More than 1 million people — roughly one in 10 New Jersey residents — face “significant” cost increases for their government-sponsored health benefits, according to data prepared for the state Treasury Department.
State officials on Tuesday warned that “midyear trends signal significant rate increases” for more than 800,000 retirees, workers and dependents in state and local government systems. Last week the department warned that the School Employees’ Health Benefits Program, with almost 300,000 enrollees, can expect higher costs. In addition to fears of higher costs to employees, potential increases may also need to be shared by state and local taxpayers.
Aon, the department’s actuary, compiled the data.
“Although the reports do not predict forthcoming rates, the information presented provides a snapshot of the plan’s dire financial situation and cost trends, and strongly indicates likely rate increases when Aon makes its rate recommendations in July for the upcoming plan year,” the Treasury Department said in a statement.
The picture is particularly grim for the 156,000 people enrolled in the State Local Government Program, the health insurance for municipal employees. Its reserve has a projected $209 million negative balance, and it may need transfers from State Health Benefits Program accounts to cover costs. That would drive up state workers’ burden further, Treasury said in a statement.
The local government plan is at risk of “an actuarial ‘death spiral‘ if significant reforms to contain spending and cost growth are not implemented soon,” Treasury reported in May.
In another squeeze for the state health plan, healthy members increasingly are choosing lower-premium plans, while those who need more expensive services are sticking with the more generous option.
Like the school plan, the local program has lost revenue because towns — with employees who tend to skew younger and are not so reliant on expensive health care — increasingly are finding lower-cost private coverage. The slimmer membership rolls leave the state “with higher-cost employees in the plan, and lower premium revenues coming in,” according to Treasury. In 2021, 63% of eligible government entities were enrolled, compared with 56% currently.
The state, local and school plans logged higher costs for prescription drug claims — particularly for weight loss — specialist doctors, behavioral health care and inpatient and outpatient treatment.
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