Health insurance crisis: N.J. needs a short-term fix and a long-term solution

OPINION

New Jersey needs a long-term solution to spiraling health insurance costs for public education employees. Right now, the immediate funding crisis is prompting legislative leaders and the Sherrill administration to consider short-term fixes that threaten to make the problem worse. That’s not to say that we don’t need immediate intervention to protect school districts and school employees alike. We are already seeing districts cutting staff and programs that are essential to student success, and that will get worse the longer this problem is allowed to linger.

But those temporary patches must be carefully constructed and coupled with work on real reforms that will bend the cost curve down in the coming years. Otherwise, the crisis now will be even worse in six months and long-term solutions will be even harder to achieve.

Today, the School Employees Health Benefits Plan (SEHBP) faces a severe deficit, with reserves not adequate to cover expected claims over the next six months. One solution that was recently floated was a midyear rate increase on SEHBP districts that would have devastating budgetary implications.

To avoid the need for such an abrupt and unbudgeted midyear increase, the state is considering a plan, introduced in the Senate as S4507, to borrow from the reserves of the retirees’ health benefits fund, which is in better fiscal shape. While that would briefly “fix” the immediate problem, we don’t need to look very far down the road to see the next crisis it would create.

That loan would have to be repaid beginning in January. Coupled with the large rate hike already expected to hit SEHBP districts then, the increased costs of loan repayment would almost certainly prompt more districts to leave the SEHBP, accelerating the plan’s death spiral.

The immediate threat to the better-funded retiree plan is minimal because the state is liable for maintaining the reserves of that plan at an actuarially appropriate level, so any shortfall there would be the state’s responsibility to cover. But that does not mean borrowing from it is a good idea.

We are ready to work with the administration, the Legislature and our school board and school business administrator partners on the best way to plug the immediate hole in the SEHBP reserves. Action is needed and if S4507 is the only immediate viable option, there are some commonsense amendments we have shared with legislators that would protect the retiree plan and mitigate the near-term financial hit to SEHBP districts. As currently written, that plan fails to offer a realistic repayment plan, which will result in premiums continuing to rise, driving more districts out of the plan and worsening the underlying financial problems.

A cleaner solution to the immediate funding deficit in the SEHBP would be a direct loan from the state. In addition to protecting the reserves of the retiree plan, such a loan could have a more flexible and manageable repayment schedule, meaning districts could have a less immediate and drastic hit to their already-stretched health insurance budgets.

But this crisis also shines a spotlight on the need to start working right now on long-term structural solutions, however we address the immediate issue. Legislation recently introduced in both houses, S4438/A5285, does exactly that by creating a system where districts can come together and use their combined scale to negotiate better rates and finally start addressing the underlying cost drivers that created this crisis. We’ve worked together on effective reforms in the past. We have the expertise if we can just muster the will to work together until we succeed.

With a state budget deal about to be finalized, we call on legislators to turn their attention immediately to those bills so New Jersey school districts can get the long-term help they need and so that the school employees who devote their careers to educating, supporting and protecting New Jersey’s children can have access to the affordable, high-quality health insurance that their own families depend on. We can’t wait any longer while the current crisis compounds. We certainly cannot wait until the whole system collapses. The time is now. Let’s solve this problem together.

Steve Beatty is the president of the New Jersey Education Association.