphasized use as a main cost driver of New Jersey’s exceptionally high public health care expenses, combined with more generous benefits and a lack of cost-cutting incentives.
Accordingly, the average health care cost for an employee in an employer plan is $14,000 nationally. In New Jersey the state pays $22,000, or 60% more than the national average.
“The state hasn’t made significant reforms to health benefits, and the result is soaring costs for property taxpayers as towns and counties are on the hook,” Wirths said. “Governor Phil Murphy won’t even make the changes he advised in 2005 to lower costs for state and local government. Several reforms recommended over the last decade also haven’t been implemented. We have to start somewhere, and this is as good of an opportunity as any.”
The State Health Benefits Commission voted to increase health insurance premiums by over 20% for in September 2022. They took effect Jan. 1 this year. It was clear in February 2022 that costs were set to increase substantially after they were frozen during the pandemic and big increases in government-worker utilization of health care.
Murphy ignored and hid that fact until he made a deal with state workers to lower their cost increases to only 3%, with the state picking up the rest of the tab. His proposed budget offers $200 million for local governments to offset health care cost increases, but they and local public unions have asked for $350 million with plan committees identifying up to $100 million in savings. Negotiations broke down earlier this year.
In 2005, Murphy chaired a Benefits Review Task Force report that recommended structural reform of health care benefits that would have saved roughly $500 million per year according to the task force’s estimates. They were never implemented by the legislature, then-Gov. Richard Codey, or former-Gov. John Corzine. Other recommendations offered by former-Senate President Steve Sweeney’s Path to Progress report also never came to fruition.
The legislature also never considered recommendations by the Pension and Health Benefit Study Commission, often referred to as the Healey-Byrne reports, which became bills sponsored by Republicans and could have saved the state $1.4 billion and local governments $2.7 billion, enough to help continue fully funding pensions and health benefits while reducing future costs and potentially lowering property taxes. At this point, those changes could probably save even more.
“If not now, it will be more of the same. Democrats commission an independent report then ignore it,” Wirths said.