Educators in New Jersey will soon have a cheaper option for health insurance that could create $1 billion in cost savings for both teachers and school districts.
Gov. Phil Murphy on Wednesday signed into law the long-awaited changes to the School Employees Health Benefits Program. He was joined at Union High School in Union Township by members of the New Jersey Education Association and state Senate President Steve Sweeney, who negotiated the deal.
Educators have been looking for this relief for several years because, as Murphy noted Wednesday, some teachers saw their take-home pay decrease each year as the cost of the insurance was tied to the premium and their salary.
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The bill, which received near unanimous support in the Legislature, will create a new health care plan called the New Jersey Educators Health Plan with lower premiums and change how employees contribute to that plan.
“We passed a fair and sensible reform that will save property taxpayers nearly $700 million annually at a critical time when our families are struggling to make ends meet,” said Sen. Chris Brown, R-Atlantic, one of the bill’s many sponsors.
The legislation is the result of an agreement with the NJEA, which recently took out a television ad to encourage support.
“When every Republican in the Legislature and every Democrat in the Legislature and the governor of the state agree with the state’s largest public employee union on health care reform that protects high-quality benefits and saves everyone money, that may just be the most surprising political story of the year,” said NJEA President Marie Blistan. “But here we are, because that’s exactly what happened.”
The changes are referred to as Chapter 78 relief in response to a law signed by Gov. Chris Christie in 2011 that required school employees to pay a percentage of their health insurance premiums based on their salary and level of coverage — the more you make and the better the coverage, the more you pay. The percentages were capped at 35% of the premium and could never equal less than 1.5% of the employee’s salary.
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After passing the Senate in March, the legislation received approval from the Assembly on Monday.
“Teachers are the cornerstone of our communities,” said Sweeney, D-Salem, Gloucester, Cumberland. “Can you imagine what parents would have done without them during this time?”
Under the new bill, employees who select NJEHP will pay a percentage of their salary based on their level of coverage — less for single plans, more for family plans, but never more than what is required under Chapter 78. The percentages increase in steps as salary increases.
According to the New Jersey School Boards Association, which supports the legislation, while it is estimated school districts will see $600 million in savings, the actual amount will depend on the level of participation.
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“If it works as intended, the plan will provide boards of education with much-needed relief from the high cost of providing employees with quality health coverage,” reads a statement from the NJSBA.
The lower premiums for the new plan will be realized in part through reduced reimbursements for out-of-network services and incentivizing the use of generic prescription drugs.
Coverage under the NJEHP would begin Jan. 1, and all newly hired employees would be required to select the NJEHP. Current employees who choose to remain in the Direct 10 or Direct 15 plans would continue to pay whatever is required under the district’s collective bargaining agreement.
Once the new NJEHP is implemented, other existing SEHBP plan options besides Direct 10 and Direct 15 will be eliminated.
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A second, even lower-cost plan, will be created by July 2021 using only New Jersey providers.
The bill includes a provision to ensure at least $300 million in savings are realized by 2023, and requires school districts not participating in the state health benefits plan to offer a plan to mirror the NJEHP.
School districts spending above adequacy must use savings from the health plan changes to lower local property taxes, but there are no restrictions on spending for districts spending below what the state deems adequate.