The reforms will modernize the State employee health benefits plans by bringing the system more in line with the private sector and federal government. Today, New Jersey’s unfunded other post-employment Benefits (OPEB) liability for providing health benefits is $71.4 billion. These reforms will substantially lower health benefits costs for local governments, including those at the county, school and municipal levels, representing another major step forward in providing real, long-term property tax relief. New Jersey spends $4.4 billion annually on public employees and retiree health care costs, with the cost of health benefits making up 9% of the State’s budget today.

The reforms will result in $3.1 billion savings for taxpayers over the next 10 years alone, while increasing choice for employees and ensuring affordability.

Cost Sharing Reforms for Active Employees:

  • All public employees will pay a statutorily-established percent of premium (“premium share”), instead of a percentage of salary, for all State Health Benefits Plan (SHBP)/School Employee Health Benefits Plan (SEHBP) and non-SHBP/SEHBP participating plans.
  • The employee’s share will phase in over four years.
  • The premium share requirement will not affect employees until their current contract expires.
  • Premium shares will vary by salary level and coverage, but may not be less than 1.5% of salary (the current standard).
  • Current employees (excepting those with 20 or more years of service as of the effective date) will pay a premium share in retirement based on the date they reach 25 years of service. If they reach 25 years after the effective date, the employee will pay the premium share in effect based on the date s/he reaches 25 years (i.e., if the employee reaches 25 years in year two of the four year phase-in, then the employee, in retirement, will pay the premium share in effect in year two of the phase-in.)

Changes for Current Retirees:

  • There will be no change with respect to premium cost sharing for current retirees.

Changes for Local and Education Employees Outside SHBP/SEHBP:

  • If the employer is not participating in the SHBP/SEHBP, then the employer and employee could agree to a different premium share and out-of-pocket cost arrangement that results in the same level of savings as the statutory premium share formula and plan design changes in the SHBP/SEHBP.
  • Savings would have to be certified by Division of Local Government Services and Division of Pensions and Benefits and the local Financial Officer in each local entity.
  • All local employers are required to offer a Section 125 “cafeteria plan” to employees.

Health Plan Design Reforms

Joint Employer and Employee Plan Design Committees:

  • For both SHBP and SEHBP, a state-level joint employee-employer Plan Design Committee is established. The employer and employees are equally represented.

Committee Role in Plan Design:

  • The Committees are responsible for providing plans with at least three levels of coverage, featuring varying levels out-of-pocket costs. The Committees have sole discretion to set the amounts for maximums, co-pays, deductibles, and other such participant costs for each plan.
  • The Committees must also provide for a high deductible health plan.
  • All current statutory requirements with respect to plan design will be repealed.