Senate Advances Major Health Savings Plan, Two Other Union-Backed Bills

On Thursday, March 19, the state Senate advanced legislation aimed at saving school districts, school employees and taxpayers hundreds of millions in health care costs.  The bill would require the creation of lower cost health plans while shifting employees to a salary-based premium sharing schedule, with the goal of reducing costs for both staff and boards of education.  The legislation, passed by a vote of 34-0, was the product of an agreement earlier this month between Senate President Steve Sweeney and the New Jersey Education Association.

Prior to the vote, the NJSBA expressed its overall support for the bill’s intent to provide boards of education with much-needed relief from the high cost of providing employees with quality health care coverage. However, the Association expressed a number of questions and concerns on the bill, while suggesting amendments that would strengthen the legislation and make it more workable and beneficial to local boards of education.  The Association also urged the Legislature to allow for a comprehensive, district-by-district analysis of the bill’s potential fiscal impact before advancing the legislation any further, to ensure that no school district could suffer from any adverse financial consequences due to the bill’s requirements. The Association’s full position statement can be found here.

What’s in the Bill?  The full text of the S-2273, as passed by the Senate, can be found on the Legislature’s website here. The Senate Majority Office also issued a summary document outlining the proposal, which can be accessed here. Below are its main components. Please note that the bill is subject to changes as it must still receive consideration by the General Assembly and the governor.

To Whom Does S-2273 Apply?  The legislation will affect all of New Jersey’s public school districts and their employees, including county vocational school districts, special services districts, educational services commissions, jointure commissions, and charter schools.  It also applies to the state’s county colleges.

How Will It Change Employee Health Care Coverage?  The School Employees Health Benefits Program (SEHBP) will establish a new “N.J. Educators Health Plan” (NJEHP), the design of which is specified in the bill. The NJEHP is expected to carry lower premiums than the existing most popular plan options in the SEHBP (i.e., NJ Direct 10 and Direct 15). Once the NJEHP is established, the SEHBP will only offer the following three plan options to employees: 1) the NJEHP, 2) NJ Direct 10, and 3) NJ Direct 15.  All other SEHBP plan options will be eliminated and no longer available to employees.  All new employees hired on or after July 1, 2020 will be automatically enrolled in the NJEHP and will not have the option of choosing any other plans.

Will It Change How Much Employees Pay Toward Their Health Insurance?  Yes, for some. Under the bill, any employee who opts into the new NJEHP will pay a percentage of their salary towards their health care coverage.  Employees with higher salaries will pay progressively more than those at lower salary levels.  Employee contributions would range from 1.65% of salary for single coverage for those at the lower end of the pay scale, up to 7.15% for family coverage for those at the highest salary level. The bill lays out the specific percentage employees in various salary ranges will pay for single, parent/child, employee/spouse, and family coverage.

Any employee who chooses to remain in his or her current plan will continue to pay the amount required under their existing collective bargaining agreements and will not shift into the new salary-based contribution chart.

Under Chapter 78, all employees were required to contribute to their health care coverage based on a percentage of their premium, which increased as their salaries rose. Under S-2273, no employee will pay more than what was required under Chapter 78.

Will There Be Any Other New Plan Options?  Yes. The SEHBP will also, by July 2021, establish a “Garden State Health Plan” (GSHP). The level of benefits will be equivalent to those of the NJEHP, except that the GSHP’s network will consist solely of New Jersey-based providers.  According to the Senate Majority Office, care delivered outside of New Jersey is 50% to 100% greater than the same services provided in-state.

For any employee who enrolls in the Garden State Plan, their contributions will be half of what is required for NJEHP enrollees.

If Enacted, When Would the Bill Go into Effect? The bill would go into effect immediately and beginning July 1, 2020, the SEHBP will start offering the new NJEHP.  A special open enrollment period will be held that will allow employees to opt into the new plan. Any employee who does not affirmatively select a plan during this period will be automatically enrolled in the NJEHP.

If it is deemed impractical to begin offering the new plan by that date, then it may be delayed by a month, but no later than August 1.

Is the Legislation Permanent?  No. Similar to Chapter 78, the bill includes a sunset provision. The new salary-based contribution schedule would remain in effect through June 30, 2027. The level of benefits in the NJEHP, GSHP, NJ Direct 10 and NJ Direct 15 would also remain unchanged for that period.

Beginning July 1, 2027, the new plans will be reevaluated by the SEHBP and at the local level.  At that point, benefit levels and employee contributions may be altered through collective negotiations. Such negotiations would be conducted as if the contributions required under S-2273 were included in the prior contract.

Will It Save Districts Money?  When the agreement was announced, it was reported that the plan would result in over $1 billion savings annually, with boards of education realizing an estimated $640 million in savings.  Employees would save approximately $400 million in premium contributions.  The bulk of the savings would be achieved through reduced out-of-network and prescription drug costs. It is unclear how much individual school districts can expect to save, and the NJSBA has requested that a comprehensive, district-by-district analysis of the bill’s fiscal impact be completed before the bill obtains final passage.

Can the Savings Be Used for Any Purpose? Not for all districts.  The bill requires any district spending above adequacy, according to the state’s school funding formula, to use any savings achieved under the bill to reduce its tax levy by the amount saved. The bill, as currently structured, places no restrictions on how districts spending below adequacy may apply the savings.

What about Districts That Do Not Participate in the SEHBP?  The bill’s provisions also apply to boards of education that do not provide coverage through the state plan, including those which self-insure or are part of a joint insurance fund.  Beginning July 1, 2020, those boards would have to offer options that have the exact same plan design as the NJEHP (and the GSHP beginning July 1, 2021). Any employee who opts into the new plans will move into the percentage of salary contribution schedule as specified in the bill, which would not be subject to change through June 30, 2027.

