Fight brewing over New Jersey budget's quest for state health benefit savings

Yahoo

14 hours ago

Assembly Speaker Craig Coughlin on the Assembly floor on June 30, 2025 (Dana DiFilippo | New Jersey Monitor)
Another fight is brewing over New Jersey's already beleaguered public worker health plans.
A provision in the $58.8 billion budget Gov. Phil Murphy signed into law Monday night calls for the state or its unions to identify $100 million of savings within the state part of the State Health Benefits Program for the first half of 2026. It spurred alarm among public-sector unions and a promised fix from Assembly Democrats, all of whom are on the ballot this fall.
'It's clear that there is no immediate need to require state workers to pay more for their health benefits,' said Assembly Majority Leader Lou Greenwald (D-Camden).
New Jersey's public health plans are in distress amid rising health care costs, spiking prescription drug utilization, frequent deadlocks in Plan Design Committees that set coverage rules, and soaring premiums spurred by — and spurring — municipal departures.
Treasury in May warned local government workers' public plan was at risk of complete collapse as more and more municipalities with larger, healthier workforces leave for cheaper private options.
The state workers' plan is shielded from that dynamic because its workers cannot choose private alternatives, but it too faces the threat of more premium increases. In 2024, the state workers' plan lost roughly $113 million, and it is loaning funds to mitigate costs in the local workers' plan, which Treasury has said could not repay its debts without a mid-year rate increase in 2025.
Union leaders say hospital pricing is the main driver of growing health benefit costs.
'Until you control the costs, you're not controlling the dollars. When hospitals are getting paid four to five times as [much as] Medicare for service because they allow the state's vendors to negotiate in their interests instead of directly negotiating with them,' said Kevin Lyons, executive director of the New Jersey State Policemen's Benevolent Association.
Lyons, a member of the State Health Benefits Program's Plan Design Committee, said New Jersey also could seek to impose caps on the growth of health services.
The state's actuary in March reported per-visit costs had increased 7% for outpatient services and 12% for outpatient emergency visits in the 12 months preceding October 2024, with similar increases for behavioral health visits, lab work, and primary care appointments. Per-visit costs for urgent care declined by 8% over that period.
Administration officials appear to favor less generous health plans. Plans under the State Health Benefits Program typically cover between 93% and 98% of health care costs. Lowering that number — called an actuarial value — could shave off a significant portion of the state's health benefit spending, which is expected to total roughly $2.9 billion in fiscal 2026.
Health benefit committees are due to approve rates for the 2026 plan year later this month. The state's actuaries will make their recommendations public during committee hearings next week.
Assembly Speaker Craig Coughlin (D-Middlesex) in a statement following Monday's budget vote said legislators last week had learned of an additional $200 million in revenue that could be used to forestall the $100 million cut to the State Health Benefits Program.
'Although I firmly believe New Jersey's public worker health plans need significant reforms to control costs, the funds allow us the opportunity to find ways to reduce those costs, while treating workers fairly,' Coughlin said, adding his chamber would hold rare hearings July hearings on public worker health benefits.
But it's not clear what revenue he's referring to.
A spokesperson for Assembly Democrats initially pointed to revenue growth in taxes on energy sales and the state's pass-through business alternative income tax, but those figures were unveiled in mid-May. The spokesperson then deferred to Coughlin and Greenwald's statements, which noted the windfall but made no mention of its source.
Overall revenue projections for the state's general fund were $247.9 million higher in the budget signed Monday than they were in the budget Murphy presented in February. The budget's $305 million increase to a $250 million transfer from the state's Debt Defeasance and Prevention Fund Murphy proposed in February more than covers the difference.
Lawmakers have limited ability to use gross income tax and other Property Tax Relief Fund revenues to reduce state worker health benefit costs. The state's constitution requires those monies be used 'exclusively for the purpose of reducing or offsetting property taxes.'
A Treasury spokesperson did not return a request for comment. Spokespeople for the governor did not address the discrepancy.
'Labor and management can work together over the next five months to find real, sustainable health care savings that ultimately help both workers and taxpayers. With public health benefit plans facing astronomical rate increases, all sides must roll up their sleeves to do the hard work necessary to address this problem,' said Natalie Hamilton, a Murphy spokeswoman.
The proposed cut represents about 3.4% the state's expected spending on its employees' health benefits in the current July-to-June fiscal year.
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