COVID After Shocks Roiling Public Workforce Health Insurance Rates

Just weeks after several hundred New Jersey public employees staged a noontime rally to protest an unprecedented hike in health insurance premiums, the nation’s largest union for federal workers sounded the alarm about the potential impact of double digits rate hikes on their members in all 50 states.

The average federal employee can expect a remarkably high increase in their health insurance premiums, with members enrolled in benefits from BlueCross/BlueShield expecting to see an increase between 10.7 and 11.7 percent in premiums, dramatically outpacing any expected pay raises and their current earnings,” according to the American Federation of Government Employees.

The union’s prediction came after the United States Office of Personnel Management disclosed that the 2023 insurance premiums for the Federal Employee Health Benefits Program would see an average 8.7 percent increase for active employees and retirees.

The AFGE represents 700,000 civil servants in almost every federal agency through 936 local unions representing a myriad of healthcare, law enforcement, clerical and technical titles.  The union’s highest concentration of members is in the Department of Veteran Affairs, the Social Security Administration, the Department of Defense, and the Department of Homeland Security.

Over the summer the New Jersey was jolted by reports that public employees working for local, county and state government agencies would face  an unprecedented 20 percent to 24 percent increase in their healthcare premiums that could kick in as early as January. Historically, the annual increase for healthcare premiums had run between three and five percent. 

For New Jersey state public employees, just a day after they protested in Trenton last month, there was relief from the double digit health premium hike when the Murphy administration and the unions representing them reached a deal to hold the increase to a low single digit bump below the rate of inflation. But for tens of thousands of municipal, county and local school districts no such relief was in the offing and their unions and employers were looking to lawmakers in Trenton for a remedy.

“According to reports prepared by the state’s health care consultant, the need to increase premiums comes after a significant ‘deferral of care; during the first year of the COVID-19 pandemic,” reported John Reitmeyer in New Jersey Spotlight News. “A bounce back in the number of people using services was projected for 2021, but the actual use of services turned out to be two to three times what was expected.”

In a statement, AFGE President Everett Kelley said the federal hike was “the highest rate of increase in health care costs in over a decade” and make it harder to address staffing issues in agencies as varied as the Bureau of Prisons, the Transportation Security Administration and the Veterans Administration as well as in the healthcare field across all agencies.

Kelley’s warning comes at a time when across the nation, as a consequence of COVID, public employers are faced with the consequences of a pandemic that killed many thousands of front line employees and sidelined many more feeling the long term consequences of the disease either personally or within their immediate household. AFGE estimates 600 of their members working in frontline positions in the VA, TSA and USDA perished from COVID. 

A recent Brookings Institute analysis found that “around 16 million working-age (those aged 18 to 65) have long COVID today, of those, two to four million are out of work due to long COVID.” More than two years into this pandemic, we still have no accurate assessment of the impact of COVID on the essential workforce, though such an analysis is pending at the Centers for Disease Control and Prevention (CDC). 


 “Insurance companies brought in $150 billion in profits from 2012-2021, including $19 billion just last year,” wrote Kelley. “Instead of coming up with creative solutions to tackle this waste in the health care system and taking proactive steps to bend the cost curve, the government is relying on the private sector’s tired, broken strategy of continuous cost-shifting onto employees.”

Kelley continued. “The only beneficiaries of this strategy are corporate executives padding their bottom lines while working families scramble to find the extra money they need to pay for basic health care necessities. One way to help curb costs would be with stronger oversight of carriers gaming the system, segmenting the market in ways that are driving up costs at artificially high rates by pooling high risk individuals into a handful of plans.” “As I wrote in a recent opinion piece, multiple credible studies show how years of paltry pay increases have caused federal employee pay to lag behind the private sector by nearly 22.5 percent,” Kelley wrote. “If the government continues to squeeze federal employees in a vice with low pay on one side and out-of-control health care costs on the other, we will continue to see widespread staffing crises and the attendant complications as the government struggles to recruit and retain talented employees who can get a better deal in the private sector.”

While some agencies and job titles in the federal government have seen an elevated rate of attrition and early retirement, government data indicates that overall the national civil service has remained relatively stable. Experts attribute that to a largely successful shift to remote work during the pandemic and to Congress’s creation of a $570 million fund as part of COVID Relief  in March 2021 to provide federal workers with 15 weeks in paid leave to deal with COVID personally or within their household. 

While the U.S. economy has been teetering on the edge of a recession, a worker shortage is commonly cited as a major risk factor for increasing the chances of a national economic contraction. 


In May, the U.S. Conference of Mayors, National Conference of State Legislatures, International City/County Management Association, National Association of Counties and the National League of Cities warned that the country needed “a national strategy to invest in the nation’s workforce…to support economic recovery in the wake of the COVID-19 pandemic, and the subsequent Great Resignation, and the aging of the country’s core infrastructure.”

