New Jersey taxpayers will pay more than $4 billion for public employees’ health insurance next year as health costs rise faster than total state spending for the second year in a row.
(Bloomberg) — New Jersey taxpayers will pay more than $4 billion for public employees’ health insurance next year as health costs rise faster than total state spending for the second year in a row.
Governor Phil Murphy’s budget for the year starting July 1 recommends a 7.4% increase for health benefits, or $280.5 million more than the current year, according to New Jersey’s Treasury Department. Overall, state appropriations are set to rise 4.8% under the proposal compared to the amount enacted the previous year.
New Jersey taxpayers and public-sector workers are shouldering the growing burden of higher health costs. The state has been in a dispute with its largest health insurer, Horizon Blue Cross Blue Shield, for almost two years over the prices the state pays for medical care and other contract issues.
The state’s plan to budget about $4.1 billion for employee health expenses in 2024 is based on claims data for the past two years for covered public workers and retirees. Counting additional funds from rebates, what employees contribute and other sources, the total spending would be about $5.5 billion, according to the Treasury. Horizon provides medical coverage for active employees and early retirees on the plan, while other companies cover Medicare-eligible retirees and provide prescription benefits.
Read more: The Hospital Bill Was $674,856. Why Did the State Pay More Than $2 Million?
New Jersey’s contract with Horizon includes some financial guarantees meant to ensure the state is getting a good deal on medical care. For two years in a row, Horizon has missed some of those guarantees, according to records reviewed by Bloomberg News. The company recently paid $6.2 million in penalties for 2021, a spokesperson for the Treasury department said.
Horizon has met commitments to the state for “significant reductions in overall costs,” a company spokesperson said by email. The company cited disruptions from Covid-19 for missing some specific targets that were set before the pandemic.
Public employees in the state faced an unexpected increase in medical premiums of about 20% for 2023. After unions protested, the Murphy administration agreed to offset much of the increase for certain workers. Local governments that faced similar hikes didn’t get the same relief.
Covid Funds
Murphy’s budget also proposes steering $200 million in federal Covid-19 funds to offset those health expenses for local workers, according to a summary document released last week. That amount isn’t counted in the $4.1 billion in health benefits spending.
Additional proposed costs to the health benefits operation include upgrading technology and boosting capacity in “finance technology, data analytics, contract management, and procurements.” The budget proposal also calls for an additional 30 staff to the Treasury office that oversees the health plan.
That office, the Division of Pensions and Benefits, filed a formal administrative complaint against Horizon in 2021 to recover $34 million over alleged contract violations. The complaint was put on hold, allegedly at the direction of Murphy’s office, Bloomberg News reported last year, citing the account of the state’s former contract manager. Murphy said he didn’t intervene.
The state said it would reinstate the complaint against Horizon by May of last year if the conflict wasn’t resolved. It didn’t. The two sides remain in discussions, a Treasury spokesperson said. In January, New Jersey extended Horizon’s contract to run the plan for another year, a deal worth millions to the company.
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