NJASA

What is Known About Chapter 44, P.L. 2020

the Health Plan for Active and Under 65 Retirees 

Chapter 44, P.L. 2020, signed into law by Governor Phil Murphy on July 1, 2020, is designed to reduce the health care contribution for school employees and non-Medicare retirees beginning on January 1, 2021. The new law makes two significant changes: (1) It changes the basis for the contributions made by employees from the premium cost of the coverage to the BASE SALARY being earned by the employee; (2) It REDUCES THE PERCENTAGE OF THE CONTRIBUTION from a range of 3% to 35% to a range of 1.7% to 7.2%. (See the examples below).

Although it will not become operative until January 1, 2021, the new law states that all school employees newly hired since July 1^st will be enrolled in the new plan, the New Jersey Educators Benefit Plan (NJEHBP) on January 1, 2021 or they may waive coverage. In the meantime, these employees will be enrolled in the plan currently in effect in the school district. 

All employees hired prior to July 1, 2020 who were covered by the former School Employees Health Benefit (SEHBP) will automatically be enrolled in the new plan, the New Jersey Educators Health Plan (NJEHP), on January 1, 2021 or they can waive health benefit coverage during the current open enrollment period. 

Employees whose districts were not in the former School Employees Health Benefit Plan (SEHBP) are deciding during an October open enrollment period between 3 choices: the new plan, the New Jersey Educators Health Plan (NJEHP), a NJ Direct 10 or a NJ Direct 15 plan or waiving coverage. Whatever they decide will become effective on January 1, 2021. All other plans currently offered by the SEHBP will not be offered after January 1, 2021.

As stated above, the health benefit contribution paid by all employees who are enrolled in the new plan will range from 1.7% of salary for those who have single coverage and are earning less than $40,000 per year to 7.2% of those with family plans whose salaries are greater than $100,000 per year.  

Those employees who do not choose to join the new NJEHBP and instead choose coverage under NJ Direct 10 or NJ Direct 15 or another plan under the collective bargaining agreement in the district, will continue to pay a percentage of the premium cost (as is now done) under Chapter 78, P.L. 2011. The health benefit contribution in these cases range from 4.5% of the premium cost for those with Single coverage and are earning less than $20,000 per year to 35% of the premium cost for those with Family plans whose income is greater than $95,000 per year. 

Employees who are retired but not yet eligible for Medicare (usually age 65) will be enrolled in the new plan upon retiring. Current retirees not yet eligible for Medicare will be enrolled in the new plan effective January 1, 2021. Retirees eligible for Medicare (65 and over) are not affected by the new law.  

These changes are expected to bring lower contributions for most school employees and result in increased take home pay. As an example, an employee currently covered by the School Employees Health Benefit Plan who has family coverage and is making $75,000 per year under the Chapter 78 law pays 23% of the premium cost, resulting in a health insurance contribution of more than $8,300 per year. That same employee’s health insurance contribution under the new health plan, the New Jersey Educators Health Plan, would be $4,125, which is 5.5% of the $75,000 salary, resulting in over $4,000 more take home pay. (It should be noted that not everyone will have such significant differences. Some highly paid employees may find that the savings are much smaller and might even find that there is little savings. Most employees, however, will see more money in their paychecks because of the law changes.)

According to information disseminated by the Division of Pensions and Benefits, the new plan benefit design will closely follow the current SEHBP and the current NJ Direct 10 plan. There will be some differences, however, particularly in out-of-network deductibles, emergency room copayment when not followed by a hospital admission, specialist care copayments and increases in generic and branded drug copayments.

More detailed information regarding the NJEHBP can be found on the New Jersey Division of Pensions and Benefits website at www.nj.gov/treasury/pensions/hb-active-sehbp.shtml. According to information released by the division, the website offers summaries of the benefits and coverages, a side-by-side comparison of the basic benefits copayments and out-of-pocket costs of the new plan and a chart showing the percentages of contributions of salary rates of Chapter 44 and the percentages of premium rates of Chapter 78 allowing an employee to calculate the difference in savings.

Beginning July 1, 2021, the State will offer an additional program for school employees called the Garden State Health Plan. This program shall provide medical and prescription drug benefits that are the equivalent to the level of benefits provided by the New Jersey Educators Health Benefit Plan, except that the benefits under the Garden State Health Plan shall be available only by providers located in New Jersey. This program will require employee contributions that are 50% of the rates of the Educators Health Benefit Plan. Information about the Garden State Health Plan will be explained in a future column after all the details are provided by the Division of Pensions and Benefits.