TRENTON — Some good news for public workers, retirees and the taxpayers who help cover their health-care costs: Rates for active state and local government workers and retirees will be going down in 2018.

The State Health Benefits Commission voted Thursday to set rates for next year, following the recommendations of Aon Consulting, the state’s health benefits consultant. In the aggregate, rates decline 1.5 percent for state workers and retirees and 1.3 percent for those in local government.

“We’ve got a decrease. I mean, who’s seen a decrease for decades?” said Dudley Burdge, a member of the panel and senior staff representative for the Communications Workers of America union.

“I don’t think so,” said James Christ, a vice president at Aon Consulting. “A positive experience. On the local government side, some of it’s driven by use of special reserve offsets. The Optum change helped substantially. The (plan design committee) changes helped substantially.”

“It’s positive. Positive messages,” Christ said.

Optum becomes the state’s pharmacy benefits manager in January, replacing Express Scripts after the state enacted a law requiring a reverse auction to be used for buying prescription drugs.

Aon estimates the change will reduce prescription drug costs by around $81 million for state workers and retirees and $43 million for those in local government.

That’s a union initiative that has proven beneficial, Burdge said.

“We were hopeful we might get 8 to 10 percent savings, and it looks like it’s more up around 12 percent. So it’s something that should have been done many years before, but we finally got it done,” he said.

The details of the rate hikes are a little more complex, as there are different impacts for different groups.

There are no rate changes for active workers in state or local government, for health insurance or for prescription coverage. Dental coverage will go up by around 3 percent.

There are no health-care premium changes for early retirees, while their premiums for prescription coverage will drop 18 percent for the state group and 10 percent for the local group.

It’s a more complex picture for Medicare retirees. Prescription premiums will be down 8 percent to 9 percent. Premiums for state retirees in a preferred provider organization, PPO, will go up 1.6 percent, while they’ll go down 20 percent for those in a health maintenance organization, HMO.

The numbers are different but the pattern the same for local Medicare retirees. Premiums for those in PPO plans will drop 1.6 percent, while it will be down 13 percent for those in an HMO.

About 84 percent of state and local government retirees are in a PPO plan.

Premiums are due to jump significantly for retirees in Medicare Advantage plans – around 20 percent for an Aetna PPO and 17 percent to 19 percent for those in a Horizon PPO. The Aetna Legacy HMO rate will drop 6.5 percent.

The increase is affected in part by the expected reintroduction of the health insurer fee, or HIF, a tax on health insurers levied through the Affordable Care Act. Congress suspended the tax for 2017, forgoing $13.9 billion in taxes, but Aon expects it will not be repealed for 2018.

“Repeal and replace, repeal, whatever, would take it out. But they haven’t gotten any traction,” Christ said. “So if nothing changes or nothing is done, it will be in place.”

The HIF is projected by Aon to increase Medicare medical costs by 14.8 percent next year.

Dental costs for retirees will go up by more than 3 percent.

Rates for current and retired teachers will be set next week when a separate panel meets.


New Jersey: Decoded cuts through the cruft and gets to what matters in New Jersey news and politics. Follow on Facebook and Twitter.


Michael Symons is State House bureau chief for New Jersey 101.5 and the editor of New Jersey: Decoded. Follow @NJDecoded on Twitter and Facebook. Contact him at michael.symons@townsquaremedia.com.

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