A series of double-digit rate increases proposed for New Jersey's state-run health insurance program would double the risk that municipalities will flee to other options, further driving up prices.
State actuaries in July recommended raising health insurance premiums for local government employees and retirees by an average of 17 percent and for their state-level counterparts by 11 percent. Premiums for the School Employees Health Plan should increase by an average of 14 percent, they said.
The more than 20% rate hike in 2022, combined with a more moderate increase last year, has local officials worried, as they worry the increased costs will further strain already-strained municipal budgets.
“The state's health insurance program is seeing double-digit growth rates, while the health insurance funds that some towns participate in are only seeing growth rates of 8 to 9 percent. What's the difference? What's driving it?” said Lori Bucklew, deputy executive director of the New Jersey League of Municipalities.
According to an actuarial report, following double-digit rate increases in 2022, enrollment in the state health insurance plan for local government employees fell by about 18% over the two-year period, with a similar decline seen for plan retirees.
Another interest rate shock could see even more towns move out.
“We have members who want to know what other plans are available and how they can keep costs down,” Bucklew said.
Maggie Garbarino, a spokeswoman for Gov. Phil Murphy, said the governor's administration “remains concerned about rising costs and their impact on families across New Jersey.”
“The Governor remains committed to working with our government and labor partners to make meaningful progress in providing affordable health care to our state's public employees,” Garbarino said.
Cities and counties regularly opt out of and join the state's health insurance program, but large-scale withdrawals could send the state's health insurance system into a vicious cycle, with rising premiums leading to fewer enrollments, which in turn leads to even higher premiums.
Bucklew said some smaller municipalities, with too few employees to insure themselves and no access to pooled health insurance procurement, may have no choice but to stay in the state's health plan, even if costs rise.
Enrollment in other parts of the public sector has proven more resilient, and policy changes that began in 2021 that base insurance obligations for school employees on compensation rather than a portion of premiums have shielded those employees from the worst effects of the sudden fluctuations, but these increases still drive up costs for school districts.
Enrollment of active-duty school employees in the School Employees Health Insurance Program has fallen by just under 3 percent over two years. States cannot transition employees to other health insurance providers, and enrollment in state plans has remained roughly flat despite rising costs.
The committee responsible for setting rates for public health insurance was scheduled to approve premium increases in late July but canceled its meeting to allow another committee to approve a pilot program that would allow public employees to get certain procedures at certain top-quality hospitals without paying out of pocket.
It remains unclear how the pilot program and other plan design changes, including reductions in specialist copayments, will affect premiums.
“We're optimistic that the increases will be reduced, but we're not sure that the increases will be reduced significantly,” Bucklew said.
It is also unclear whether the committee intends to approve the rate hike at its regular September meeting or whether it will convene for a vote outside of its regular schedule.
The state is scheduled to open enrollment for its public health insurance program on Oct. 1, but a Treasury Department spokesman warned that delaying the rate setting would leave less time to coordinate with providers and do other work to ensure a smooth transition to the new program year.
“In the past, delays in approving fees and little time to prepare for open enrollment on Oct. 1 have led to numerous issues during the open enrollment process that have adversely affected members,” Treasury Department spokesman Daniel Curry said.
Delaying the enrollment period would also cause problems, she said, because employees would have to complete their work before the new system year begins on Jan. 1.
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