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Senate President Sweeney says it will save local governments millions of dollars annually

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

State Senate President Stephen M. Sweeney (D-Gloucester) Tuesday unveiled what he described as a comprehensive package of proposals designed to deal with the cost of health benefits for public employees and he maintained it will save local governments millions of dollars annually.

A main feature of the package calls for increasing public employees' contributions to their health coverage costs so that their shares are more in line with the private sector.

The increased contributions would be phased in over a seven-year period commencing with the expiration of each collective bargaining agreement — with a shorter phase in for an employee with single coverage. Lower-income employees would contribute a smaller percentage.

The state would mandate that all local governments and school districts provide a menu of different health benefit options for employees to choose from, with no fewer than five heath plans available. Sweeney said this would allow workers to have "choice" based on family status, age and desired levels of benefits.

The state would also require that each board of education and local government create an "Employee Benefits Quality, Cost and Delivery Committee." The committee would create a collaborative framework at the local level where labor leadership from each local unit will work with elected leaders and policy makers to find the best vendors, solutions and approaches to health care.

Additionally, a wellness program would have to be established, and incentives based on healthy habits built into the premium structure. Moreover, local employers would have to conduct dependent audits — as the state government is required to do under recent pension and health law overhauls. This would ensure that only eligible dependents are covered.

There would be an immediate moratorium on local governments entering the State Health Benefits Plan and school districts and educational employers from joining the State Educator's Employee Benefit Plan. Based on mounting losses and the overall economic position of the state's fiscal health, Sweeney said the state should not assume any additional financial liability without proper due diligence.

The proposals also call for the promoting the use of generic drugs and bulk pricing for pharmacy benefits to help reign in pharmacy costs."

Sweeney said his proposals would allow local elected officials to help rein property taxes, and provide a fair way to implement increased costs on middle and lower income public workers.

"Health benefits are a major factor in what drives up property taxes and this plan will finally do something about it," Sweeney said at a Statehouse press conference. "We cannot continue with band aid measures for issues that deserve real solutions. It is time for action, not sound bites and meaningless political rhetoric that resolve nothing. Government must be run like a business, and this reform package is a major step in that direction."

Sweeney said he expects the legislation to be worked on over the course of the next several weeks. He said that securing increased contributions from public employees is key to normalizing the disparity with the private sector but added that alone will not address the long term challenges with the rising cost of health care.

"This is about saving local taxpayers hundreds of millions of dollars a year when fully phased in, while at the same time not putting such a heavy burden on workers that they can't afford benefits," Sweeney said. "Moreover, this will provide local elected leaders practical solutions on health care benefits that can be realistically implemented. Simplification, local control and balanced measures to address cost and quality are needed to remedy the issues."

Assembly Speaker Sheila Y. Oliver (D-Essex) did not wholeheartedly embrace Sweeney's proposals. They usually join in announcing Democratic initiatives.

"We are aware of the plan and have been talking to the Senate president," Oliver said. "The Assembly can embrace many of the elements to protect taxpayers in this proposal, but as in all things the Assembly will give it its own review. I look forward to discussing it with the caucus and moving forward soon."

In the private market place, some employers offer their workers choice in coverage, allowing them to pick plans based on the coverage that may best suit their needs and having the employees contribute based on the level of coverage they select. A great number of New Jersey private sector workers are not offered health care insurance.

Sweeney said national studies reveal that when engaged, health care consumers make more informed decisions which in turn lead to better outcomes and reduced cost. He said choice also means opening the markets to more solutions and increased competition which he maintained generally breeds lower costs and increased quality. Sweeney said he believes choice in coverage options and choice in insurance solutions would create a better climate for competition and reduced cost at all levels. The senator said another challenge facing New Jersey is the fact that the state government is actually in the health insurance business through its administration of two state health benefit plans that school districts, municipalities, counties and other local government units can select to provide coverage.

"There are mounting losses and artificial subsidies affiliated with these plans, which has created yet another ‘ticking fiscal time bomb' for taxpayers," Sweeney said. "The bottom line is the state should not be in the insurance business. Just like when the state deregulated the auto insurance business, we need to do the same thing here by getting out of the health care business for local governments."

Buena Vista Mayor Chuck Chiarello, president of the New Jersey State League of Municipalities, said the organization welcomes Sweeney's proposals.

"We commend Senator Sweeney for his attention to the large and growing impact of health insurance costs on municipal, county, school district and State budgets, and on our property tax payers," Chiarello said. "We will carefully review the specifics in the bill, as soon as it becomes available.

For a number of years, League officials have warned that local governments were facing a financial crisis with regards to health care for active employees and post retirement benefits.

"The problem is significant and one that will require difficult decisions," Chiarello said. "We have long argued that there must be cost sharing and incentives to empower customers. Individuals must develop a new paradigm for healthcare and it begins with personal responsibility. Judicious planning for larger co-pays, appropriate deductibles and elimination of dual coverage will prospectively result in significant savings."

"For New Jersey's small towns, who already are dealing with extreme pressures, the Senate president's plan will be a fiscal life line," Democratic Lambertville Mayor David M. DelVecchio said. "The overwhelming number of municipalities across the state will be able to pass along the greatest amount of property tax relief to their residents through this sensible plan. And it would be fair to the dedicated employees who work hard to give our residents the best possible quality of life."

"One of the biggest issues local officials have to face is the escalating health care benefit costs for employees," Democratic Camden Mayor Dana L. Redd said. "Senate President Sweeney's plan addresses this problem in a smart, workable manner. This reform package calls for a fair and equitable approach based on annual employee earnings and gives mayors a legislative tool to control escalating and rising health care costs."