A broad coalition of unions representing hundreds of thousands of public sector workers will converge on Trenton at noon on Tuesday to push back on 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 have run between three and five percent. A preliminary vote on the hike, which would add considerable upward pressure on municipal and county property tax rates, could come come as early as Wednesday when the State Health Benefits Commission meets.
The lunch time rally will bring together a rare ideological cross section of unions that include teachers, firefighters, law enforcement officers, nurses as well as municipal, county and state workers from hundreds of bargaining units who in their totality represent a hefty block of voters with a proven track record of turning out.
“Increasing healthcare costs for working families doesn’t make New Jersey stronger or fairer,” said Jim McAsey, a national state representative with the CWA and member of the New Jersey State Health Benefit Program Plan Design Committee. “It would hurt essential workers and increase property taxes for everyone. The only ones who benefit from this are the greedy CEOS in the healthcare industry.”
At a Sept. 9 virtual press conference, union officials predicted the hikes would amount to anywhere between $1,500 to $1,800 a year on an average family plan, equivalent to a 1.5 percent cut.
Back in July, when word of the possible hikes broke, Gov. Murphy told reporters it was linked to “a surge post-pandemic in the pursuit of medical services and medical attention….that’s not unique to New Jersey—this is a phenomenon around the country if not around the world.”
Murphy asserted his administration had “done more than any state in America to make healthcare accessible and affordable than any state in America” and that the premium hikes were “yet another reminder we have more work to do.”
In a fact sheet issued by NJ Division of Pension & Benefits the premium spike was linked to “increased utilization by members” and “overall health care cost increases driven by the “combined effects” of COVID-19 that “resulted in far higher utilization of medical services overall by our plans’ members, both because of illness due to COVID infections, and perhaps more significantly, because so many members are having services or procedures previously postponed due to the pandemic.”
SMOKE ON THE HORIZON
Back in July, NJ Advance Media reported on an internal email sent by New Jersey Association of Counties Executive Director John Donnadio that warned county officials about rate increases in the pipeline including a 24 percent increase for medical and a 3.7 percent hike for drug benefits for active public workers, “as well as a 15.6 percent increase in medical and a 26.1 percent increase in pharmacy benefits for public workers who retired before the age of 65.”
Donnadio’s preview for the counties was based on two reports done by Aon, consultants for the State Health Benefits Commission that were submitted on July 13 but not made public until after word of the proposed massive rate hikes leaked out.
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.”
“Our taxpayers deserve an explanation,” Turner wrote in a statement. “Health insurance companies have made record profits, as fewer people make hospital and doctor visits. The rate increase proposal begs the question, how much of our taxpayer money is going toward enriching those at the top while the rest barely survive.”
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, urged the design committees for the State Health Benefits Program and the School Employees Health Benefits Program to hold off on their planned July 27 to advance the rate hike.
“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.”
“The proposed premium increases will impact hundreds of thousands of state and local government workers, teachers, and retirees who will see their health care costs soar if the proposal is adopted,” said Senate Republican Leader Steven Oroho. “These higher premiums will also have a huge impact on school districts and local governments that pay a large portion of the total premiums for their employees. Any higher costs they pay will translate directly into higher property taxes for our families. We must investigate the failures that led to these catastrophic premium increases to develop an effective plan going forward.”
BACK ON PLANET EARTH
The projected premium hikes for New Jersey’s public sector workforce did appear to be out of line with what was being predicted nationwide for employers.
“Employers in the U.S. expect health plan costs per employee to rise 5.6 percent on average in 2023,” reported the Society for Human Resources Management . “While significantly higher than the premium increase of 4.4 percent projected for 2022, the 2023 increase lags overall inflation, which is currently running at about 8.5 percent year-over-year.”
In a letter sent to Gov. Phil Murphy on August 23 by the state’s top union leaders, lead by NJ AFL-CIO President Charles Wowkanech, the unions warned the price hike would impact “nearly one million healthcare consumers” and would “have a massive inflationary impact for those families and for the State as a whole.”
The letter continued. “These increases will strike a blow against your efforts to make a “stronger fairer” New Jersey that is more affordable for middle class families, and they may even set the stage for creating a higher market rate for healthcare overall in the State. These increases cannot be allowed to go into effect.”
Poltico’s Daniel Han reported that Treasury spokesperson Jennifer Sciortino countered in a statement the unions’ letter relied on “inaccuracies” to make their case.
“Treasury shares the concerns regarding recommended rate increases expressed by union leaders,” Sciortino said in a statement. “However, there are a number of inaccuracies contained within their letter. We have always been, and remain, ready and willing to continue to work with labor representatives, the state’s vendors, and the Legislature to reduce the rate increases for the coming plan year … It is important to note that the recommended rates for plan year 2023 set out in the Aon report are just that — recommendations.”
