New Jersey has renewed interested in examining the cost of state health care benefits to its taxpayers, as well as how third-party administrators operate health plans.
Gov. Phil Murphy announced the creation of a task force Thursday to analyze the existing health care spend, as well as how the state bids for health plan operators.
This announcement comes on the heels of an inquiry from state Sen. Paul Sarlo (D-Wood-Ridge) to Treasurer Elizabeth Muoio about the billing and payment practices of the insurers, Horizon Blue Cross Blue Shield of New Jersey and Aetna.
Nationally, self-funded employers are taking greater control of their health care costs by looking for creative alternatives to curb spending.
The state is on a similar path with frustration, which has been building since before Murphy took office.
In fact, Sen. Declan O’Scanlon (R-Red Bank) told ROI-NJ on Thursday that Murphy’s task force is just helping to kick the can farther down the road.
“It’s not a call to action, it’s a call for procrastination,” he said. “We already know what we need to do, we know the depth of our budget problem, we know that our health benefits offerings are the richest in the country — the taxpayers can’t afford it — and we already know the solution that won’t overburden our public workers.”
The solution, O’Scanlon said, is to reduce the richness of the offerings in the health plans.
He pointed to a 2015 report by the Pension and Health Benefit Study Commission, which led to legislation that he helped sponsor.
In the report, the authors wrote: “New Jersey’s public-sector health benefits are the third-costliest in the nation. These costs, projected to increase from $3.1 billion in 2014 to $3.7 billion for 2016 for state-paid groups alone, place a significant drag on the state budget and have done so for decades. The same is true at the local level, where annual health benefits costs, without reform, could approach $10 billion by 2016.”
The report also said: “If health benefits costs had been kept in check, some of the budget pressure that led to pension underfunding would have been relieved, and the hole from which the state must now dig itself out might be much less deep.”
O’Scanlon said the formation of a new group to look at the same problem is not helping. Especially as state employees, just as in the private sector, have to increasingly contribute towards their health care coverage.
But the task force has been directed to come up with recommendations by October 2018, which provides ample time to address any concerns before the state bids for health plan administrators for the upcoming year in June 2019.
This is relevant to Sarlo’s original line of questioning, which was spurred by suspicion that Horizon and Aetna may be profiting from the state through their billing practices.
In her response, Muoio clarified that there are no additional methods for the plans to rake in revenues from the state, and that fees they charge are limited.
Muoio added that the plans are audited every few years and have last been audited in 2015 and 2017 with no significant findings.
But that still leaves the state with a more than $3.4 billion tab for health care spending, or about 9 percent of the budget.
In comparison to Affordable Care Act plans, New Jersey’s state health benefits are above and beyond the highest metallic level (which range from bronze to platinum), O’Scanlon said.
By looking at what is included in the health plans would be a start and could save the state at least $1 billion.
“The treasurer, in her testimony, said we can’t afford to kick the can down the road anymore,” he said. “If you put it all together, you could save $1 billion at the state level. It will also affect property taxes. You can save several billion at the local level. It is a win-win, and the sooner we do it, the smarter we are.”
Murphy’s new task force calls for monthly meetings to identify “near-term opportunities” to reform health management, cost savings for the request for proposal for commercial plans, as well as plan design recommendations by October, according to a statement Thursday.
“I believe that, by moving toward value-based, and other smart purchasing strategies, in the state’s health benefits systems, we can lead by example in sharing our best practices and efficiencies with other health systems in the state, including Medicaid and the individual market,” Murphy said in the statement.