New Jersey Gov. Phil Murphy’s administration wants to save more than $100 million annually on public employee benefits.
State Treasurer Elizabeth Maher Muoio unveiled a cost-savings initiative Thursday centered on auditing Medicare eligibility and more closely examining fees paid out to third-party vendors. Muoio said new measures are needed after the state’s health consulting service, AON, indicated in a presentation last week that most public benefit plans for active members could see a 6% rise in premiums for 2019.
“As part of the Governor’s goal to change the way we do business, we put together an internal working group at the start of this administration that was tasked with finding more immediate health benefit cost savings,” said Muoio in a statement. “These initial measures are designed to exact savings through efficiencies in order to keep premiums in check while maintaining the same quality level of service for members. “
Muoio said it has been more than a decade since the state Division of Pension and Benefits audited its enrollment for accuracy to determine Medicare-eligible enrollees and staff at government entities such as higher education institutions to determine who can be removed from state-administered plans. She said audits have already begun and upon completion by the end of next year are expected to result in yearly savings of roughly $77 million.
The benefit-saving framework outlined by Muoio also involves evaluating the state’s agreements with third-party administrators such as Horizon, Aetna and Optum, which receive added fees for other services provided to members. Her proposal involves closer scrutiny of invoices to verify they reflect services provided, which could yield up to $25 million of savings.
The treasurer is also encouraging, following a long hiatus, the resurrection of plan-design committees that can formulate modifications to cut premiums and improve how out-of-network claims are administered. Muoio said exact savings will be dependent on the extent of the reforms that are ultimately adopted.
“We anticipate that these proposals can be enacted relatively quickly while the Governor’s Special Task Force pursues longer term savings, enhanced value within the plans, and efficiencies,” said Muoio. “Ultimately, our goal is to find the most cost-effective means to deliver quality health benefits to our nearly one million state and local government and school employees.”
The Murphy administration is grappling with a severely underfunded pension system despite a record $3.2 billion payment in the latest budget only met 60% of the actuarially determined contribution. The pension burden triggered 11 bond rating downgrades under former Gov. Chris Christie to the lowest of U.S. states with outside Illinois. The state now has general obligation bond ratings of A-minus from S&P Global Ratings, A3 from Moody’s Investors Service and A from Fitch Ratings and Kroll Bond Rating Agency.
“While I’m happy to see some action, these reforms are not nearly enough,” Senate Minority Leader Tom Kean Jr., R-Westfield, said in a statement. “We need comprehensive public-employee benefit reform in order to deliver real relief to property taxpayers across New Jersey.”