State Budget - Bergen Record - 3 of 6 - Health care costs cause pain

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Published in the Bergen Record, Tuesday, July 18, 2006

Third of six parts
Workers' health care causing pain

By MONSY ALVARADO
STAFF WRITER

Whatever else you can say about pregnancy and labor, it didn't cost Christel Vasquez of Teaneck much.

Premiums for the teacher's health insurance are paid entirely by her employer, the Jersey City public school district. It covered her regular checkups, two ultrasounds and a first-trimester screening. When she delivered her daughter more than a year ago, Vasquez paid nothing to the hospital.

"I paid $5 co-pays, but that's it," said Vasquez, who is expecting her second child in December. "The insurance paid for everything."

Things are a lot different for Nicol'e Gordon of Ridgefield Park. A retail saleswoman, Gordon gave birth to twins in October. Even though more than $100 of her biweekly paycheck went toward her health insurance premiums, she still ended up paying for portions of her ultrasounds, and $30 in specialist visit copayments. She said she paid more than $2,500 in medical expenses by the time she took her babies home, and is still receiving bills.

"You are not expecting to be shelling [out] that much money," she said. "It's kind of annoying when you see people that do not have to pay anything."

As health-care costs swell, private companies are scaling back employee medical benefits, choosing high-deductible plans, increasing copayments and asking employees to contribute more toward premiums.

But in New Jersey's public sector, where nearly 78,000 employees of the state government and state college system enjoy free medical coverage for themselves and their families, things are moving at a much slower pace, if at all. Winning even the smallest concessions during contract negotiations is an uphill battle because of strong unions, tough bargaining rules and rigid state guidelines about employee contributions.

"I've said it in negotiations," said Jeff DeSimone, a Ridgefield Board of Education member. "In the real business world, a businessman couldn't stay in business paying these types of benefits."

Public employees and union officials say they have accepted smaller raises and other compromises to keep top-notch benefits. Asking them to share in the cost of reducing the tax burden is not the solution, they say.

"We think that is the wrong perspective to be taken in terms of the current issues with health care," said Steve Baker, spokesman for the New Jersey Education Association. "It shouldn't be about getting concessions. We should be looking at ways to make sure everyone has adequate and affordable health care."

Rising costs

Employee health-benefit expenses are a major and growing cost for government in New Jersey. In 2005, the state government spent $1.9 billion on employees and retirees enrolled in New Jersey's largest public-sector benefits pool; local governments spent $1.2 billion. That figure is projected to more than double in five years, according to a task force commissioned by state Sen. Richard J. Codey last year, when the West Orange Democrat was acting governor.

Closer to home, health benefit costs are driving budgets upward. In North Jersey public school systems, for instance, a computer analysis by The Record found that medical-insurance costs rose more than twice as much as overall expenses from the 1997-98 to the 2004-05 school year. The analysis covered a majority of the school districts in northeast New Jersey, the 79 for which data were available for the entire time period. Those districts spent 10 percent of their 2004-05 budgets on health benefits.

Among the most glaring examples are Bloomingdale, where health benefits grew by 129 percent; Fort Lee, where they jumped 161 percent, and Teaneck, with a 111 percent hike. In all three districts, overall expenses grew by less than 40 percent.

"It's eating us alive," said Fort Lee school Business Administrator Nick Girone. "There's no question about it."

While annual percentage increases actually have eased since the early 1990s, continued hikes of 10 percent to 20 percent a year represent "big chunks of your budget. It just keeps going up. There is never a slack time," he added.

Local governments find themselves stuck amid high property taxes, rising operating costs, flat state aid and state-imposed spending limits. Officials say they can't continue to absorb the increases.

"There has to be some radical changes in how we provide benefits," said Bogota Mayor Steve Lonegan. "Otherwise it's going to drive taxes through the roof."

Codey's Benefits Review Task Force identified potential savings, but none that sits well with the public-sector unions.

State and local governments could save $350 million annually if they paid 95 percent of employee premiums, rather than the full cost for the popular NJ PLUS plan, the panel said.

"We felt quite strongly, given the looming liability of health benefits, that they be negotiated hand in hand with wage benefits and that employees begin to pay some amount of the health care premium," said Philip Murphy, chairman of the task force.

The group suggested that public employees and retirees contribute through higher co-pays, deductibles or other means. To reduce the high costs of prescription drugs, the eight-member group recommended the state give preference to generic drugs and rely on mail order for prescriptions.

The group also recommended eliminating a provision that allows couples who both are public employees to receive separate -- and sometimes overlapping -- health coverage packages.

Baker, the NJEA spokesman, said that the organization opposes significant increases in health care costs for public employees. He also said that, with co-pays and other costs, public employees do contribute to health coverage expenses.

"No one is receiving completely free health care," he said. "When you look at health benefits, you can't look at them independent of salaries. If a local doesn't make changes to its health benefits, but accepts smaller wages, can you say they didn't do anything to contain costs?"

The New Jersey State League of Municipalities says health care is the No. 1 issue confronting state government and is a major factor for local governments.

"Legislative help is needed and the proposals suggested by the Task Force are a good start," the league said in a statement. "A major task force should be established to deal with this issue inclusive of state and local governments, as well as experts."

State Treasurer Bradley Abelow confirmed that medical care is driving the growth of the state's budget.

"On a state level, on a national level, the private sector, it's hard to control. But it must be a point where we focus on a cost-containment strategy," he said.