Last year 48 million Americans quit their current employment, an historic high and four times the number of people in the national AFL-CIO’s rank and file. According to the Bureau of Labor Statistics that trend has continued into this year with 4.2 million Americans leaving their current job in August. The highest quit rate was in hospitality and food services. While quit rates in federal, county and municipal workforces all saw a slight increase, they remained the lowest quit rate of the sectors tracked by the Department of Labor’s Bureau of Labor Statistics. 

According to the latest data, there are more than 10 million open jobs as compared to 5.5 million Americans currently not in the workforce who want a job.  Historically, public employment in New Jersey offered some insulation from the economic fluctuations in the private economy as well as superior healthcare and pension benefits. In recent years, New Jersey’s public employees have been paying more out of pocket for their healthcare coverage.

In an interview last month Patrick Colligan, the president of the New Jersey State Policemen’s Benevolent Association, said during an interview that he estimated the healthcare premium hike would translate to a 1.5 percent payout for his members. 

Colligan said that historically, individuals who went into government employment knew they would never get rich “or join an expensive country club” but “we counted on the pension and health benefits to be there but now in Jersey the pension is in peril and the benefits are a complete disgrace.”

Even before the pandemic that claimed the lives of 17 New Jersey PBA members, recruiting police officers was a problem, according to Collegian, who expects the further erosion of benefits to prompt more of his members to leave the profession. 

Last month, Byram Township in Sussex County, which is enrolled in the the State’s Health Benefits Program passed a resolution warning that the projected 21.6 percent premium hike for current municipal workers would “painfully deplete” their paychecks while forcing up local property taxes.


State Senator Shirley K. Turner (D-15th) blasted the double-digit rate increases as “very troubling” and “underscoring the need for greater transparency surrounding rate increases and even greater accountability.” Turner has introduced legislation that would permit some of the state’s American Rescue Plan surplus to be used to offset whatever price hike is finally approved.

Senate President Nick Scutari, Senate Majority Leader M. Teresa Ruiz and Senator Paul Sarlo, the Chairman of the Senate Budget Committee,  tried to slow down officials the rate hike, which ultimately was passed. 

“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,” wrote Scutari, Ruiz and Sarlo. “We urge those with approval authority to reject the plan that was suddenly scheduled for action with little notification and no real justification. The Treasurer should use her authority to block the planned approval and make sure a full accounting of the finances of the two health benefits’ plans is made public and fully discussed.”

Dudley Burge, with the NJ Communications Workers of America is the representative of the New Jersey AFL-CIO Public Employee Committee on the State Health Benefits Commission. “A lot of our state legislative leaders like Majority Leader Ruiz have talked about using some of the surplus of the American Rescue Plan but we need something more tangible,” Burge said. “And remember at least 10,000 Rutgers University employees with the CWA, AFSCME and the AFT unions are also facing the same hike in premiums.”


Just days after the State Health Benefits Commission voted to go ahead with the controversial rate hike, the state’s School Employees’ Health Benefits Commission approved a 15 percent rate hike.

“The increases mean workers will pay more out of pocket and districts will shoulder bigger costs, which could in turn affect taxpayers through either higher property taxes or cuts to programs and staff,” reported Brent Johnson, for NJ. Advance Media. How much school districts pay to cover insurance costs compared to how much employees pay varies by district, depending on what unions have negotiated. Districts generally cover the majority of costs, with employees paying the rest.”

The rate increase for the SEHBP follows two years of rate decreases in that plan. Nonetheless, an increase of that size is always a cause for concern,” the New Jersey Education Association, the state’s largest teachers’ union, wrote in a statement.  “That is why we demanded detailed information on the increase and did not vote on rates until we had that information. That is also why we have insisted that, going forward, the School Employees Health Benefits Commission will receive regular updates regarding plan utilization and the anticipated impact on future rates, so that we have a clearer picture throughout the year.”

The NJEA statement continued. “We urge our members to consider taking advantage of the New Jersey Educator Health Plan, which was created two years ago as part of Ch. 44, a health care reform law championed by NJEA. That plan provides high quality coverage at a much more affordable cost to our members.”

According to the New Jersey School Board Association, there’s a pressing need for action in Trenton to fend off potential cuts by local districts mid-school year that could be required to cover the healthcare rate spike just as they are trying to rebound from the two year destabilization of the pandemic. 

“The school budgets were finalized last spring and the tax rates have already been struck so to the extent this increases the costs to local districts they will have to find places in their existing budgets to cut in order to pay for these increases,” said Janet Bamford, NJSBA’s Chief Public Affair Officer, during a phone interview.  “I can tell you the NJSBA would be very glad to see some relief from Trenton to relieve the significant financial impact on the affected districts.”

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