As is the case with SEHBP-participating employers, these districts will also have to hold a special open enrollment this July (if impractical, then this August).  Employees will be able to move into the NJEHP or maintain their existing coverage at their current contribution requirements. All new employees will be enrolled in the NJEHP and must remain in the plan through June 30, 2027.

Non-SEHBP districts will still be permitted to maintain any health benefits plans they currently offer. Employees who choose to stay in those plans continue to pay their Chapter 78 contributions or any amount that has been agreed to through negotiations. Other than the NJEHP and GSHP, no new health benefits plans may be added by these districts until 2027, unless such plans result in additional premium reductions.

Beginning July 1, 2027, employee contribution requirements and health benefit levels will once again be topics for negotiation.

What about Districts that Participate in SEHBP, but Have Contracts that No Longer Permit Employees to Opt into Direct 10 and Direct 15, the Only Existing Plans that Would Remain under S-2273?  The bill is currently silent on this issue, which may need to be addressed at the bargaining table.  The NJSBA has sought clarification on this matter so as to avoid potential violations of collective bargaining agreements.

Anti-Subcontracting and Job Protection Bills Also Passed

In striking the deal with the NJEA, Sweeney also promised to advance two long-time legislative priorities of the union. Both bills have been, and continue to be, strongly opposed by the NJSBA.

The first, S-2303, concerns subcontracting agreements entered into by public school districts, county colleges and the state’s public institutions of higher education. It places several burdensome and expensive hurdles in the way of districts seeking to outsource non-instructional programs and services. Specifically, the bill imposes the following conditions and requirements on any school district considering the subcontracting of non-instructional services and personnel, such as paraprofessionals, food services, pupil transportation, custodial services, building and grounds:

  • Makes the employer’s decision to subcontract a mandatory subject of negotiations;
  • Prohibits subcontracting during the term that a collective bargaining agreement is in effect;
  • Requires the employer to provide written notice to any union that may be impacted by the decision to subcontract at least 90 days prior to soliciting bids for a subcontracting agreement;
  • Provides the union the right to meet and consult with the board of education to discuss the decision to subcontract and the opportunity to engage in negotiations over the impact of subcontracting; and
  • Grants any employee replaced or displaced by the subcontracting agreement any previously acquired seniority and recall rights whenever the subcontracting ends.

Taken together, the onerous and costly provisions of S-2303 would severely inhibit the ability of a board of education to subcontract.  The NJSBA believes the decision to subcontract a service is – and must remain – a non-negotiable, managerial prerogative so that boards of education can effectively and efficiently manage their resources and quickly respond to a fiscal emergency. The lengthy negotiation, notice and arbitration requirements would impede a district’s ability to use subcontracting to respond to a budget crisis and would effectively make the subcontracting option no option at all. By essentially taking the subcontracting option off the table, boards of education will be forced to consider other alternatives to balance their budgets, such as cuts in programs and services, teacher layoffs, tax increases, or some combination of the three.  None of these options are in the best interests of either students or taxpayers and should only be employed as a last resort.

A copy of NJSBA’s testimony on the bill can be found here.

The NJSBA led a coalition of education organizations and others representing local government, higher education and the business community in opposing the bill.  That group consists of the Garden State Coalition of Schools, the N.J. Council of County Vocational-Technical Schools, the N.J. Association of School Administrators, the N.J. Association of School Business Officials, the N.J. Business and Industry Association, the Chamber of Commerce of Southern New Jersey, the N.J. State Chamber of Commerce, the N.J. State League of Municipalities, the N.J. Association of Counties, N.J. Council of County Colleges, and the N.J. Association of State Colleges and Universities. A joint letter sent by those organizations to the state Senate can be accessed here.

The second bill, S-993, would establish overreaching, tenure-like protections for school district support staff and would subject a board of education’s personnel decisions to costly, protracted challenges through binding arbitration.  If enacted, the legislation would grant a non-teaching staff member the right to submit to binding arbitration virtually any disciplinary action taken by a board of education against the individual.  The bill includes an overly expansive definition of disciplinary action to include reprimands, withholding of increments, terminations or non-renewals, expiration or lapse of employment, or lack of continuation of employment.  Furthermore, it permits the employee to submit to binding arbitration any dispute regarding a disciplinary action regardless of the reason behind the employer’s action.

The NJSBA strongly opposes the measure as it would prevent districts from effectively managing employee conduct and performance.  The legislation will impede a district’s ability to respond to a budgetary shortfall, a decline in enrollment, or changing educational needs or priorities.  It will also likely lead to costly litigation that will force school districts to spend a greater share of their limited resources in the courtroom rather than in the classroom.

NJSBA’s statement opposing the bill, which was sent to the full Senate, can be found here.

What’s Next?  All three of the bills summarized above were approved by the Senate, without receiving a committee hearing, on Thursday.  They now head to the General Assembly, which has not scheduled the bills for consideration and currently has no meetings dates on its calendar beyond March 25.

The NJSBA will continue to gather information on the health benefits savings proposal. It will also seek changes to ensure that all member districts will benefit from its provisions and that none will suffer any adverse financial consequences. Local board of education members are strongly encouraged to contact their local legislators and urge them to request detailed information on the potential impact the bill will have on their respective districts’ budgets and taxpayers before voting on the bill.

The Association has also drafted sample resolutions that local boards of education may adopt and join the NJSBA’s advocacy efforts in opposing the two job protection bills. We also encourage members to contact their elected representatives in the General Assembly and urge them to vote no should these bills come before them. The sample resolutions can be accessed through the links below.