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Cities Shunning N.J. Health Plan Could Save $100 Million

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Feb. 28 (Bloomberg) -- New Jersey cities and towns are missing out on more than $100 million in annual health-care savings by not joining the state’s insurance plan, according to an audit released today.

Four municipalities passed up almost $12.6 million in savings by forgoing the State Health Benefits Plan in favor of other options, the audit from Comptroller Matthew Boxer shows. The report focused on the townships of Brick, East Brunswick and Haddon, as well as Essex County, home to Newark, New Jersey’s largest city.

The four local governments would have avoided a combined $1.1 million in insurance-broker fees by joining the state plan in 2009 and 2010, the years studied by the audit. On average, the total savings would have been $1,007 for each enrollee in 2009 and $979 in 2010, according to the report.

“Health coverage for public employees is an area in which substantial savings can be realized for taxpayers,” Boxer said in a statement accompanying the report. He estimated that if all New Jersey’s local governments participated in the state plan, the amount would exceed $100 million a year.

Hard to Do

Local governments outside of New Jersey have joined state health plans to cut costs, Boxer said. His report cited findings from the Boston Foundation, a nonprofit organization that funds research, which said that 15 Massachusetts municipalities saved $35 million during the first year of joining their state plan.

The New Jersey communities examined by Boxer’s office have a combined population of more than 921,200, and the number covered by municipal health insurance was more than 6,300. Essex County would have saved $9.6 million over the two years, while Brick, located in Ocean County, would have saved $2.1 million, according to the report.

In a written response to the audit, Essex County Administrator Ralph J. Ciallella said it’s impossible for the county to move toward a complete change-over to the state plan, citing union contracts and rulings from the courts and arbitrators over benefits.

7 of 21

The state plan was set up in 1961 to provide health insurance to qualified state workers. In 1964, it was expanded to all public employees in New Jersey.

As of April 2011, 7 of the 21 New Jersey counties and 349 of 566 municipalities were participating in the state plan, according to Boxer’s report.

Under a pension and benefits overhaul signed into law last year by Governor Chris Christie, a Republican, all public employees are required to contribute more of their salaries for medical coverage based on the cost of the plans.

The new requirement is being phased in over several years and contributions are based upon salary.

To contact the reporter on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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