The School Employees Health Benefits Commission (SEHBC) approved lower premiums for the School Employees Health Benefits Plan (SEHBP) for the 2019 plan year beginning on Jan. 1. Premiums for active employees will decline by 1.1 percent, while the cost of coverage for both early and Medicare-eligible retirees will also go down, resulting in a combined 9.3 percent reduction across all groups of plan participants.
The reduced costs reflect the recent health care savings agreement reached between the state’s public employee unions and Gov. Murphy two weeks ago, which is expected to generate nearly $500 million in savings for state and local governments over the next two years.
This past July, the state’s health benefits consultant AON recommended premium increases of 6.6 percent for active employees and an overall increase of 2.4 percent. However, since that time, the SEHBP Plan Design Committee (PDC) adopted a number of plan changes that resulted in the reduction that was formally approved last week.
The most significant change approved, at least in terms of anticipated cost savings, will be the switch to Medicare Advantage plans for retired educators. According to a statement from the governor’s office, the shift to Medicare Advantage for SEHBP enrollees is expected to save the state $162 million in 2019 and $110 million in 2020.
In addition, the SEHBP PDC signed off on the creation of two new plan options that will be available to active employees and early retirees. These plans, known as Horizon NJ Direct 0 and Aetna Freedom 0, are designed to encourage the use of in-network primary and specialty care services by eliminating co-payments from members while lowering the cost to employers. Savings would be achieved through out-of-network payment reforms and the increased use of generic drugs.
The zero copay plans will be made available during the upcoming open enrollment period and consist of the following components, which apply solely to the new NJ Direct 0 and Freedom 0 plans and not to any other existing SEHBP plan options:
- Out-of-network costs (200 percent of the Medicare rate)
- Elimination of copays for primary care physicians and specialists
- Increase emergency room copays to $50/visit (fee waived if patient is admitted)
- Limit chiropractic and acupuncture therapies from out-of-network coverage
- Physical therapy out-of-network reimbursement change
- Implementation of mandatory generic prescription drugs (SEHBP will pay for cost of generic equivalent; members pay cost difference if they choose brand-name drug)
- Implementation of closed prescription drug formulary which directs prescriptions to more cost-effective, clinically-equivalent medications
- Increased incentive for NJWELL program participation ($500/subscriber)
In 2019, the annual premium amounts under these new plans will be considerably lower than the amount employees and school districts pay under the option currently selected by most employees, Horizon NJ Direct 10.
According to reports published by the state’s health benefits consultant, annual premiums (medical-only) for the new plans will equal $9,280 for single coverage and $26,540 for family coverage. Contrast that with the medical premiums for NJ Direct 10 that will total $11,589 for single coverage and $33,145 for family coverage in 2019. As a result of these lower costs, the state estimates that local districts stand to save approximately $23 million in 2019 if 10 percent of current enrollees switch to the new plans.
Switching from the legacy plans to either of the newly created plans will result in meaningful financial savings for employees, boards of education and taxpayers without significantly diminishing the level of benefits.
The reduction in premiums for active employees is a welcome reversal from the trend of sizeable increases that the SEHBP has experienced in recent years. In 2018, SEHBP premiums for active employees increased by 13 percent, which followed an 8.4 percent increase the previous year.
In a statement, NJSBA Executive Director Dr. Lawrence S. Feinsod applauded the recent cost-savings agreement while urging the Legislature, Governor, and all interested stakeholders to take further action to relieve the burden that the cost of health care places on school district budgets and the ability to invest in important educational programs.
The Division of Pensions and Benefits has launched a new webpage with information on the new SEHBP zero copay options here.
Additional details on all SEHBP plan options and premium levels can be accessed through the NJ Division of Pensions and Benefits website and by clicking on the links below: