Governor aims to slice N.J.’s health costs by $800M, but not by cutting benefits

Gov. Phil Murphy stopped short of reducing the richness of health benefits for state employees in his budget proposal Tuesday, leaning on several other ideas, instead, to reduce the state’s health care costs by $800 million.

Those include ideas from Senate President Stephen Sweeney’s Path to Progress plan — which supports reduced benefits and audits of the health benefits utilization — as well as renegotiating contracts with third-party health insurance administrators and pharmacy benefits managers.

“In total, our budget contains roughly $800 million in real and lasting savings in the delivery of public employee health care in the coming fiscal year — a 16 percent year-over-year decrease from the current budget,” Murphy said.

The TPA issue is one that was raised by specialist doctors attempting to prove that insurers were profiting through questionable practices in the way they executed third-party contracts.

State Sen. Paul Sarlo (D-Wood-Ridge) sent a letter to Treasurer Elizabeth Muoio last year to get insight into the issue and has created legislation this year that would hire an auditor to oversee the health plan for the state.

Meanwhile, the state is rebidding the contracts, likely to go to current TPAs Aetna and Horizon Blue Cross Blue Shield of New Jersey, with an estimated savings of $11.9 million, according to Murphy’s proposal.

In addition to those savings, the state will see a reduction of costs related to the out-of-network law —the signature law of state Sen. Joseph Vitale and Assembly Speaker Craig Coughlin (both D-Woodbridge), which Murphy signed into law last year — by $9.6 million.

The state also will save $115 million through reforms in the health benefits plans for state and school employees, which include limits on out-of-network payments for physical therapy, acupuncture, chiropractors and generic drugs.

These are some of the plan design changes that are one step shy of completely reducing benefits from the current platinum metallic level — based on the metallic coverage levels set by the Affordable Care Act — to gold, which is a richer plan design than many private companies offer.

Other health care savings the governor is projecting in order to balance the budget include:

  • Shift Quest Diagnostics to in-network: Employers were incurring heavy out-of-network charges for lab work as Quest, which was not in-network with Horizon. Projected savingsof $12.5 million.
  • Audit of Express Scripts: Recover funds from the PBM for filling claims that were ineligible in state health plans. Projected savingsof $7.9 million.
  • Dependent eligibility audit:An audit is currently underway to determine if employees’ dependents are eligible to receive benefits. Document collection ended March 1 and results of the audit are expected in April.  Projected savings of $61 million.
  • Social Security disability audit: The state anticipates an audit to ensure spouses of employees who are on Social Security disability use Medicare as a primary payer. Projected savings of $9.4 million.

The audits were mentioned in the Path to Progress plan, which Sweeney (D-West Deptford) has taken on the road with town halls around the state.

The plan suggested an ongoing third-party audit of health care claims, which is similar to the idea baked into Sarlo’s legislation. It also suggested keeping a closer eye on who is signing up for health benefits, especially the list of dependents and of families with multiple state government employees signing up for more than one plan.

Read more from ROI-NJ on the budget: