Up and Up: Towns and Schools Face Double Digit Health Insurance Increases in New Jersey

HAZLET, NJ - Taxpayers will be asked to buckle up yet again as health insurance costs continue to rise in New Jersey towns and schools. Area towns, such as Hazlet, use SHBP for their employee medical coverage. Its set to go up over 17%.

The plans, not well known to the public, are comprehensive medical plans including prescription coverage that are run by the state and managed by Horizon Blue Cross Blue Shield of New Jersey and also Aetna.

The reason for the latest increase comes from an analysis by the state consultant AON. They illustrate a presentation for towns and a second presentation for schools. The presentations are a must read for local officials and administrators. The results are not attractive.

Specifically, the plans are facing enormous claims pressure and the better risks, meaning the towns and schools with low claims, are looking elsewhere. This can create a downward spiral where high risk entities stay in the plan and the healthier - and more profitable - groups leave.

Derek Dailey, Executive Vice-President, Public Sector Practice Leader at MarshMcLennan Agency stated that many school districts and municipalities are evaluating options with their benefit professionals. "Elected officials, Administrators and CFO's are tired of double-digit rate increases and are actively evaluating their options outside the SHBP. Many leaders are in a due diligence mode for their taxpayers in advance of January 1, 2025. Time is running out, however, as the new year approaches. Public entities need to order their claim data now - which may be free - to shop around."

SHBP Plan Design Committee Adopts Resolutions at July Meeting**BULLSEYE

According to news releases from the SHBP and in a move to address rising healthcare costs, the State Health Benefits Program (SHBP) Plan Design Committee convened for its regularly scheduled July meeting on Wednesday and approved seven resolutions for Plan Year 2025. Various plan changes are actively under consideration.

Among the adopted resolutions, the first six align with previous years' provisions. However, a notable change was introduced in Resolution 2024-2, concerning Formulary Management and Out-of-Network Physical Therapy. This resolution now includes a provision allowing for the reexamination and modification of the formulary at any time to create a new one aimed at cost savings for the plan, local government employers, and employees.

The resolutions adopted include:**STANDARD

- **Resolution 2024-1**: Reduced Specialty Copay

- **Resolution 2024-2**: Formulary Management and Out-of-Network Physical Therapy

- **Resolution 2024-3**: Mail Order Incentive and $0 Copay for Generic Mail Order Prescription Drugs

- **Resolution 2024-4**: Generic Substitution Preference

- **Resolution 2024-5**: Copay Reduction for Retiree Mail Order Preferred Brand Prescription Drugs

- **Resolution 2024-6**: Tiered Network Plan Financial Incentive Pilot Program

A significant addition this year is **Resolution 2024-07**, which introduces a Centers of Excellence (COE) Pilot Program. This initiative aims to curb the escalating costs of health and prescription drug benefits by implementing bundled pricing and ensuring transparent and predictable costs while demonstrating superior clinical outcomes compared to national averages and the Third-Party Administrator (TPA)'s in-network providers. The pilot, applicable to PPO plans, will run for five years and covers non-emergent procedures such as:

- Bariatric surgery (e.g., gastric bypass, gastric banding)

- Knee replacement surgery (e.g., total knee arthroplasty)

- Hip replacement surgery (e.g., total hip arthroplasty)

- Spine surgery (e.g., discectomy, laminectomy)

- Heart surgery (e.g., coronary artery bypass, heart valve surgery)**BULLSEYE

Members are incentivized to use COE facilities by being exempt from copayments and receiving a $150 gift card during the first two years of the program. Those opting for procedures with a TPA network provider instead of the COE will face escalating cost-sharing, starting with a copayment equal to the plan's emergency room copayment in Year 1, and increasing annually to $1,000 by Year 5.

Why Health Insurance Costs Continue to Rise

The rising costs of healthcare insurance have become a significant concern for both municipalities and schools. Several factors contribute to these increases:

1. **Advances in Medical Technology and Treatments**: While these advancements improve health outcomes, they often come with high costs. New medical technologies, specialty drugs, and advanced surgical procedures significantly drive up expenses.

2. **Chronic Disease Prevalence**: The growing prevalence of chronic diseases such as diabetes, heart disease, and obesity increases the demand for ongoing medical care and prescription drugs. According to the CDC, about 60% of Americans have at least one chronic condition, and 40% have two or more.

3. **Prescription Drug Prices**: The cost of prescription drugs has soared in recent years. Data from the Kaiser Family Foundation indicates that drug prices increased by 2.5% in 2022, outpacing inflation.

4. **Administrative Costs**: The complex nature of the U.S. healthcare system leads to high administrative costs. A report by the Center for American Progress found that administrative costs account for about 25% of total hospital spending.

5. **Aging Population**: As the population ages, the demand for healthcare services increases. The U.S. Census Bureau projects that by 2034, older adults will outnumber children, leading to higher healthcare utilization and costs.

Impact on Municipalities and Schools

The committee's decisions highlight the distinct impacts on healthcare cost increases among municipalities and schools.

- **Municipalities**: Face direct budgetary pressures from these rising costs, which can affect their overall fiscal health and potentially lead to higher taxes or reduced services. Municipalities often have to balance these costs with the need to provide essential services to residents.

- **Schools**: May experience constrained budgets, affecting their ability to allocate funds toward educational programs and resources, ultimately impacting student services and outcomes. Higher healthcare costs can lead to reduced funding for classroom resources, extracurricular activities, and support services for students.