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9-19-06 GSCS Testimony before Jt Comm-Public Employee Benefits Reform
GSCS testimony reports cost-saving gains under private carriers, members' approach to health benefits demonstrates millions can be removed from local taxes with additional flexibilities allowed ... State Health Benefits plan should be modernized.

 

Garden State Coalition of Schools/GSCS

 

Testimony before Joint Committee on Public Employee Benefits Reform

 

September 19, 2006 Clifton High School

 

 

Thank you Senator Scutari and Assemblywoman Pou, Co-Chairmen, and members of the Joint Committee on Public Employee Benefits Reform. My name Lynne Strickland and I am Executive Director of the Garden State Coalition/GSCS. I am pleased to be here on behalf of the 350,000 students enrolled in the 110 districts represented by the GSCS. 

Today, at your invitation, we offer suggestions from our members on ways of trimming one of local school districts¡¦ budgets biggest cost drivers via revisiting restrictions in the State Health Benefits Plan(SHBP) and offering comparative examples from these local school districts that vividly demonstrate the cost savings available to them under private carriers. The main differences here are that the private carriers offer flexibility to districts that enables them to secure cost saving measures in negotiations ¡V such as co-pay - as well as plan offerings, such as types of plans, or specific plan choices such as dual-spouse ¡¥opt out incentives¡¦.

A criticism of private carrier v SHBP has been that private carrier plans often bump up their charges within a few years. Districts ¡V more than 60% participate in private plans now ¡V have become more and more adaptable to that phenomenon and like Smokey Robinson¡¦s stand-bys, have learned how to handle this -  they  know they had ¡§better shop around¡¨ when necessary.

It is important to note that in regards to the ¡¥opt out incentive¡¦ (and perhaps other savings comparisons) the savings to local districts can be quite substantial; while the cost to the state was recently annotated in a fiscal note as being ¡§revenue neutral¡¨. We are charged today with reporting the local cost savings that clearly in turn reflect in fewer taxes having to be paid by the local property tax payer, which is the basis for your endeavors in this Special Session. A final and very important point about this option ¡V under the SHBP municipalities, counties and county colleges are allowed to offer an opt-out incentive to employees. Schools are not. You have to not only ask why, but also to recognize that this separate treatment for schools as a class is indefensible.

A number of examples of our members¡¦ experiences and suggestions follow below. I will just highlight a few and then turn over the remainder of our time to representatives of the Glen Ridge School District to give you a first hand report of their local district¡¦s approach to cost saving measures in regard to health benefits.

 

Some GSCS Local Member District Examples:

Mercer County school district¡K

(1) Allow employees to receive a monetary incentive to waive coverage;

(2) Allow districts to negotiate with individual bargaining units over deductibles, co-pays, employee contributions, etc;

(3) Make changes in SHBP that will result in meaningful savings (change in co-pay on office visits from $5 to $10 would likely result in a relatively small amount of savings and would probably not be increased for many years¡Xany changes must be carefully chosen to result in significant savings.

Bergen County school district¡K

 

(1) Allow for opt out provisions for those district employees having coverage through a spouse.  We privately insure through Horizon Blue Cross Blue Shield negotiated an opt-out provision reducing our health insurance premium costs by $250,000 a year.  Over the course of the three year contract we have saved our taxpayers $750,000 in health insurance premiums.

 

ƒn (2) Allow for districts to provide a variety of health insurance options.  We offer both PPO and Traditional Indemnity plans.  All new hires are provided with PPO coverage and at tenure may switch to traditional coverage.  Over the last three years we have seen the number of staff members choosing to retain PPO coverage after tenure growing. 

 

(3) Provide only one policy per couple, if both a husband and wife are employed by the school district.  Eliminate the requirement that stipulates separate policies for a husband and wife working in the same school district.

 

ƒn (4) Allow districts the ability to negotiate with the bargaining units contributions for health insurance.  In our district, our teachers, secretaries and administrators contribute towards the cost of family coverage. 

 

Monmouth County school district¡K 
(1) FY07 just went with Horizon Blue Cross Blue Shield from 
SHBP and we are saving $100K this year in premiums alone; 
 
(2) Additional savings are anticipated due to the flexibility 
enabled by being outside of SHBP. Some ways in which  
this local district might accrue taxpayer savings would be its 
ability to offer incentive option to spouses because full 
coverage for both spouses ¡V when each spouse already has 
coverage - is not mandated as it is under the SHPB;  
(3) Flexibility - potential for increasing co-pays or premium 
contributions at the negotiating table.
 

