How Murphy administration hopes to cut costs of state health benefits

File photo State Treasurer Elizabeth Muoio.

Treasurer Elizabeth Muoio announced Thursday several initiatives that New Jersey will pursue to find cost savings in the state health benefits plan.

A presentation to the state health benefits plan design committee by AON on Wednesday, stating premiums will increase by 6 percent for 2019, spurred the announcement, according to a statement.

“As part of (Gov. Phil Murphy’s) goal to change the way we do business, we put together an internal working group at the start of this administration that was tasked with finding more immediate health benefit cost savings,” Muoio said in the statement. “These initial measures are designed to exact savings through efficiencies in order to keep premiums in check while maintaining the same quality level of service for members. We anticipate that these proposals can be enacted relatively quickly while the governor’s Special Task Force pursues longer-term savings, enhanced value within the plans and efficiencies. Ultimately, our goal is to find the most cost-effective means to deliver quality health benefits to our nearly 1 million state and local government and school employees.”

There have been several calls to action to find savings in the health benefits plan, most recently during the budget battle last month.

Some are pointing to a report commissioned by former Gov. Chris Christie’s administration, which highlight some of the very savings initiatives Muoio announced — including audits of members, third-party administrators and plan designs.

But under Christie, the plan design committee didn’t meet for a whole year, and none of the savings measures could be discussed, let alone implemented.

Sen. Paul Sarlo, who wrote a letter regarding third-party administrators in April, expressed support for Muoio’s plans.

“The Plan Design Committees were instrumental in the past in finding real and lasting savings at the same time health benefits were fully preserved,” Sarlo said in a statement. “The reconstituted committees will follow through with the same mandate of eliminating waste. These savings can be captured this year as part of the reforms to the School Employees Health Benefits Plan that were included in the approved budget.”

The Department of the Treasury outlined its initiatives in a statement Thursday:

  • Member eligibility audits: It’s been nearly a decade since the Division of Pension and Benefits audited its enrollment for accuracy. An audit of dependents, spouses, Medicare-eligible enrollees and staff at higher education institutions and other government entities, is expected to identify ineligible enrollees that can be removed from state-administered plans. These audits have begun and are expected to be completed by the end of next year, resulting in savings of roughly $77 million.
  • Third-party administrators: In addition to the fees paid by the state to third-party administrators, such as Horizon, Aetna and Optum, these vendors also receive additional fees for other services provided to members. The Office of the Treasurer is actively working to ensure transparency in its relationship with these TPAs to ensure that members and the state are receiving a high return on their investment — both as it relates to the quality of care received and without the burden of unnecessary and costly services. As part of this proposal, invoices will be verified to ensure that they reflect services provided and payment mechanisms to TPAs and providers will be streamlined in order to ensure accountability and accuracy. Implementation of these proposals are underway and expected to yield roughly $15 million to 25 million in savings.
  • Plan design committees: Plan design committees have begun reconvening after a long hiatus, and the administration is actively engaged in discussions with members on potential modifications to achieve reductions in premiums. In the past, PDCs had been actively engaged in several critical plan modifications that not only produced savings for members and taxpayers, but also improved the quality of service delivered to members. That mission will continue this year with the PDCs as they explore, with the administration, several potential plan improvements, including a review of how out-of-network claims are administered.  The magnitude of the savings will be dependent on the extent of the reforms that are ultimately adopted.

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