Joining states like Wisconsin, Michigan and Ohio that are requiring public employees to pay more for health benefits, the New Jersey Assembly on June 23 approved a bill that will require 750,000 government employees and retirees to contribute substantially more for their health insurance and pensions. The trend is designed to prevent additional lay-offs of state workers, who then confront sticker-shock in the individual market, though it may also be drying up funds those workers use to buy voluntary benefits.

The New Jersey law sought by Republican Gov. Chris Christie will also suspend cost-of-living increases to pension checks, raise retirement ages and curtail union contract bargaining rights. The state Senate is expected to send the legislation to Christie for signing today.

“We are putting the people first and daring to touch the ‘third rail’ of politics in order to bring reform to an unsustainable system,” Christie said after the bill passed.

A broker in Cherry Hill, N.J., Roger Jennings approves of the bill. “All Christie was trying to do was get them to step up and pay a little bit more toward the cost of [benefits],” he says. “The federal government and the state government and the municipalities don’t have the money. We’ve got to be able to fund these kinds of plans in the future. Whether it’s the health care plan or the retirement plan, the money’s not there to fund these benefits when they come due.”

Jennings reports receiving numerous phone calls from laid off state employees who are looking for individual major medical insurance after realizing they couldn’t afford the true cost of insurance under COBRA. “So instead of paying 10% or 15% of $2,000 for a family, now they have to pay the whole thing because they’re not working because they got laid off because they wouldn’t give,” says Jennings. “This is what it’s all about. They’re trying to stop this and trying to renegotiate going forward so they don’t have this continuing on into the future because there’s not enough money.”

It reflects the trend Jennings sees with his private market clients at Roger Jennings Insurance, mostly small groups of 2-50 lives. He never thought he’d be in the position of promoting high-deductible plans and HSAs, “but that’s what the employers I work with are forced to do.”

In Florida, David Moore of Capital Insurance Agency is not surprised to hear of the events in New Jersey. Legislation that would have seriously affected state employee health insurance and core benefits failed to pass this spring, but he believes “that’s coming in another year.”

Although health benefits are not affected directly yet, Capital Insurance Agency sells voluntary benefits in the government marketplace and business has slowed now that those on the government retirement plan will be required to contribute 3% to their retirement funds starting July 1. Coupled with massive layoffs and the fact that state employees have not received a raise in the last several years, “it’s really hard on us right now because employees are in a state of unrest and certainly unpleased and it’s kind of hard to sell voluntary benefits when your clients don’t know, one, if they’re going to have a job, and secondly, they’re taking a pay cut,” says Moore. “It’s been really rough. Our sales have hurt.”

As more states look for ways to increase deficit reduction, brokers across the country working in the government market could face similar hardships.

 

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