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Fight brewing over New Jersey budget's quest for state health benefit savings
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. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
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14-03-2025
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With elections on the horizon, anxious Democrats fret over energy rates
Assembly Speaker Craig Coughlin said upcoming legislative hearings will help lawmakers decide what to do to curb rising energy prices. (Photo by Mary Iuvone for New Jersey Monitor) New Jersey Democrats are turning their attention to electricity prices amid a furor over high utility bills this winter and looming rate hikes that will push up power rates this year at about the time of June's legislative primaries. Democrats have introduced a seven-bill package meant to control electricity rate growth that includes measures to streamline utility assistance applications, set new processes to determine utilities' profit margins, and sunset a surcharge that increases monthly electricity bills, among other things. Legislators' newfound focus on electricity rates comes after the Board of Public Utilities last month approved auction results that are expected to add roughly $25 to customers' monthly energy bills and amid broader concern about electricity prices. This comes as an AI boom sends energy demand surging and supply struggles to keep pace. 'What we're worried about in the immediate is the impact on ratepayers in New Jersey,' Assembly Speaker Craig Coughlin (D-Middlesex) told the New Jersey Monitor. 'There are people who are struggling because prices have gone up, and to add this on top of that is a substantial increase.' Coughlin and Senate President Nicholas Scutari (D-Union) last week announced they will hold joint hearings to determine other methods to slow growing utility costs. Coughlin said they have yet to set dates for those hearings. Republican officials have blamed surging costs on Gov. Phil Murphy's energy agenda, which has broadly favored renewables like wind and solar over fossil or nuclear sources that generate nearly all of the state's electricity. 'The problem is our supply has diminished incredibly and we have not done anything under these current energy policies to address it,' said Assemblyman Alex Sauickie (R-Ocean). 'That means if we don't do something like natural gas immediately, this problem is going to last for years, several years.' Assembly Democrats in late February circulated talking points that sought to lay the blame for rising rates at the feet of the Board of Public Utilities, Republicans, and PJM Interconnection, the grid operator for New Jersey and 12 other states. A PJM spokesperson noted New Jersey imports more energy than it produces. Some other states on its grid had not seen similar rate increases, he said, adding the state's renewable energy goals had contributed to the present cost increases. 'Policy is a major factor as to why we are experiencing this supply-demand crunch. Decarbonization policies have driven resources off of the system while demand is increasing dramatically on the system due to data center proliferation and the onshoring of the manufacturing industry,' said Dan Lockwood, the spokesperson. He added many renewable energy projects had stumbled over hurdles — like supply chain disruptions and permitting issues — that lay well outside PJM's control. One bill in Democrats' new package would require utilities to join regional transmission organizations like PJM. Federal regulations allow utilities that voluntarily join these organizations to collect an extra 0.5-percentage-point return on equity — called an RTO adder — and the bill is an attempt to prevent utilities from collecting that. 'Isn't that their job to join these groups … to be able to purchase our power that we need?' said bill sponsor Assemblywoman Andrea Katz (D-Burlington). 'I don't get paid extra just for going to vote on legislation. That's my job.' Utilities pass their expenses — including for capital investments — directly to consumers, and they are allowed to profit off their capital investments at negotiated rates. In New Jersey, that rate, called the return on equity, is typically 9.6%. Barring New Jersey utilities from collecting money through the RTO adder would produce savings, though they would be limited. Though Katz's bill has no fiscal note attached to it, analysis on a similar bill by Maryland's Office of People's Counsel found eliminating the RTO adder would save ratepayers there roughly $20 million each year. Maryland ratepayers spent nearly $8.9 billion on electricity in 2024, according to Energy Information Administration Data. The savings won't be much greater for New Jersey ratepayers, who purchased nearly $12 billion of electricity last year, per federal data. In 2021, the Board of Public Utilities reduced PSE&G's return on equity rate by 1.28 percentage points — about two-and-a-half times the reduction of barring RTO adders — and said the lower rate would save PSE&G customers roughly $36 a year. New Jersey Rate Counsel Brian Lipman, whose office advocates for ratepayers on utility matters, said his office backs the mandate, adding it would 'save ratepayers hundreds of millions of dollars.' He said his office also supports lower rates for utility providers' return on equity, In past legislative hearings, Lipman has repeatedly urged lawmakers to forgo additional mandates on utilities, noting the cost of utilities' investments are repaid by ratepayers at a markup. Those mandates can include requirements to build infrastructure to support, for example, electric vehicles. Coughlin declined to commit to forgoing additional mandates on utilities, saying lawmakers need more information before taking action. 'We haven't taken anything off the table, nor are we committed to doing anything specifically. That's the purpose of having the hearings,' Coughlin said. The impact of other proposed changes, including one that calls for the Board of Public Utilities to consider the lowest reasonable rate of return when setting utility rates, rather than a fair and reasonable one, is unclear. Murphy has sought to build renewable energy sources in New Jersey, with the goal of having New Jersey draw 100% of its from 'clean energy' sources by 2035, but renewable sources still account for an overwhelming minority of the state's power generation, about 8.3% in 2022, according to the Department of Environmental Protection. What renewable energy projects have come online have not filled energy losses from shuttered fossil fuel plants, including its last two coal plants in 2022, and the closure of Oyster Creek Nuclear Generating Station in 2018. Meanwhile, public and political opposition has canceled natural gas projects proposed for Woodbridge, North Bergen, and Kearny. The generation losses have pushed power produced in other states on PJM's grid, including in coal plants, to New Jersey, especially when usage surged in the cold of winter, said Greg Lalevee, business administrator for the International Union of Operating Engineers Local 825. He urged the state to expand its generation capacity, even if it means standing up gas plants that could be decommissioned or converted to hydrogen as new technology becomes available or renewable projects begin operating. 'My view is this: I think we need to put as much electric in the grid as possible,' said Lalevee, whose members would benefit from jobs on energy projects. Coughlin declined to say whether rising rates have caused him to look more favorably upon natural gas projects, which accounted for 48.7% of the state's energy generation in 2022, saying only that he was 'focused on solving the problem.' SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
