TESTIMONY FOR THE
JOINT COMMITTEE ON PUBLIC EMPLOYEE BENEFITS REFORM
October 12, 2006
Good morning. My name is Barbara Horl, and I am a Lobbyist in the Governmental Relations Department for the New Jersey School Boards Association, a non-partisan federation of more than 600 school districts. I am representing members of school boards across the state who are committed to providing quality public education to the children of New Jersey.
For many years, the New Jersey School Boards Association has been concerned about how the rising costs of health care benefits impacts school districts and property taxes. Although the Joint Committee’s task is formidable, we believe that you can make considerable strides in providing property tax relief by helping us work as intelligently and efficiently as possible.
Rapidly rising health-benefits costs directly affect labor costs, a significant part of any district’s budget. We believe you can facilitate great cost savings to school districts who provide health benefits through the State Health Benefits Plan.
Things have changed over the years. In 1991, 457 school districts were part of the SHBP, representing 76 percent of all New Jersey districts. Because of huge increases in premiums since the mid-1990s, and the plan’s rigid structure, 218 school districts have left the SHBP and have gone with private health insurers. Districts have saved millions of dollars by making this move. Clifton saved $1.5 million the year they left – $1.5 million in one year!
So what’s wrong with it, and why should you support legislation to make it more flexible? What’s wrong is that it has areas which are not subject to negotiations – and the savings that negotiations could bring.
The plan’s uniformity rule requires that all employees be treated equally, which eliminates any ability to negotiated “tiered” coverage, or different conditions for different classifications of employees, which might be based on salaries, classification of employees, date of employment, etc.;
The method of paying for dependent coverage is also controlled by the uniformity rule, which requires that employers pay the exact same percentage of the cost of coverage for all dependents enrolled in the program;
The payment of employees’ premiums for coverage requires that employers must fully pay these costs;
The prohibition against duplicate/multiple coverage is due to the uniformity rule, precluding any negotiations to limit the employees’ ability to have an individual enrollment as well as a dependent in their spouse’s enrollment;
The complete choice of coverage is left up to the employee for the choice of insurance coverage, and the enrollment of eligible dependents;
Levels of deductibles and co-pays are set by statutes and are therefore not negotiable items:
Incentives for non enrollment may not be negotiated.
In December, the Benefits Review Task Force endorsed these very changes. In its report, the Task Force noted that if local employers were allowed to negotiate - and if they reached an agreement to pay even 95 percent of the cost of employee coverage, as compared to the 100 percent they now pay – the savings would be $52 million a year.
That’s $52 million in savings to taxpayers. It’s a $52 million change that this committee should demand today.
It shouldn’t surprise you that school districts have opted out in order to obtain flexibility for their staff and savings for the taxpayers of their communities. Of the districts which have left the SHBP, over 80% have negotiated tiered coverage and/or waiver incentives. And many have managed other great cost containments too. Including:
- Increasing co-pays and deductibles
- Offering a managed care option only
But school districts have not been treated fairly in recent years. When the law changed a few years ago, the State’s ability to negotiate tiered benefits was not given to school districts, nor were school districts permitted the right to offer of waivers of duplicate coverage.
Every year, opting out of the SHBP gets more attractive. We have reports of other negotiated savings that would result if you would legislate the changes for schools that you have accorded the State. S2163, sponsored by Senator Ray Lesniak, would fix the problem. We urge all of you and all your colleagues to support this bill. Pure and simple, it’s a matter of fairness, and it’s a matter of saving tax dollars.
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