Horizon Blue Cross Blue Shield has a $136 million state contract to manage close to $5 billion the state spends on healthcare, according to Bloomberg News. HBCBS provides coverage to close to four million people including over 600,000 on the state’s public employee plan. It does not have any role in setting the premiums that public employees pay. That’s overseen by two state commissions.
Back in 2020, the state legislature approved Horizon Blue Cross Blue Shield plan to reinvent itself from being a non-profit health services corporation into being a mutual holding company.
The sticker shock for healthcare for public employees, coming amidst the historically high inflation has driven an unusual wedge between Gov. Phil Murphy and the state’s unions that have been some of Murphy’s staunchest allies.
A MONTANA SOLUTION?
“They were required to help people navigate for quality care at an affordable price to get their medical procedures done and they didn’t,” McAsey told InsiderNJ of Horizon’s performance. The CWA official said that New Jersey’s hospitals lacked transparency about pricing and “right now, New Jersey’s hospitals are just charging us exorbitant rates. If it weren’t for corporate greed we would not be in this crisis.”
McAsey said one way to short circuit the run up in prices was to link hospital procedures costs to a current reference point that could be tied to what Medicare pays. “Montana implemented this reference based pricing and instead of their health benefits program being in the red in almost no time at all, that state’s health benefits fund was in the black with more money in it than the state’s general fund.”
The political fallout for Horizon Blue Cross Blue Shield from criticism from the unions has been compounded by a former state employee whistleblower that alleged the benefits provider failed to live up to its contract of helping beneficiaries get their medical procedures at the most affordable prices which in turn helped to drive up what they spent.
In comments to NJ Advance Media, Horizon spokesman Tom Wilson defended his company saying it was “proud of the work we perform” which included realizing “significant savings” for the state.
“As would be expected with a contract of this size, scope and complexity, Horizon meets regularly with the Division to improve efficiency, resolve areas of disagreement, address underlying concerns and deliver for the state and the public employees whose benefits Horizon administers on behalf of the State Health Benefits Plan and School Employees Health Benefits Plan,” Wilson told the news outlet. “Horizon continues to provide its services per the contract and comply with the specific language that guarantees cost savings and other performance benchmarks.
The Murphy administration’s credibility on the issue of Horizon and containing health care costs was undercut by a Bloomberg News report back in June about a whistleblower whose job it was to monitor HBSBC’s performance of its $34 million contract “that was supposed to improve care and reduce costs for state workers”.
Bloomberg News reported that Christin Deacon, a state Department of Treasury employee “filed an internal complaint over the performance of Horizon’s navigator program, which was supposed to offer enhanced online search tools and a call center for policy holders. Deacon said she and her staff tested the navigational tools and found them to be lacking.
“Every time I called, they failed miserably,” Deacon told Bloomberg.
“A little over a year ago, the state Treasury office overseeing the health plan for New Jersey employees recommended clawing back $34 million from Horizon Blue Cross Blue Shield,” reported Bloomberg News. “The state alleged that the insurer failed to deliver on a new service, for which the state had paid extra, that was meant to help members find better care at lower costs.”
Deacon told Bloomberg resigned her position as assistant director in the state Division of Pensions and Benefits because of the lack of follow through on her concerns. “It is our fiduciary obligation to pursue these claims in a meaningful way,” Deacon wrote in a memo she forwarded to Bloomberg.
NJ Advance Media reported that following the Bloomberg blockbuster story Gov. Murphy denied he had interfered with the Department of Treasury’s attempt to recoup the money from Horizon.
INSULATED FROM REAL SCRUTINY?
“I haven’t stepped in,” Murphy was quoted as saying. “There’s a process that you go through when an agency in the government has an issue with payment from a vendor. And that process is underway, and we’ll let that process play out.”
The news outlet said Deacon’s LinkedIn entry put the state’s failure to follow up on her troubling analysis in a broader context that raises the question of how much slack Trenton is willing to cut the state’s powerful healthcare industrial complex.
“This story is important to the taxpayers of NJ, but the reason it should be read far and wide is because it is but one example of the manner in which political influence plays a role in perpetuating the status quo in healthcare,” Deacon posted in LinkedIn according to NJ Advance Media.
“If your state’s public sector health plan has had the same carrier for decades, perhaps you should question the public procurement processes and influence at play,” she continued. “I was unprepared for (the) absolute backlash I would face when I attempted to enforce the contractual terms agreed upon by Horizon BCBS; similarly I was shocked when I was told to ‘stand down’ when we asked NJ hospitals to confirm whether they were compliant with Federal transparency regulations.”