The actuary that provides analysis for the state’s three state-administered health plans is recommending double-digit rate increases for all three.
Of particular importance for Cape May County municipalities is the Aon company’s recommended 36.5% increase for the local government employees plan. This would come following double-digit increases in that plan’s rates for the last three years.
The recommended increase for the school employees health benefits program is 29.7%, and for the state workers program 21%.
It is now up to the State Health Benefits Commission and the School Employees Health Benefits Commission to decide what to do with the recommendations, which are driven by both prescription drug benefit costs and health-care costs.
Michael Cerra, executive director of the New Jersey League of Municipalities, said such rate increases are “unsustainable.”
Cerra said increases of this magnitude are likely to have significant impacts on municipal budgets and property tax rates. In a statement July 9 the League called for “substantive reforms.”
For local government workers – active workers, early retirees and Medicare retirees combined – the bottom line of 36.5% is driven by a proposed medical care premium increase of 33.2% and a prescription drug plan proposed increase of 53.4%.
Since 2022 five of Cape May County’s 16 municipalities have withdrawn from the state plan and moved to private insurance. They are Ocean City, Avalon, Sea Isle City, Cape May City and Middle Township. It is likely that increases like those recommended by Aon will drive others out of the state plan if the proposed increases are accepted by the State Health Benefits Commission.
According to reporting by the New Jersey Monitor, John Donnadio, executive director of the New Jersey Association of Counties, blurted out an expletive when he heard of the proposed increases. That statement captured what others are saving more politely.
Stone Harbor Mayor Tim Carney says the increases over the last few years are “forcing municipalities across the state to consider new ways to provide health benefits to employees. Stone Harbor is no different.” Carney added: “Stone Harbor will be looking at both public and private options to cover our employees without undue burden on our taxpayers.”
The probability is that significant relief will be difficult to formulate given the financial realities driving the proposed increases.
A July 9 release from Gov. Phil Murphy’s office points to health care and prescription drug inflation, the growing popularity of expensive weight-management drugs, a growing utilization of health-care services and an increasing reliance on complex and higher-cost care settings.
The release also notes that there is a $150 million loan balance caused by the local government plan fund’s borrowing from the state plan fund to cover its shortfalls.
A question municipal officials will face is whether reform would come in time for the 2026 budget cycle.
In May a Treasury department report said the local government plan had entered into “what actuaries commonly refer to as a death spiral.”
Also of concern to property tax payers, that same Treasury report added that the school employees plan “now faces significant financial and actuarial risks and may be on a similar trajectory.”
The report makes clear that the situation is not one of temporary imbalance – “it reflects deep-seated structural challenges that, if unaddressed, will further destabilize the plan.”
One option listed by the report is for the state to begin an orderly unwinding of the local part of the State Health Benefits Plan, leaving local government units and school districts to find health coverage as they can or to gain coverage through group insurance they set up.
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
