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Monday, March 12, 2007

New Jersey State Union Worker Contact: Health Care Insurance – Another Giveaway

If you could get a $19,160 increase in salary and a $4,518 decrease in your annual health insurance contributions, would you think you were getting a good deal? How about a $19,160 salary increase, but a $1,109 increase in your health insurance payroll deduction, would you happily take it?

Would it help make up you mind if you knew your employer’s annual contribution to your health insurance was currently $13,992 and likely would be $22,814 in four years?

That’s the deal Governor Jon Corzine has negotiated with New Jersey’s state worker unions. It’s also the deal the state’s taxpayers are expected to swallow and like it.

Here are the details. Currently, New Jersey offers three types of medical plans to state employees– an indemnity plan (Traditional Plan), Health Maintenance Organization plans (HMOs) and the NJ PLUS plan, a blend of HMO and indemnity coverage. The contact will offer one less choice to active employees.

Under the new union contract, the state’s Traditional and NJ Plus plans will be eliminated and replaced with a hybrid of the two, keeping the best features of each plan. Employees will have the option of remaining in an HMO and those with 25 years of service before July 1, 2007 can still choose the Traditional Plan when they retire.

As the union tells it members, “we have negotiated a better health plan than the one we had”. They are right. Here’s a comparison of all health insurance plans currently offered by the state and the union’s explanation of the new hybrid plan.

So, from the state employee’s perspective, what’s not to like about the contract’s health insurance provisions? Some employees, for the first time, will have to contribute toward their medical coverage - 1.5 percent of their salary. But for some employees, those already contributing, their payroll deductions will be considerably less. Regardless, all employees will be a get a 3 percent raise in each of the first two years and a 3.5 percent raise in the final two years of the contract. That’s on top of regular incremental salary increases, providing the average worker with a 35 percent salary increase over the course of the four-year union deal.

Currently, the annual employee contribution for family coverage is $614 for an HMO, $5,335 for the indemnity plan (Traditional) and $0 for NJ Plus. Next year, the average employee will pay $817 for either an HMO or the new hybrid plan. (Average state worker annual salary of $54,742 x 1.5 percent). In the final year of the contract he’ll be paying $1,109 – 1.5 percent of his $73,902 salary.

That average employee previously enrolled in the Traditional plan will save $4,518 in employee contributions in the first year. If enrolled in an HMO, he’ll see a small annual increase of $203 and if formerly enrolled in NJ Plus, an increase of $817.

The contract’s first-year 3 percent increase more than covers the 1.5 percent employee contribution – forever. And, employee contributions will be before tax. As the union put it - “That means that in net money, the money you get in your check, the cost of healthcare will be about 1%”.

The state currently pays $13,992 for NJ plus family coverage, including prescription drugs, and has yet to put a price tag on the new hybrid plan. We know the new hybrid plan will be better and that unlike NJ Plus, will offer a medical network in all 50 states and eliminate the need for a primary care physician referral to see a specialist.

The state’s cost certainly won’t be going down. The Benefit Review Task Force estimated active employee health insurance benefits would increase 13 percent annually though 2010. That would bring the average annual cost for the new plan to $22,814 at the end of the four-year union contact.

What a deal. If you’re a state worker you’d be a fool not to accept this contract, no matter what Carla Katz might tell you. If you’re a taxpayer, you’d be a fool to think Jon Corzine had you in mind when he offered up his latest gift to his union pals.

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9 Comments:

At 2:36 PM, Anonymous Bob said...

So, from the state employee’s perspective, what’s not to like about the contract’s health insurance provisions?

What's not to like is the loss-leader mentality of the deal. On it's surface it looks like a wonderful deal . . . and it is. What is troublesome to state employees is what will happen four years from now.

Once the inch is given on health contributions, the next contract will not be 1.5% but significantly more. That's what state workers don't like.

Dollar for dollar, this deal is wonderful in the short run for state workers. In the long run they lose.

I know you and others are not concerned with that, but that is what is not to like.

 
At 3:05 PM, Blogger Enlighten-NewJersey said...

Bob,

How can the state worker possibly lose either in the short term or in the long run? The 13.6 percent across-the-board salary increase in this contact is locked in forever. These wage scale increases are compounded year after year.

Give us an example, with numbers, to show us how it’s possible for an employee to lose in the long run under this contact.

 
At 6:15 PM, Anonymous Bob said...

Not under this contract . . . but in four years there is another contract. While dollar amounts may go up, so will the percentage of the benefits the worker will have to contribute.

