In July 2021, the New Jersey Legislature quietly amended P.L. 2020, c. 44 (Chapter 44), to the primary benefit of school districts which do not participate in the School Employees’ Health Benefits Program, by requiring that unions and school districts must negotiate to “substantially mitigate” the excessive net health insurance cost increases to those districts due to the cost of implementing Chapter 44.
Chapter 44’s Unintended Consequence
By way of background, in July of 2020, Governor Phil Murphy signed Chapter 44 into law. Chapter 44 overhauled the health benefit plans offered to school employees and augmented the cost-sharing structure between school districts and employees to be significantly less expensive for employees than contributions under Chapter 78. Although the State has touted the success of Chapter 44 and the cost-savings to be derived therefrom, a recent survey from the New Jersey Association of School Business Officials found that 130 school districts which do not participate in the School Employees’ Health Benefits Program, saw their health insurance costs increase significantly as a result of implementing Chapter 44. Those districts found that changing the contribution rates from a percentage of the premium under Chapter 78 to a percentage of salary under Chapter 44, leading to a reduction in employee health insurance contributions which is greater than the health insurance cost decrease to the districts, resulted in a net cost increase to those school districts. Some districts had to “replicate” the New Jersey Educators Plan (as their existing coverage did not have a similar plan) which caused premiums to far outpace the existing cost of health coverage.
Earlier this year, one of those 130 school districts, the Franklin Township Public School District, filed a Complaint with the Council on Local Mandates, arguing that Chapter 44’s mandate is unfunded. They argue that the law mandates employee contribution percentages, contribution caps, plan terms and the coverage or co-pay amounts. Thus, the original law directed school districts and unions to negotiate over the impact of the cost difference, when the cost to the employer under Chapter 44 is of greater cost than other negotiated health insurance plans. A hearing on Franklin Township’s Complaint was held on May 21st. Although no decision has been rendered in that matter, only twelve (12) days after the hearing, State Senators Sweeney and Coughlin co-sponsored bill A-5825/S-3487 (P.L. 2021, c. 163), proposing amendments to Chapter 44. The bill was signed into law by Governor Murphy in July 2021.
The Legislature Amends Chapter 44
The simplest change under the amendments was to delay the implementation date for the Garden State Plan to January 1, 2022. More important, A-5285/S-3487 rewrites Chapter 44’s entire section (Section 8), which concerns the obligation of school districts and unions to negotiate over the net health insurance cost increase to those districts resulting from the implementation of Chapter 44. Section 8 of Chapter 44 was amended to provide as follows (additions are underlined, with deletions bracketed):
With regard to employers that have collective negotiation agreements in effect on the effective date of this act, P.L.2020, c.44, that include health care benefits coverage available to employees when the net cost, which is the cost after deducting employee contributions, to the employer is lower than the cost to the employer would be compared to the New Jersey Educators Health Plan, the employer and the majority representative shall engage in collective negotiations [over], that include all terms and conditions of employment, to substantially mitigate the financial impact of the difference as agreed to by the parties, which may include modifications to plan level offerings or contributions for the New Jersey Educators Health Plan or the equivalent plan, or to both plan level offerings and contributions. Notwithstanding any provision of law or regulation to the contrary, plan level offerings or contributions for the New Jersey Educators Health Plan or the equivalent plan, or both plan level offerings and contributions, may be modified pursuant to collective negotiations required by this section.
Any school district with an increase in net cost as defined above as a result of changes by P.L.2020, c.44 (C.52:14-17.46.13 et al) shall commence negotiations immediately, unless mutually agreed upon by the employer and the majority representative to opt to substantially mitigate the financial impact to the employer as part of the next collective negotiations agreement which may include, but not be limited to, salary increases, step guides, or other terms and conditions of employment.
Prior to this amendment, the plain language of Chapter 44 did not permit school districts and unions to negotiate changes to plan offerings and/or employee contribution levels, even if the net health insurance costs to the district had increased. Previously, Chapter 44 merely directed districts and unions to negotiate over the financial impact of implementing the law, without providing them with any tools to do so.
What the Law Change Means for Your School District
A-5825/S-3487 mandates that school districts and unions negotiate to substantially mitigate the net health insurance cost increases to districts resulting from the implementation of Chapter 44. The amendments explicitly authorize changes to plan level offerings and/or employee contribution levels to allow the parties to substantially mitigate health insurance cost increases to those districts. The amendment further permits school districts and unions to agree to substantially mitigate the impact of Chapter 44 in the next round of negotiations through salary increases, step guides, and other terms and conditions of employment.
School districts and unions must negotiate to substantially mitigate health insurance cost increases to the districts by considering all terms and conditions. Accordingly, the recent amendments to Chapter 44 now provide affected school districts with some tools to help offset health insurance cost increases brought on by the implementation of Chapter 44.
The Weiner Law Group provides legal services to boards of education across New Jersey and is well-equipped to help your school district navigate changes in the law brought on by Chapter 44 and the recent amendments thereto. For more information about Chapter 44 or general education law, call 973-403-1100.