Unions, Murphy agree to save taxpayers $500 million

State and local government – and by extension, the taxpayers who fund them – are expected to save almost $500 million under changes to healthcare plans for active and retired public workers agreed to Monday by labor unions and Gov. Phil Murphy’s administration.

Among the unions reaching the agreement was the New Jersey Education Association, which wouldn’t agree last year to a similar move to a Medicare Advantage plan for retirees when the idea was raised by Gov. Chris Christie’s administration and put in place for other health plans.

“It’s an excellent agreement. It really shows what we can all do when we all work together in a cooperative and transparent way,” said NJEA executive director Ed Richardson.

Murphy thanked unions for good-faith negotiations and called on the Legislature to “provide relief” to public workers “from some of the most harmful effects” of pension and health benefit reforms adopted in 2011. He didn’t specify what changes he wants to see.

“As I’ve said from day one, I believe in the power of collective bargaining and negotiating in good faith with our workforce. Today’s agreement is a testament that this approach works – for the state of New Jersey, for workers, and for our taxpayers,” Murphy said.

Richardson said there’s “a level of trust, a level of transparency” now that didn’t exist before, when he says the Christie administration wouldn’t share data about what was driving health costs so that the union could try to develop suggestions.

“There seemed to be a complete misunderstanding of what our motivations and capabilities were, and that’s not the case now. Everybody understood that we too want to be able to move forward in a way that’s cost-effective and sustainable,” he said.

Much of the savings – more than $270 million out of $496 million – results from putting retired teachers in a Medicare Advantage plan that emphasizes in-network care. Retirees can be reimbursed $250 a year in co-payments and earn $250 for taking part in a wellness program.

“And yet on the other side of it, generate savings through some level scrutiny by physicians and preapproval of certain procedures, mostly diagnostic procedures,” Richardson said.

A new health plan for active workers delivers a 14.5 percent cut in the premium and no copays for doctor visits. It saves money by strongly emphasizing in-network care.

“If you are currently never or rarely accessing care out of network, this is probably a very good deal for you,” Richardson said.

“Our members, we have to remember, are paying a huge share of the premium costs,” he said. “If that share is going down by 14.5 percent, they’re going to see a savings from this as well.”

Savings to taxpayers are estimated at $274 million in 2019 and $222 million in 2020.

Senate Minority Leader Tom Kean Jr. says that’s encouraging but modest and that a reduction in workers’ health benefits, to ‘gold’ level from ‘platinum’ under the parameters of the Affordable Care Act, could save more than $1 billion a year.

“Taxpayers deserve to know that every opportunity to achieve savings on the massive cost of public employee health benefits is being investigated,” Kean said.

State Treasurer Elizabeth Maher Muoio said the health benefits changes, including ones made earlier to pharmacy benefits, are “a tremendous step in the right direction” and that the state will continue working with labor unions on other ideas.

Murphy appointed a task force that is reviewing the state’s health benefits plans that will hold the first of three planned public hearings Thurday night in Hamilton, Mercer County.

The changes were endorsed Monday by a committee of the School Employees’ Health Benefits Program and are scheduled for final ratification on Wednesday.

A headline on earlier version of this post incorrectly described the savings as taking place over one year. They take place over two.

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Michael Symons is State House bureau chief for New Jersey 101.5 and the editor of New Jersey: Decoded. Follow @NJDecoded on Twitter and Facebook. Contact him at michael.symons@townsquaremedia.com