State Announces Major $500M Healthcare Savings Agreement

On Sep 17, 2018

The Murphy administration has reached a healthcare benefits agreement with labor groups, including the New Jersey Education Association (NJEA), a cost-cutting deal that will save the state and local governments nearly half a billion dollars ($496 million) in savings. The agreement includes $274 million in savings in the coming plan year for healthcare costs for public employees and retirees and another $222 million in year 2020 from the adoption of Medicare Advantage for both SHBP and SEHBP retirees and introduction of a new health plan focused on in-network care. The reforms were passed today through a committee-level vote on the Schools Employees’ Health Benefits Program (SEHBP) Plan Design Committee (PDC). The plan is scheduled for a final vote by the School Employees’ Health Benefits Commission (SEHBC) on Sept. 19.

“I thank New Jersey’s educators and public employees for coming to the table in good faith to negotiate ways to provide high-quality healthcare at the lowest possible cost, leading to improved delivery of healthcare for beneficiaries and significant cost savings for the state, local governments, and New Jersey taxpayers,” said Gov. Phil Murphy. “As I’ve said from day one, I believe in the power of collective bargaining and negotiating in good faith with our workforce. Today’s agreement is a testament that this approach works – for the State of New Jersey, for workers, and for our taxpayers.

“We must also understand that public employees are part of the solution to the state’s fiscal woes, but sadly many are struggling to get by and provide for their families,” said Governor Murphy. “That’s why I’m calling on the Legislature to provide relief to firefighters, educators, police officers, and public workers from some of the most harmful effects of Chapter 78. By supporting middle class workers, we’ll help build a stronger and fairer New Jersey for all.”

According to Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, “NJBIA commends the Murphy administration for making a strong move in the right direction to address New Jersey’s fiscal challenges. This reduction in spending for healthcare costs for public employees and retirees falls in line with private-sector employers who have been adjusting their health plans to meet the challenges of increasing health benefits costs.

“We look forward to building upon the progress being made today and will continue to monitor the progress of the recommendations made by the bipartisan Economic and Fiscal Policy Work Group this summer. We need to continue to see the New Jersey’s future through the lens of regional competitiveness and affordability.”

Key Highlights for SEHBP:

For 2019, a new plan will be introduced for the active members and early retirees currently enrolled in the School Employees’ Health Benefits Program (SEHBP). This plan will encourage use of in-network primary and specialty care by requiring no co-payment from the members.   For the retirees eligible for Medicare, the current enrollees in the PPO 10 and PPO 15 plans will be migrated to the Medicare Advantage plan. The new plan will be called the SEHBP Educators Medicare Plan. These key changes create significant savings for members and school boards alike.

Key Highlights For Medicare Retirees:

• Members will have the ability to participate in the NJ WELL program and earn $250 per participant;
• For the first two years of the enrollment in the SEHBP Educators Medicare Plan, the first $250 in co-payments will be reimbursed annually.

Key Highlights For Actives and Early Retirees:

• Active and early retirees will have the opportunity to enroll in a new plan, either thru Horizon or Aetna, which will allow members to earn $500 by participating in NJ WELL program and pay no co-payment for visits to primary and specialty doctors when staying in network.
• Encouraging in network utilization alone will result in a plan premium that is 14.5% lower than the legacy plan through a focus on in-network utilization.

Key Highlights for SHBP:

The State Health Benefits Program (SHBP) will also see significant cost savings for FY 2019. By reauthorizing the formulary changes (use of generics, various out-of-network reforms) adopted in 2016, the state is expected to realize $37 million in savings, which was assumed in the FY 2019 Appropriations Act. Aetna’s bid for the SHBP retiree contract for Medicare Advantage will result in additional savings to the state and local governments for the next two years.

These savings noted above are in addition to savings derived through a joint examination by labor groups and the Murphy Administration of the State’s current Pharmacy Benefits Management (PBM) projections. Significant savings were derived from the rebid of the PBM contract through what is known as a “reverse auction” that the state conducted in 2017.  This was something labor groups encouraged strongly. This change reduced pharmacy costs for state and local governments by over 25%. Active school employee members will see a sizable difference in their premiums for Plan Year 2019 with rates decreasing by 1.1 percent – in stark contrast to the 13% increase they saw last year – even before introduction of the new changes.

“The Administration is committed to implementing smart strategies to lower healthcare costs for our public employees,” said Treasurer Elizabeth Maher Muoio. “By making these changes, state and local governments will realize significant savings to the benefit of New Jersey taxpayers. This is a tremendous step in the right direction and we look forward to continuing to work with our partners in labor to find ways to provide healthcare in the most effective, comprehensive, and cost-efficient way possible.”

The Murphy Administration is committed to continued efforts to improve the quality, value and long term sustainability of the state’s health benefits system. The Governor has convened the State Health Benefits Quality and Value Task Force, which will be meeting again this week, as well as hosting its first public listening session in Hamilton this Thursday, September 20th.

Key Highlights for SHBP:

The State Health Benefits Program (SHBP) will also see significant cost savings for FY 2019. By reauthorizing the formulary changes (use of generics, various out-of-network reforms) adopted in 2016, the state is expected to realize $37 million in savings, which was assumed in the FY 2019 Appropriations Act. Aetna’s bid for the SHBP retiree contract for Medicare Advantage will result in additional savings to the state and local governments for the next two years.

These savings noted above are in addition to savings derived through a joint examination by labor groups and the Murphy Administration of the State’s current Pharmacy Benefits Management (PBM) projections. Significant savings were derived from the rebid of the PBM contract through what is known as a “reverse auction” that the state conducted in 2017.  This was something labor groups encouraged strongly. This change reduced pharmacy costs for state and local governments by over 25%. Active school employee members will see a sizable difference in their premiums for Plan Year 2019 with rates decreasing by 1.1 percent – in stark contrast to the 13% increase they saw last year – even before introduction of the new changes.

“The Administration is committed to implementing smart strategies to lower healthcare costs for our public employees,” said Treasurer Elizabeth Maher Muoio. “By making these changes, state and local governments will realize significant savings to the benefit of New Jersey taxpayers. This is a tremendous step in the right direction and we look forward to continuing to work with our partners in labor to find ways to provide healthcare in the most effective, comprehensive, and cost-efficient way possible.”

The Murphy Administration is committed to continued efforts to improve the quality, value and long term sustainability of the state’s health benefits system. The Governor has convened the State Health Benefits Quality and Value Task Force, which will be meeting again this week, as well as hosting its first public listening session in Hamilton on Sept. 20.

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