As more details have emerged on the proposed premium increases for the School Employees’ Health Benefits Program and State Health Benefits Program, the New Jersey School Boards Association has drafted a sample resolution boards of education can adopt to express their opposition to the exorbitant rate hikes.

Boards of education are encouraged to add this resolution to their next meeting agenda and send it to the Legislature and the governor’s office. NJSBA also continues to urge members to reach out directly to the governor’s office and to  local legislators to inform them of the potential impact on New Jersey’s students and urge them to search for strategies to limit increases for the 2023 plan year.

A copy of the sample resolution can be found on the NJSBA website.

In addition to opposing the proposed rate hikes, the resolution also stresses the need for greater local school district management representation on the School Employees Health Benefits Commission and School Employees Health Benefits Plan Design Committee. It also urges the Legislature to revisit the 2020 health benefits reform law, commonly referred to as “Chapter 44,” which was supposed to reduce health care spending and generate millions of dollars in savings for school districts, employees and taxpayers. Instead, that law has unfortunately resulted in increased costs for local boards of education.

Rate Details Released

School Board Notes previously reported that premiums in the SEHBP would rise significantly in 2023. Since that time, the official rate recommendations have been posted to the Division of Pensions and Benefits’ website. Absent any action to alter the proposals, SEHBP premiums will increase by far more than they have in recent history.

Per the Plan Year 2023 Rate Setting Recommendation Analysis, “recommended rate change for Local Education Actives is a 15.6% increase for medical and a 10.8% increase for the prescription drug premium rates, for a total increase of 15.1%.”  Medical and prescription drug coverage for the NJ DIRECT 10 and NJ DIRECT 15 plans will increase by 15.3%. The cost of the same coverage under the NJ Educators Health Plan, established by Chapter 44, will rise by 14.9%.

Premium increases for the State Health Benefits Program, which covers state workers and participating towns and counties, are expected to be even greater. The recommended rate change for active local employees is a 24% increase for medical and a 3.7% increase for the prescription drug rates, for a total increase of 21.6%. The New Jersey League of Municipalities and New Jersey Association of Counties are also actively opposing the rate increases.

These proposed SEHBP rate hikes would mean that family medical and prescription coverage under NJ DIRECT 10 will increase from $34,376 in 2022 to $39,774 next year. Family coverage under the NJEHP – the creation of which was supposed to result in significant saving for employees, school districts and taxpayers – will go from $30,595 to $35,062. Therefore, the NJEHP will cost more next year than the most generous SEHBP option, NJ DIRECT 10, costs in the current plan year.

While double-digit increases under the SEHBP plan option are problematic and unsustainable, increases in the NJEHP are particularly concerning for local boards of education. Under Chapter 44, employees enrolled in that plan pay a percentage of salary toward their health care, rather than a percentage of premium, as was the case under “Chapter 78.” The result is that employers will need to absorb nearly all of the cost associated with any increase in NJEHP premiums.

“NJSBA believes that the proposed premium increases are unacceptable and must be rejected,” said Dr. Timothy Purnell, executive director of NJSBA. “Should they go through as is, districts will be forced to make incredibly difficult budgetary decisions that could result in cuts to critical educational programming, services and staff. At a time of record inflation, every action must be taken to bring the premium adjustments down to a more acceptable level.”

Legislative Response

The proposed increases have received strong criticism and backlash from both sides of the aisle in the State Legislature.

When news of the potential increases was first reported last month, Senate President Nicholas Scutari, Majority Leader M. Teresa Ruiz and Sen. Paul Sarlo, chairman of the Senate Budget Committee, issued a statement urging those with approval authority to put off acting on the plan that would result in double-digit rate increases in health care premiums. “This is a staggering increase that will saddle taxpayers, public sector workers and educators with higher costs at a time when we are all contending with inflationary pressures and a possible recession,” they said. The senators also stated their intentions to try to prevent the exorbitant increases from being approved. On Aug. 8, Sen. Shirley K. Turner, vice-chair of the Senate Education Committee, introduced two pieces of legislation regarding SEHBP: S-2994 “concerns annual reporting requirements of SHBP and SEHBP commissions” and S-2995 would require “use of federal Coronavirus State Fiscal Recovery Fund grants to reduce increases in premium rates for SHBP and SEHBP for calendar year 2023.” As of this writing, text is not yet available for either piece of legislation. As described further in the “NJSBA Delivers Testimony on How to Use American Rescue Plan Funds” article of this School Board Notes, at a public hearing held last week by the Murphy Administration, the NJSBA advocated for investing ARP SFRF funds to provide school districts relief from expected rate increases.

Republican leadership in the New Jersey Senate and General Assembly called for the formation of a special legislative committee to investigate massive health care premium increases that would be paid by active and retired public employees and taxpayers. The legislators also pointed to what they deemed a “failed” 2020 health benefit reform, Chapter 44, which was supposed to generate massive savings for school districts but is driving up costs for many districts and property taxpayers.

Assembly Speaker Craig Coughlin, Budget Chair Eliana Pintor Marin and Majority Leader Lou Greenwald also expressed concern about the proposed rate increase for public employee health plans. “At a time when New Jersey residents and local units are bearing the burden of inflation that has driven up the cost of their everyday expenses, increases of 20% or greater in the cost of health insurance premiums is a major concern,” they said. They also submitted a letter with a series questions to the two state benefits plan design committees that oversee the state and school employees health benefits programs and urged them to extend deliberations and consider other options prior to the adoption of new premium rates.

Ruiz also announced plans to introduce legislation “aimed at enhancing the conversation around rising health care costs, by ensuring that the voices of more members are heard during discussions about rate increases that will impact them financially.” Her bill would add a representative from a municipality, a county, the state’s county colleges and a member representing school business administrators to their respective state-level health benefits commissions. Under existing law, NJSBA already has an appointee on the School Employees Health Benefits Commission. In a news release, she indicated this legislation is but another component of the overall effort undertaken by her and members of Senate Leadership to combat the drastic increases in health plan premiums facing the SHBP and SEHBP.

Vote Postponed

The SEHBC was originally scheduled to vote on the 2023 premium rates in late July. However, that meeting, as well as that of the State Health Benefits Commission, was cancelled as news of the proposal surfaced. No meeting to take up a vote on the 2023 premiums had been scheduled as of the date of publication of this article.