Essex County school district¡K

(1) We are in a private carrier as of 2.5 yrs ago (Horizon).  Total savings the first year were approx $250k.

(2) We have a combination of co-pay, and opt-out clauses in there as well.  The opt-out saves us approx $10k per employee if they opt out. (That¡¦s net savings after we deduct the opt out incentive).

 (3) It helped us in negotiations because we were able to recycle some of the opt out savings into a small increase in the salary contract.  Secondly, we offered a flex spending savings plan for the staff.

Morris County school district¡K.

 

(1) There is no doubt we have saved substantially by not being in the SHBP.  The last time we looked at this because they were talking about forcing us back into the plan - our conservative estimate is that it would cost us about $500,000 the first year.  It is very misleading for them to say it will save money if they force us all back in.  It will save the state money because it increases the pool but it will cost districts like mine a fortune.

(2) My suggestion has been for them to first change the SHBP and then many districts will want back in.  The worst thing about the state plan is that it does not allow tiering. In my district everyone hired after Jan 1, 1998 is only entitled to POS level of coverage and has to buy up to PPO or Traditional.  Eventually no one will be entitled, a tremendous savings, this is impossible with the state plan as it exists today.

(3) The other simple problem is that even though we all know medical costs are the big driver in a lot of district cost increases the mediators who work to resolve contracts still revert to the norm and suggest that asking teachers to contribute to their own health insurance is a radical proposal.
This is not radical except with NJ teachers and it drives the cost past reason.

(4) Opt Out Incentive: I am sure you know it is ridiculous to think that spouses who are entitled to the same benefits (e.g. both teachers aren't forced to take one rather than 2 plans, even if they are in the same district)

We save some money by offering an incentive to not take health benefits if your spouse has coverage.

(5) One of the core issues is that there is a marked difference between the cost of POS and PPO and traditional.  They have to make teachers contribute to the cost of the difference in these plans; schools cannot sustain that increase annually

Somerset County school district¡K

(1) Opt out alone saves us over $1.1 million/yr    (100 people elect to opt out, rough approximate savings of each $11K)

(2) We just negotiated out of contract offering traditional replaced by PPO - discounted 6% or $178K

(3) Increased prescription co-pays from $5 generic/$5 brand to $5 generic/$10 brand, provided $200K savings

Union County school district¡K

It is true that we have a better rate going private for benefits. 

(1)     Redesign SHBP with more managed care etc¡K and building incentives for districts to enter it at reduced rates.

(2)     The State should consider is throwing up the administration of the program to someone other than Blue Cross.  This is how we have saved money. 

(3)     The State could also take benefits off the bargaining table just as pension is not part of negotiations. 

 Addenda:
 One:

 Two examples of why State Health Benefits Plan (SHBP) costs school communities more than private carrier plans -

 

52:14 - 17.31A offering incentive ¡¥Opt out of coverage¡¦ clause

 

Uneven playing field: While Municipalities, municipal authorities and county colleges are permitted to offer ¡¥op-out¡¦ incentives to a spouse, schools are not.

 

Districts consistently report savings are gained by their ability to offer ¡¥opt out incentives¡¦ from dual-spouse coverage, e.g. See ¡§local school district¡¨ examples provided in this testimony.

 

52:14 ¡V 17.40 dependent coverage

 

Changing context not reflected in SHBP: When salaries were low and benefits
 were cheap, local school district practice resulted in agreeing to fully 
paying premiums/co-pays were negotiated away at the bargaining table. 
At the same time, the law just about makes the practice written in stone
by mandating that all bargaining units in a district would have to agree to 
contribute via co-pay. Practically speaking, the clause that stipulates 
this100% agreement of all the units shuts down the possibility of co-pay 
negotiation under the SHBP
 
Two: 
 
Results of NJASBO State Health Benefits Program Survey
 
¡P         238 members responded to the survey
¡P         101 indicated they participated in the SHBP
¡P         137 were not in the SHBP
 
Of the 137 districts not in the SHBP:
 
¡P         123 or 90% indicated a private plan was more cost effective.
¡P         106 or 77% indicated they offered coverage waiver options to 
                         employees. Estimated savings from the waiver option 
                         ranged from a low $3,000 to a high of $1,200,000.
 
