On Wednesday, Aug. 19, the School Employees Health Benefits Commission (SEHBC) voted to adopt the premium rates for Plan Year 2021. Compared to 2020, the recommended rate change for local education agencies is a 6.3% decrease for medical and a 9.9% increase for the prescription drug premium rates, for a total decrease of 4.9%. A copy of the full rate renewal report can be accessed here.
The rate renewal for 2021 marks a significant development for the School Employees Health Benefits Program (SEHBP) as it will be the initial year of implementation for P.L.2020, c.44 (“Chapter 44”), the recently signed school employees health benefits reform legislation. That law, which was the culmination of compromise between Senate President Steve Sweeney, Assembly Speaker Craig Coughlin, Gov. Phil Murphy and the New Jersey Education Association, will impose significant changes to health benefits coverage for teachers and other school employees, as well as the amount that such employees must contribute to the cost of their coverage.
Chapter 44 requires the creation of a new lower-cost health care plan – the New Jersey Educators Health Plan (NJEHP) – within the School Employees Health Benefits Program (SEHBP) to become operable at the beginning of next year. The NJEHP was designed to carry lower premiums than the current two most popular SEHBP plans, NJ DIRECT 10 and NJ DIRECT 15. The reduced costs are to be achieved primarily by reigning in the cost of out-of-network care and prescription drugs. While Chapter 44 calls for the creation of this new plan, it also eliminates all other existing choices other than NJ DIRECT 10 and NJ DIRECT 15
Using NJ DIRECT 10 premiums as the baseline, the NJEHP premiums for medical and prescription drug coverage will be 16.5% lower than the current year’s DIRECT 10 rates. For plan year 2020, the annual medical and prescription drug coverage premium for a family under NJ DIRECT 10 cost $36,147. For 2021, the same level of coverage for the NJEHP will cost $30,299. For medical coverage only, an NJEHP family plan will carry an annual premium of $27,074 compared to the 2020 NJ DIRECT 10 rate of $31,850.
The following provides a comparison between the 2021 NJEHP and both the 2020 NJ DIRECT 10 and DIRECT 15:
| Medical Coverage Only | NJEHP (2021) | NJ DIRECT 10 (2020) | NJ DIRECT 15 (2020) |
| Family | $ 27,074 | $ 31,850 | $ 30,320 |
| Single | $9,466 | $11,136 | $10,109 |
| Employee + Spouse | $ 18,993 | $ 22,273 | $ 21,203 |
| Employee+Child(ren) | $ 17,608 | $ 20,174 | $ 19,719 |
| Adult Child Rate | $ 8,304 | $ 9,769 | $ 9,300 |
| Rx w/ Medical Coverage | |||
| Single | $ 10,594 | $ 12,639 | $ 12,032 |
| Employee + Spouse | $ 21,188 | $ 25,278 | $ 24,063 |
| Family | $ 30,299 | $ 36,147 | $ 34,411 |
| Employee+Child(ren) | $ 19,705 | $ 23,508 | $ 22,379 |
| Adult Child Rate | $ 9,293 | $ 11,087 | $ 10,554 |
For a full breakdown of SEHBP premiums by coverage level and tier, please refer to the rate renewal report.
Pursuant to Chapter 44, any employee enrolled in the NJEHP will pay a percentage of salary toward their health care benefits, as outlined in the law. Employees not enrolled in these plans will continue to pay either “Chapter 78” contribution levels or whatever is required under their collective bargaining agreements.
For this fall’s open enrollment, active employees hired before July 1, 2020, will be allowed to select one of three plans – the NJEHP, NJ DIRECT 10 or NJ DIRECT 15. Employees that do not affirmatively select one of these three choices will be enrolled in the NJEHP. Employees hired between July 1 and the end of this year will be automatically enrolled in the NJEHP, regardless of their existing coverage. As mentioned above, all other existing SEHBP plan options are being eliminated, such as NJ DIRECT ZERO, the other PPO plans and all HMO and high deductible plans.
Chapter 44 also requires the creation of a second new plan option named the Garden State Health Plan (GSHP). The GSHP will have the same plan design as the NJEHP with one exception – it will only cover New Jersey-based providers. The SEHBC will set the premiums for that plan next year and employees will have an opportunity to move from their existing plan into the GSHP during a special open enrollment period. Employee contributions for those enrolled in the GSHP will be one-half of the contribution required under the NJEHP. Last week’s action by the SEHBC did not set premium levels for the GSHP as that plan does not need to be established until July 1, 2021.
The action taken by the SEHBC does not directly impact school districts that do not participate in the School Employees Health Benefits Program. Currently, approximately 35-40% of the state’s public school districts participate in the SEHBP, while the balance procures health care coverage through the commercial insurance market, by self-insuring, or joining a health insurance fund. These districts will still have to comply with Chapter 44 by offering plans which are equivalent to the NJEHP and GSHP. As is the case with SEHBP districts, the NJEHP and GSHP must be made available to employees before Jan. 1, 2021 and July 1, 2021, respectively.
While the lower premium levels for the NJEHP are certainly a welcome development, it remains to be seen what the overall or district-by-district impact on SEHBP-participating districts’ finances will be. A significant question is whether the savings realized through lower premiums are enough to offset the reduced employee contributions resulting from the transition to a percentage of salary contribution schedule. Much will depend on the extent that employees migrate from their existing coverage and into the NJEHP. The same will be true for non-participating districts as they develop and offer equivalent plans.