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.