Local governments are finding the rising price of health insurance for their workers a hard problem to solve, and a new state law – along with future labor contracts and shifting public sentiment – is forcing police, firefighters, teachers, and city workers to shoulder more of their own costs.
Thanks to legislation recently signed into law by Gov. Christopher Christie, New Jersey law now requires that when current labor contracts end, government employees on every level will have to negotiate new contracts that require them to contribute at least 1.5 percent of their annual salaries toward their own health insurance.
The 1.5 percent figure would then go directly toward the State Health Benefits plan that many towns use. This legislation is part of passed reforms that will also change pension calculations, limit sick-leave payouts, and remove part-time workers from the insurance system, but only for new hires.
But some unions, whose members never had to pay for their health insurance, may turn to the courts or see members retire before the new obligations take effect.
“The writing is on the wall.” – Christopher Pianese
Pianese said the average city employee with family medical coverage under North Bergen’s Horizon Blue Cross Blue Shield plan costs the city upwards of $20,000.
North Bergen’s health insurance costs for the 2009-2010 fiscal year were $10.3 million in their $77 million budget, of which $2.7 million went to the employees’ prescription drug plan.
The township had changed prescription providers to Alamo Insurance Group last year for a two-year contract, in order to get a better deal.
Right now, town employees do not contribute to their health insurance, but the township was successful in raising copayments on prescriptions last year.
This June, the employees’ insurance coverage will be up for renewal with Horizon, and Pianese said they are expecting a 15 to 20 percent increase in costs unless they shop for coverage someplace else. At the same time North Bergen will be introducing its 2010-2011 fiscal budget.
When North Bergen employees contracts are up for renewal in 2011, employees can expect to contribute more toward whichever plan is chosen.
Negotiating toward the future
Pianese said in 2007, when the township’s department of parks and public property was unionizing, the city and new union agreed that the employees’ cost of health insurance would be frozen and paid for by the township until their contract ends Dec. 31, 2011 – but the union would contribute 25 percent of any increases accrued over that time.
“I felt that it was very important at that point to start getting a contribution from employees and here we are in a climate now where if you don’t get a contribution something is wrong,” said Pianese.
He disagreed with the state’s 1.5 percent rule, believing that it would make more sense for employees to pay a percentage of what the insurance actually costs, rather than paying according to their salaries.
Also, while North Bergen pays for its own health insurance policy, the state-ordered 1.5 percent contribution would go to the State Health Benefits program. North Bergen, unlike other surrounding communities, has its own health benefits provider rather than choosing the state policy.
The North Bergen Board of Education is a member of the state plan, and this year is contributing $11.5 million in benefits out of its $111.1 million budget. They experienced a 25 percent increase from last year.
With their current contract, teachers do not have to contribute.
Pianese said that for the last 20 years, it was “taboo” for cities to encourage insurance contributions during union negotiations, but that those times are changing. When unionized personnel of the township are up for contract renewal in 2011, such as the police and Department of Public Works, he expects to demand health insurance contributions from those workers in all their contracts.
Private sector hurting more
The changes in the public sector may not be as difficult as the challenges being felt by the private sector. Jorge Gallo, a North Bergen resident and a project manager in the financial industry, said he was turned away by his doctor last week. His company had changed their coverage to New Jersey Health First, a company new to the state, and now he cannot be covered for a procedure he was going to receive from his doctor under his old insurance.
He said he contributes around $300 per month to his insurance plan, but has to pick and choose which coverage he can afford, which often significantly cuts down on his options.
“It’s really nice that people who work for the state can negotiate the contracts they want, the pay raises,” said Gallo. “I didn’t get a pay raise. The cost of living went up for everyone.”
Another North Bergen resident, Phil Radelat, is currently covered under COBRA Continuation Coverage, but he is unemployed and time is running out. He believes that no state worker should have to contribute to insurance as long as a “reasonable arrangement” is worked out that is not detrimental to the taxpayer.
Unions will fight it
Pianese said that increasing health benefit costs were making the crafting of budgets more and more difficult. Under state law, the amount to be raised from taxes to fund state budgets cannot increase more than 4 percent. However, combined with contract wage increases, other costs, and benefits, which routinely rise around 20 percent, staying within a 4 percent cap was nearly impossible.
“The writing is on the wall,” said Pianese.
Dominick Marino, the president of the Professional Firefighters Association of New Jersey, vowed to fight the contributions in court. He said that his organization, as well as many other unions in the state, has filed to fight the legislation for being unconstitutional in court.
He said that he isn’t going to say whether or not a government worker should contribute, but that the decision shouldn’t be imposed on them by law, but worked out through contract negotiations as it always has been.
North Hudson Regional Fire and Rescue – the fire department that covers five towns in northern Hudson County – has experienced increased health insurance budget costs as well. In 2008, health insurance cost around $5.3 million, while in 2009 costs rose to $7.2 million in the proposed $54 million budget.
Co-Director Jeff Welz said that they expected their health coverage, formerly with Horizon, to cost them $600,000 more in 2009, a 20 percent increase, so they switched coverage to Cigna. But it is still pricey. Prescriptions and medical insurance cost them respectively $2 and $5 million in 2009.
“We can contain the health care cost for that portion for the 2010 year, but it still could come back up in 2011 if our claims exceed [those costs],” said Welz.
He said that even with a state contribution plan, the department would only receive around $1,500 back to help pay for each worker’s insurance, based on 1.5 percent of an average salary of $100,000. He said that the average plan costs $5,000 for single coverage and $24,000 for a family plan.
He agreed that the state-mandated 4-percent tax cap makes calculating budgets difficult, since health care increases at a far faster rate.
The Regional is currently in contract negotiations with the North Hudson Firefighters Association and will begin negotiations with the North Hudson Officers’ Association this summer. Currently its members do not pay for prescriptions and do not contribute to their plans.
‘They are going to have to contribute to these costs,” said Welz. “Everything cannot be on the backs of the taxpayers.”
Tricia Tirella may be reached at TriciaT@hudsonreporter.com.