Governor Corzine's office said steps have already been taken in the 2007 budget to keep public employee benefit costs down. The budget includes bulk purchasing of prescription drugs for the State Health Benefits Program and Medicaid for a projected savings of $75 million. The state also plans to rely more on generic and mail-order drugs in the state health plan for a savings of $20 million, said Brendan Gilfillan, Corzine's spokesman.

"The governor understands that the skyrocketing costs of public employee benefits pose a serious challenge to our state's finances and this report confirmed that," he said. "We will continue to look for efficiencies and cost-cutting measures going forward. Additionally, the governor intends to address some of the issues raised in the report in the upcoming contract negotiations."

Increasing costs

Health costs are rising fast nationwide, fueled by increased demand for medical services, new and more intensive medical treatments, an older population and unhealthy lifestyles. And insurance costs have kept pace.

A recent survey by the state's Chamber of Commerce revealed that costs for New Jersey companies ran higher than the national average -- increasing an average of 12.7 percent in 2004 and 13.3 percent in 2005. Garden State employers paid an average of $7,307 per employee for health benefits in 2004, up $735 from the previous year, according to a survey by the New Jersey Business and Industry Association.

But in the public sector, employees barely feel the pinch of those increases.

Local school districts and municipalities have several options for providing benefits. They can contract with private insurance carriers, find a self-insurance fund -- where a town pays for each claim submitted -- a joint insurance fund with other towns, or join the State Health Benefits Program, which allows participants to choose among seven medical plans. The biggest health-insurance pool in the state, it provides benefits for 366,093 working and retired public employees enrolled. Additionally, 440,647 spouses and children of employees and retirees are covered through the plan.

Some state employees kick in toward premiums for their own coverage. But employees in the 938 municipalities, school districts and county agencies enrolled with the state program pay nothing for their own coverage.

Nearly 78,000 state employees are enrolled in the NJ PLUS plan, the most popular of the seven options available through the SHBP; they receive free coverage for themselves and their families, according to Thomas Vincz, a spokesman for the Department of the Treasury. More than 125,000 local employees also get free health benefits under the program, with only a few kicking in toward family coverage, he added.

Arlene Schatz, acting president of the Hackensack Taxpayers Association, said its members often complain that rising health benefit costs are putting more pressure on residents' pockets.

"What's upsetting for us as taxpayers is that most of us don't work for a municipality or any form of government," she said. "We all are on fixed incomes. We all work in the private sector where we all contribute to our health packages."

Negotiating change

Health benefits are almost always an item of contention around the negotiating table, but rarely do public employees budge on givebacks.

"Protecting health benefits is our No. 1 priority," said George Lambert, an NJEA field representative for Region 23, which encompasses northern Bergen County. "We've been very successful. There's no district in this region where members pay for health benefits. I don't see giving that up. Ever."

Vasquez, the teacher from Teaneck, acknowledges that health benefits are a nice perk of her job, but says it balances low pay, especially early in a teaching career. She points to teachers who hold several jobs to make ends meet.

She made $43,100 last year, her fourth on the job.

"In the teaching profession you don't make good money until you are in the system for 10 years," she said. "I rely on my check to pay my mortgage."

But local officials and property-tax watchdogs maintain that the days when public employees traded low wages for premium benefits are long gone. Nowadays, they say, many government workers have both -- good pay and good benefits.

They point to police officers in some municipalities, like Hackensack, earning base pay of more than $93,000 after five years of service, and schools superintendents and administrators who rake in six-figure salaries. Besides their wages, public employees also get paid vacation, sick and personal days, longevity payments and a pension when they retire.

Some also get lifetime health benefits.

"Lots of folks in the private sector don't have it as good," said Ramsey Mayor Richard Muti. "When you figure all these benefits, plus decent pay, public-sector employees are doing well. It's time they pay a greater share in health benefits costs."

But talks of givebacks seldom go smoothly. Negotiations can last for months. And when a new pact is reached -- thanks to strong unions, arbitration rules and a rigid state health benefits plan -- taxpayers usually continue to bear the brunt of the costs.

"[Public-employee unions] have a good system of representation," said Deborah Kole, staff attorney for the League of Municipalities. "And there has not been as cohesive an effort by municipalities. Sometimes you have towns agreeing to something and it slowly becomes the norm."

Small steps

Some governments contain costs by shopping around. Earlier this year, Hackensack opted for self-insurance and expects to spend $8 million on health benefits, the same as last year.

Some have had a modicum of success at the bargaining table.

In Ridgefield Park, new hires get full coverage in the traditional plan -- where employees can see almost any doctor -- for themselves, but must pay for family coverage for three years. The district calculated the savings at $408 a month per affected employee.

And in Rutherford, new school hires can only choose the preferred provider plan, a hybrid between an HMO and a traditional plan. When they reach tenure, employees can enroll in the more expensive traditional plan.

"The hope was that once they got into [the PPO] plan they would stay in it," said Superintendent of Schools Leslie O'Keefe Conlon.

Teachers and other employees in the Ringwood schools have been contributing toward family coverage since 2000. Former Board of Education member Joseph Walker, who helped in negotiating the change, said it took months to convince the union.

"At the time the union members understood the board's dilemma," Walker said. "From management, we considered it a foot in the door, as far as breaking the ice in this. At the time, we were the fourth or third district [in the state] that ever got it."

Some new white-collar employees in Ramsey will also have to contribute to family coverage premiums, and police have agreed to a PPO. Muti, the mayor, said before the changes, health insurance premiums had risen an average of 15.8 percent; come September, they will rise 5 percent.

"That is definitely a trend that other municipalities must follow," he said. "They need to get their employees to contribute more toward their health benefits."

Staff Writers Bob Ivry and Dave Sheingold contributed to this article.

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