State’s CWA Deal: Savings from New Health Plan, 2% Yearly Raises
The state’s tentative contract agreement with its largest public-workers union includes $70 million a year in savings on health-care spending, primarily through an additional health plan that includes less generous out-of-network benefits.
The changes in the Communications Workers of America four-year contract, which if ratified would extend through mid-2023, also include a new formula based on workers’ salaries for their contributions to health benefits, for those who choose the new PPO plan – moving away from the formula in the 2011 law known as Chapter 78 that set contributions as a portion of health insurance premiums.
The changes are expected to save the state $70 million a year, part of the $800 million in health-care savings Treasurer Elizabeth Muoio anticipates for the 2020 budget. More than $140 million of those savings are still to be finalized, most likely through audits and contracting reforms.
“We’re all in this together, and I think labor realizes that, and this administration I think has been able to have some productive and positive conversations in that regard,” Muoio said Monday.
The contract also includes four 2 percent raises over four years – in October this year, July 2020, July 2021 and April 2022 – bonuses of $750 to $1,000 for workers at the top of the salary pay scale in October 2021 and 2022. The bonuses won’t count toward workers’ pensions.
The raises come with incremental costs of nearly $120 million over four years, including $20 million in fiscal 2020. Compounded over the four years, the $280 million in accumulated health savings are offset by $281 million in accumulated raises.
The health-care savings are broader than what it in the contract and include, most notably, the impacts of the Medicare Advantage plan agreed to by the teachers’ health plan design committee last year.
Gov. Phil Murphy said the cumulative changes to health benefits will also save taxpayers hundreds of millions of dollars.
“Their impact on local and school budgets is also expected to deliver more than $400 million in property tax relief,” Murphy said in his budget speech.
Senate President Steve Sweeney, D-Gloucester, and other lawmakers said such money shouldn’t be retained by counties, towns or school districts for their budgets.
“If there are savings derived from this, then we should do legislation to force local governments, in my opinion, to reduce the property taxes by the savings. They shouldn’t be allowed to spend money. If it falls in their lap, they should have to give it back to the taxpayers,” Sweeney said.
Senate Minority Leader Tom Kean Jr., R-Union, said savings like those in the CWA contract are good but insufficient, given the scope of New Jersey’s financial problems and unmet needs.
“Something like platinum to gold on the health benefits would save a billion dollars,” Kean said, referencing a change recommended in the bipartisan "Path to Progress" report. “So if you’re looking at a savings like that, that again is repeatable over time, you would have a predictable spend. You could also make some of the other things we need to focus on.”