Huge health insurance increase could spur N.J. property tax hikes, layoffs, local leaders warn Murphy

Democratic Gov. Phil Murphy is under fire from local government leaders and some state lawmakers as municipalities and counties in New Jersey grapple with an unprecedented double-digit rate increase on premiums for state health benefit plans.

New Jerseys State Health Benefits Commission in September voted 3-2 to approve rate hikes of more than 20% on health plans that cover more than 800,000 state and local government workers, including a 22.8% rate increase on premiums for local and county governments.

We would have to turn off the lights in Pleasantville and lock the door if this increase goes through, Pleasantville Mayor Judy Ward said Wednesday during a joint press conference with dozens of other mayors, county leaders, local government lobbyists and a handful of Democratic state lawmakers.

Were already an overburdened community, Ward said. I hope the governor and all those responsible will hear us and give us the relief that we need.

The rate hike is expected to cost local governments in New Jersey more than $350 million, according to New Jersey Association of Counties Executive Director John Donnadio.

Newark Mayor Ras Baraka said the rate hikes are expected to cost his city about $24 million, and that does not include all of the other expenses that are growing here in the city.

I think the insurance companies should take a hit as well, Baraka said. It is inhumane to ask us to pay this much money in the middle of whats going on. Get politics news like this right to your inbox with the N.J. Politics newsletter. Add your email below and hit “subscribe”
      

The sharp increase in premiums is hitting local governments just as federal COVID relief funds are beginning to dry up and local leaders are confronting rising costs for a wide range of government services amid record-high inflation.

Many leaders on Wednesday expressed concerns about filling holes in local budgets, and they only have one source to tap when revenues run dry: property taxes.

Rate hikes are expected to cost Essex County about $21 million, County Executive Joseph DiVincenzo, Jr. said, adding that it doesnt look good for the people of this county.

How do you expect us to be able to put a budget together? Its impossible, DiVincenzo said. The only thing I could do is raise taxes, lay off employees and find other ways to cut costs within the budget, and its going to be very difficult to do.

Donnadio said the decision to increase rates appears to have been made in a vacuum without regard for local government employers and local government employees.

He and other local leaders on Wednesday said they are asking the Murphy administration to provide immediate relief on par with a deal the governor struck with a relatively small group of state employees.

Shortly after the rate increases were approved in September, five labor unions issued a joint-statement announcing they had reached an agreement with the Murphy administration that will limit the increase on state employee contributions to 3%.

As part of the compromise, state employee co-pays for specialists will double from $15 to $30 and co-pays for urgent care will increase from $15 to $45.

They can talk about negotiating higher co-pays, but that saved maybe one or two percent, Donnadio said. The vast reduction for the state employees was because the state is now absorbing the cost.

A post-pandemic surge in demand for health care services and record-high inflation are the two primary forces driving the massive increases, according to Aon, the risk management firm the Murphy administration hired to conduct this years rate analysis.

Murphy and administration officials have repeatedly said the rate increases are largely formulaic and a problem that states across the country are facing.

Ripple effects from the COVID-19 pandemic are causing health insurance premiums to rise nationwide in both the public and private sector. But the size of the increase in New Jersey is two to four times larger than average increases seen in other states, and it is about 20 points higher than typical yearly rate adjustments.

The deal with state employees and the way the Murphy administration handled the rate increases this year have left local government leaders and some state lawmakers angry and perplexed.

This is clearly a political situation thats going on right now because some people are being treated differently than others, Branchburg Township Administrator Gregory Bonin said.

State Assemblywoman Eliana Pintor Marin said during Wednesdays press conference that she believes the Murphy administration was not answering questions truthfully during budget hearings and negotiations in the spring.

If we would have known what was coming ahead of time, the budget negotiations would have looked very differently, said Pintor Marin, D-Essex. I guess Ill be a little more cautious going into budget season this year, she added. We are always open and willing to negotiate, and I think its time for the administration to show that as well.

Local leaders also are asking Murphy to extend the open enrollment period for the State Health Benefits Program by at least 30 days. Open enrollment began on Oct. 1 and ends the last day of the month.

This will allow local governments and employees to shop around for less expensive plans, Donnadio said.

Labor representatives and lobbyists have repeatedly warned that these rate hikes could cause a mass exodus of local governments from state health plans. If that does occur, it could spell more trouble for the state health benefits program and lead to even more rate hikes in the future.

What I think you will see is local governments looking for more cost effective options, New Jersey League of Municipalities Executive Director Michael Cerra recently told NJ Advance Media.

Unless the administration steps in here and offers parity…thats going to be the outcome, Cerra said, adding that the Murphy administrations decision to move ahead with the double-digit rate increases was profoundly shortsighted.

Murphy spokesperson Christi Peace said the governor understands and shares the concerns of workers affected by the rate hikes and reiterated that rising costs for health care is a nationwide issue.

The Administration is always looking to work with our partners in government and labor to seek solutions that will help us deliver quality health care at an affordable price to every New Jerseyan, Peace told NJ Advance Media. The governor is committed to making our state a more affordable place for working and middle-class families, and believes everyone deserves quality, affordable health care.

Peace pointed to Murphys creation of an Office of Health Care Affordability and Transparency as one example of the governors commitment to addressing rising costs and making life more affordable for New Jersey residents.

This office and the administration as a whole will continue our ongoing efforts to understand the cause of rising health care costs and seek solutions to this issue so that more New Jerseyans can access the affordable health care they need going forward, Peace said.

Our journalism needs your support. Please subscribe today to NJ.com.

Derek Hall may be reached at dhall@njadvancemedia.com. Follow him on Twitter @dereknhall.