Health insurance premiums will cost 34.4% more for 300,000 public school and county college employees and their families across New Jersey next year as medical costs continue to escalate and the popularity of costly prescription drugs soars.
The change will affect teachers and other school staff in Camden, Pemberton, Evesham, and nine other South Jersey districts, as well as six unions at four local colleges.
What is to come for students, employees, and taxpayers may be just as dire. Cutting jobs, reducing transportation and student extracurricular activities, and raising property taxes are the most likely options school districts and colleges will consider, said Jonathan Pushman, advocacy director for the New Jersey School Boards Association.
“The dilemma is there are limited options we can turn to,” Pushman said. “A lot of difficult decisions are ahead.”
On Friday, the New Jersey School Employees Health Benefits Commission voted 4-2 to accept the premium increases forecast by the state’s actuary. Democratic Gov. Mikie Sherrill’s administration had warned that if the commission did not act, it would have closed down the insolvent program at the start of the new year.
Instead, the rate hikes will take effect in January.
The School Employees’ Health Benefits Program serves 212 school districts and county colleges, representing 300,000 employees, retirees, and their dependents.
The local districts covered by the plan are Camden, Brooklawn, Beverly, Delanco, Evesham, New Hanover, Pemberton, Willingboro, Elk, Newfield, Camden County Technical Schools, and the Burlington County Board of Special Services, which serves special-needs students.
It also provides coverage for employees of Camden County College, Rowan College at Burlington County, Rowan College at Gloucester County, and Rowan College of South Jersey, according to the New Jersey Treasury Department.
There are a total of 590 school districts in New Jersey, with the majority of them, including Cherry Hill, obtaining health coverage outside the state plan. In recent years, steeper costs have compelled many districts to leave in search of a more affordable option. Those who stay tend to serve an older and sicker — and therefore a more expensive — population and cannot afford a better deal on the open market.
These conditions have created a “death spiral” for the plan, actuarial and state officials say. The State Health Benefits Plan for state and local workers faces a similar crisis.
As it is, the health benefits program owes the state $70 million to cover midyear shortfalls, according to Aon, the state’s healthcare actuary.
The union-affiliated members on the commission voted against the premium hikes, insisting there had to be a way to cut costs.
After the vote, New Jersey Education Association president Steve Beatty and other top officials said in a statement that their members on the commission “requested information, proposed specific steps to reduce the rates and sought greater transparency about the factors driving these increases. Unfortunately, the division has refused to meaningfully engage in that effort.”
The rate hikes “threaten the resources available for students,” the union officials’ statement said. “They should not lose out because health care costs are out of control. When districts are forced to spend significantly more on health care, that leaves less money for the programs, staff and services our students rely on every day.”
School officials huddled this week to consider the array of unpalatable options. Few were ready to say what comes next.
Rowan College of South Jersey “will continue to evaluate the situation and make adjustments as necessary while keeping student success our priority,” said Susan Nardelli, vice president of communications, marketing, and enrollment management. “Every industry is facing the same healthcare struggle.”
Union leaders said they are counting on state lawmakers to find a solution. They said they seek action on a proposed bill that would create a new health benefits trust, composed of union and management leaders, and establish a three-doctor medical advisory panel. Districts that join would not be permitted to leave, according to the bill.
The new insurance trust would “provide greater transparency and accountability and is focused on controlling costs,” the union’s statement said.
School boards agree that dramatic changes are necessary, Pushman said. This must include “honest conversations with unions,” he said.
Schools — which are funded by taxpayers — bear 98% of the cost of health insurance compared with the 2% covered by employees, Pushman said. In the private sector, employers pay about 90% of the cost.
A law enacted during the pandemic set specific limits on what school employees must pay for healthcare, based on their income level. That law, which expires at the end of next year, has limited the options for savings, Pushman said.
“As much as we want to provide quality healthcare coverage, bearing the costs of these incredibly rich plans is getting to the point of unsustainability,” he said.
State Sen. Troy Singleton (D., Burlington) agreed.
“We have to be honest with … what the state can afford to provide sufficient coverage for employees. It’s not a bottomless pit for taxpayers,” Singleton said. “It’s become a frustrating point for all parties.”
