ASSEMBLY APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

ASSEMBLY, No. 1457

 

with Assembly committee amendments

 

STATE OF NEW JERSEY

 

DATED: FEBRUARY 22, 1996

 

      The Assembly Appropriations Committee reports favorably with committee amendments Assembly No. 1457.

      Assembly Bill No. 1457, as amended, makes various changes regarding the payment of the premium or periodic charges for State Health Benefits Program (SHBP) coverage.

      The State as an employer currently pays the full cost of SHBP premiums for coverage of active State employees and their dependents. This bill provides that the obligations of the State to pay the premium or periodic charges for SHBP coverage with respect to active employees and retirees may be determined by means of a binding collective negotiations agreement, including any agreements in force at the time of the adoption of this bill. With respect to State employees for whom there is no majority representative for collective negotiations purposes, the State Health Benefits Commission may, in its sole discretion, modify the respective statutory payment obligations of the State and such employees in a manner consistent with the terms of any collective negotiations agreement binding on the State.

      The bill provides that if a husband and wife are both eligible for SHBP coverage under the program as employees:

      (1) each may elect coverage for himself or herself as an employee and for their qualified dependents, including the spouse, under the traditional plan or NJ Plus, but only one may elect coverage for himself or herself and for their qualified dependents, including the spouse, in a participating HMO; and

      (2) each may elect single coverage in any participating HMO, provided that he or she is not covered under that HMO as a dependent of his or her spouse.

      The bill allows the State and independent State authorities to establish a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code to provide for a reduction in an employee's salary in exchange for payment by the employer of any required employee contribution for SHBP coverage, medical or dental expenses not covered by SHBP, or dependent care expenses. The amount of any salary reduction under the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.

      An active employee over age 65 currently must enroll in Medicare Part B; the State or local employer reimburses the employee for the Medicare Part B premium payments. The bill eliminates the enrollment requirement and terminates the requirement that the State or local employer reimburse active employees for Medicare Part B premium payments.

      The bill clarifies the premiums to be paid by the State and employees for health benefits in retirement for State employees with 25 or more years of service credit in a State-administered retirement system. The bill provides that:

      (1) for each State employee who accrues 25 years of service credit in a State-administered retirement system or retires on disability before July 1, 1997, the State shall pay the full cost of the premium or periodic charges for the health benefits provided to a retired State employee and dependents covered under the State Health Benefits Program, but not including survivors, and shall also reimburse the retired employee for premium charges under Part B of Medicare covering the retired employee and the employee's spouse; and

      (2) for each State employee who accrues 25 years of service credit in a State-administered retirement system or retires on disability on or after July 1, 1997, the State shall pay the premium or periodic charges for the health benefits provided to a retired State employee and dependents covered under the State Health Benefits Program, but not including survivors, and shall reimburse the retired employee for premium charges under Part B of Medicare covering the retired employee and the employee's spouse: (a) in accordance with the provisions, if any, concerning health benefits coverage in retirement which are in the collective negotiations agreement applicable to the employee at the time of the employee's accrual of 25 years of service credit in the retirement system, or (b) if the employee has no majority representative for collective negotiations purposes, in a manner consistent with the terms, if any, concerning health benefits coverage in retirement which are in any collective negotiations agreement deemed applicable by the State Health Benefits Commission to that employee at the time of the employee's accrual of 25 years of service credit in the retirement system.

 

FISCAL IMPACT:

      The Governor’s FY 1997 Budget in Brief estimates that premium sharing for traditional coverage and the elimination of dual coverage will save an estimated $15.8 in State-employer contributions to the SHBP; the savings depend in part on the specifics of contracts still under negotiation. The Governor’s proposed FY 1997 budget assumes savings of $1 million in State payments of federal employment taxes on amounts deferred under cafeteria plans. Removing the requirement that employees over age 65 be enrolled in Medicare Part B is estimated to reduce State reimbursements for such coverage by $1.9 million in FY 1997.

 

 COMMITTEE AMENDMENTS:

      The committee amendments:

      (1) remove local employers from the provision that the premium or periodic charges for health benefits coverage may be determined by means of a binding collective negotiations agreement, and clarify that the employees of Rutgers and the New Jersey Institute of Technology are deemed State employees;

      (2) add a provision that removes the requirement that State and local employees over age 65 be enrolled in Medicare Part B and be reimbursed for such coverage;

      (3) clarify the premiums to be paid by the State and employees for health benefits in retirement for State employees accruing 25 or more years of service credit in, or retiring on disability from, a State-administered retirement system before and after July 1, 1997;

      (4) supply definitions for some frequently used terms;

       (5) remove local employers from the provisions that obligation to pay the premium or periodic charges for SHBP coverage with respect to active employees and retirees may be determined by means of a binding collective negotiations agreement and that allows employers to establish cafeteria plans for their employees; and

      (6) allow reimbursement of eligible employees and retirees resident in low population density counties, enrolled in the managed care plan and with fewer than two participating physicians in 20 miles of their residence for the services of a nonparticipant physician.