Combined testimony offered by GSCS President-elect, Dan Fishbein, Glen Ridge, follows:
 

GARDEN STATE COALITION OF SCHOOLS/GSCS

 

Dr. Marjorie Heller., President

Lynne Strickland, Executive Director

Betsy Ginsburg, Parent Network Representative

 

Phone 609 394 2828  Fax 609 396 7620                   Website ¡¥gscschools.org¡¦                    Email ¡¥gscs@gmail.com

 

 

Good afternoon Senator Scutari, Assemblywoman Pou and members of the Joint Committee on Public Employee Benefits Reform.  My name is Daniel Fishbein, Ed.D. and I am the President Elect of the Garden State Coalition/GSCS and the Superintendent of Schools in Glen Ridge. I am pleased to be here on behalf of the 350,000 students enrolled in the 110 districts represented by the GSCS as well as the almost 1900 student in Glen Ridge. 

Today, I offer suggestions and areas the committee needs to consider before making decisions that if not thought out may have an adverse impact on school districts. I also look forward to continuing this conversation, as these ideas certainly will give birth to other constructive ideas along the way and will need to be worked out as this process continues.

 

BENEFITS

 

  • The current State Health Benefits Plan (SHBP) is inflexible and limits local boards¡¦ negotiating ability, resulting in increased costs for local taxpayers.  Do not restrict districts¡¦ current ability to shop for cheaper plans by requiring all districts to participate in the SHBP.  Doing so would only create a rigid, monolithic system that does not promote competition in the health benefits marketplace.  Also, the nearly 300 districts that are currently experiencing savings by contracting outside of the State plan would see immediate cost increases.
    • Just this week a colleague from a high school district in Bergen County informed me that they had settled their teacher contract and was able to get out to the SHBP at a saving of close to $500,000. Thus their contract settlement resulted in a negligible increase in the total cost of contract. Mrs. Strickland pointed out, these kinds of savings are widespread among the districts around the state who have left the SHBP

o        Allow for ¡§opt out¡¨ provisions for those district employees who have health coverage through a spouse in the SHBP.  By using the ¡§opt out¡¨ provision Glen Ridge and Ridgewood, both privately insured through Horizon Blue Cross/Blue Shield, reduced health insurance premium costs by approximately $100,000 a year and $250,000 a year respectively. 

    • In Glen Ridge we project an approximate $200,000 saving by insuring outside the SHBP. Thus to go into the current SHBP it would cost the taxpayers the $200k plus the $100K we save with the opt out provision.

o         Allow districts to provide a variety of health insurance options.  In Glen Ridge, for example, offers both POS (Point of Service) and Traditional Indemnity plans.  All new hires are provided with POS coverage and at tenure may switch to traditional coverage.  Over the last three years, Glen Ridge officials have seen an increase in the number of staff members choosing to retain POS coverage after tenure 

o        Provide only one policy per couple, if both a husband and wife are employed by the school district.  This eliminates the requirement that stipulates separate policies for a husband and wife working in the same school district.

 

Flexibility will lead to savings.

 

Finally I ask that you look at a current practice that I feel has had a negative impact on school spending.  S-1701 has been controversial since the day it became law, but there is one particular provision of that legislation that I feel has actually increased budgets. The provision in question is the mandatory reduction of fund balance (surplus) to two percent. Prior to S-1701, districts with healthy fund balances were able to budget less conservatively in certain areas, especially benefits and energy, where unforeseen cost changes often occur after the budget is passed by the voters. For example, definite health insurance rates are rarely known during the budget process, and the premium increases that are eventually submitted by the insurance broker are usually in the form of a percentage range rather than a single figure.  Thus the dollars allocated in the advertised budget for health insurance expenditure are the best ¡§guess¡¨ based on the district¡¦s rolling history of premiums versus claims.  If you are hit hard with claims in Feb, March and April, for example, the premiums for the following year may spike and you will be caught short on your budgeted number. In the past, districts were able to be more liberal in their budget projections, using a lower percent increase or even purposely budgeting short in this area just to make the cap. Since the implementation of S-1701 districts can no longer risk either being caught short on a budget item or purposely budgeting less conservatively in a particular area because we are reluctant to risk using up fund balances that have been so severely restricted.

 

Thank you for your time in consider this important isuue.