As all state workers have known for years, it is far better to take fewer dollars and not pay a dime toward health benefits.

This contract buys them out of that stance. It will cost the worker when he finds himself contributing thousands to his benefits.

You'll point to the pre-tax dollars he can purchase those benes with and that is a fair point. In the end, however, he will lose.

 
At 8:00 PM, Blogger Ken Adams said...

Bob, forgive me for the rude response, but this is necessary. The damned whining state employees should be thanking the taxpayers of this state every freaking day for our past generosity; they (including you) should not be running around screaming about the camels nose under the tent.
We have fully funded your health care for long enough. It's time you made a contribution. Private sector employees, who face significantly higher risk in employment security, have been making such a contribution for a long time. My own health insurance expenses went up nearly 50% this year, to almost $44 a week, because of the rapidly rising cost of health care.
Public employees have it way too good in this state.

 
At 12:45 PM, Blogger Enlighten-NewJersey said...

Bob,

Let’s compare a few scenarios. To make things less complicated, we’ll pick an employee at the maximum salary for his position and therefore, ineligible for any incremental salary increases. His salary in 2006 is $54,742.

Scenario #1
He receives no salary increase of any type, but he never contributes towards his health insurance. He retires in 2050.

He will have earned a total of $2,408,648.00 and contributed a total of $0 for health insurance from 2007 through 2050. His net total salary is $2,408,648.00.

Scenario #2
He receives the across-the-board salary increases per the 2007-2010 contract of 3%.3%, 3.5% and 3.5% and pays 1.5 percent of his salary for health benefits. He never receives a salary increase of any type for the rest of his working years. He retires in 2050.

He will have earned a total of $2,725,552.23 and contributed a total of $40,883.28 for health insurance from 2007 through 2050. His net total salary is $2,684,668.94.

The employee is ahead by $276,020.94 under Scenario #2.

Scenario #2a

In the 2011-2014 contract he’s forced to start paying 3 percent of his salary for health insurance and there are no across-the-board salary increases. No incremental raises either.

He will have earned a total of $2,725,552.23 and contributed a total of $78,210.63 for health insurance from 2007 through 2050. His net total salary is. $2,647,341.60

The employee is ahead by $238,693.60 under Scenario #2a.

Scenario #2b

Under the 2015-2018 contract he’s forced to start paying 6 percent of his salary for health insurance. Still no raise.

He will have earned a total of $2,725,552.23 and contributed a total of $145,399.85 for health insurance from 2007 through 2050. His net total salary is $2,580,152.38.

The employee is ahead by $171,504.38 under Scenario #2b.

Scenario #2c

It’s now the 2019-2022 contract and it’s still bad news for our employee – no salary increase and he’s forced to start paying 9 percent of his salary for health insurance

He will have earned a total of $2,725,552.23 and contributed a total of $205,123.60 for health insurance from 2007 through 2050. His net total salary is $2,520,428.63

The employee is ahead by $111,780.63 under Scenario #2c

Scenario #2d

We’re now in the 2023-2026 contract and still no salary increase. He now has to start paying 12 percent of his salary for health insurance.

He will have earned a total of $2,725,552.23 and contributed a total of $257,381.88 for health insurance from 2007 through 2050. His net total salary is $2,468,170.35.

The employee is ahead by $59,522.35 under Scenario #2d


Scenario #2e
It’s now been 20 years and the 2027-2030 is not good to our employee. Still no salary increase and he starts paying 15 percent of his salary for health insurance.

He will have earned a total of $2,725,552.23 and contributed a total of $302,174.69 for health insurance from 2007 through 2050. His net total salary is $2,423,377.54.

The employee is ahead by $14,729.54 under Scenario #2e.

 
At 2:54 PM, Anonymous pt said...

the state will go bankrupt within 5 years unless the sales tax is 15% and property taxes more than triple in that time

 
At 8:39 PM, Anonymous Anonymous said...

you might want to get a grip on reality. not ALL employees get raises. it is this kind of unsubstantiated propaganda that keeps those employees who are not part of the problem from ever advancing. the only employees who ALWAYS get raises are those who are specifically covered by a union. there are a significant number of employees, hard-working employees, who are up the creek without any raises, sometimes for years on end. by making the bold assertion that ALL state employees will see their salaries climb 35% over the next 4 years, you simply reveal your inability to be unbiased and impartial in your propaganda. shame on you -- do your homework next time so you don't sound so uneducated.

 
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