Gov. Sherrill Has Other Plans, But Proposed Make-over of State Health Plan (A5285/S4438) Must Be Seen for What It Is: a Terrible Bill.

With all the turmoil surrounding the state’s School Employee Heath Benefit Plan (SEHBP) and its 34% hike in premiums, one of Sunlight’s readers directed our attention to a bill currently before the legislature, the Public School Employees’ Health Benefits Trust Act (A5285/S4438), that proposes a new structure for the state’s health plan for government employees. So we took a look at it and can confirm that it is a terrible bill that would likely re-create the same problems that SEHBP had with a worse governance structure. Tellingly, the NJEA’s fingerprints are all over the bill and we wonder what that says about the various sponsors (such as Senate Education Committee chair, Sen. Vin Gopal). We do not think Gov. Sherrill would ever sign such a bill, which strips her of much of the power she has over appointments to the SEHBP board. Perhaps recognizing this, Sherrill has convened a broad-based working group to devise a new state health plan. We would wager that she will wait for the working group’s recommendations (due in 2027) before she agrees to any new policy. Even though we think that A5285/S4438 is now dead in the water, we think it’s worth explaining why it is such a lousy piece of legislation.

1. All schools districts would be forced to join the state plan. The bill would force all school districts into the new state plan (a trust within but not part of the state’s Department of Treasury). School districts would no longer be able to self-insure via private insurance providers, as two-thirds of districts currently do. This would disempower school boards, leaving them unable to control their own health benefit costs and subject to the decisions of a state-level board. We imagine this would be hugely unpopular with the 400 self-insuring school districts from across the state. (As an example, see the concerns expressed by the East Brunswick school board).
2. Higher healthcare costs would result in tight school budgets and higher property taxes. Until January 1, 2028, the employee contribution rates would be those established by the Chapter 44 law passed in 2020, which are set as a percentage of salaries (rather than premiums), and after that would be set by the trust’s board with the requirement that the contribution rates continue to be tied to salaries. This would keep in place the dynamic that caused the current problem with SEHBP: When heath care costs rise and necessitate premium increases, those increases will be borne entirely by school boards and therefore property taxpayers. And yet they would have no say in the matter (see #1 above). This is a recipe for tight school budgets — including teacher layoffs and school program cuts — and higher property taxes.
3. The new board is union-dominated and strips the governor of the power over appointments to the SEHBP board. We would not argue that the current nine-person SEHBP board has worked well. Because of an unfilled seat (dating to Gov. Murphy), the board repeatedly deadlocked 4-4, with the teachers’ unions voting as a four-vote bloc. The new board would have 10 members, but five of those would be appointed directly by the employee unions, one would be appointed by each of the three associations for school administrators, one by the school boards association, and one by the governor. This strips the governor of the significant powers of appointment she has over the SEHBP board. As the state’s top elected official, the governor will be held accountable by voters for the results, so the governor should have control of the board, which controls the plan. Moreover, the school administrators would be covered by the new health plan, and as beneficiaries would have conflicts of interest when setting policies and contribution rates for the new plan. This would also align them with the employee unions and could result in a union-dominated board. The school boards and taxpayers would have little say and yet bear most of the costs. Sure seems like the unions (that is, the NJEA) had a big say in this new configuration.
4. No tie-breaking mechanism. Incredibly, given all the problems the recent dead-locked SEHBP board caused, the new plan’s even-numbered board has no tie-breaking mechanism. It’s as if they didn’t think it through or, even worse, deliberately wanted the ability to dead-lock the board. Qui bono?

The new bill would extend a failed system. Chapter 44 was a gift from Gov. Murphy to his biggest political supporter, the NJEA. It created the current, broken system, whereby soaring healthcare costs — which are a nationwide problem — are borne entirely by school boards and property taxpayers. It was a short-sighted bill that, while protecting teachers from premium increases, did nothing to control health benefit costs and left teachers exposed to tighter budgets, layoffs, program cuts as well as higher property taxes. And it blew up SEHBP. A5285/S4438 would simply extend this failed paradigm. Tellingly, the NJEA’s fingerprints are all over the new bill. What does that say about the many sponsors of the bill, particularly Senate Education Committee chair, Sen. Vin Gopal?

We believe Gov. Sherrill recognizes this. We believe she knows how SEHBP and A5285/S4438 imperil her affordability agenda and undercut the quality of public education in New Jersey. And we believe she is not in the pocket of the NJEA the way Gov. Murphy was. Her new working group appears to be a strong step in the right direction. We will see.