Guest column / Jeffrey H. Keefe / Christie uses wrong data on health care contribution - pressofAtlanticCity.com: Commentary

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Guest column / Jeffrey H. Keefe / Christie uses wrong data on health care contribution

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Posted: Friday, April 22, 2011 12:01 am

Guest column / Jeffrey H. Keefe / Christie uses wrong data on health care contribution

The effort by New Jersey's political leaders to seek parity in public-employee contributions to health insurance costs is based on an incorrect comparison.

Gov. Chris Christie has proposed that New Jersey state and local public employees contribute 30 percent to the cost of health insurance. State Senate President Stephen M. Sweeney's proposal moves more gradually toward the 30 percent goal over seven years. Both Christie and Sweeney, D-Salem, Gloucester, assert that the 30 percent employee contribution is fair, since it will place state and local public employees at parity with private-sector workers. They are wrong. In New Jersey, comparable private-sector employees contribute 22 percent to the cost of their health insurance.

Christie uses national estimates for all health-insurance plans not directly based on the private sector, but on the contribution rate used by the Federal Employees Health Benefits Program, which relies on national comparisons to set rates. The FEHB relies on the Kaiser Family Foundation /Health Research & Educational Trust survey report, which pegs employee contributions at 30 percent of the costs of family health-insurance plans and 19 percent of the costs of single health-insurance plans

There are several problems with using this estimate.

First, the U.S. Department of Health and Human Services' more comprehensive survey, the Medical Expenditure Panel Survey estimate for all New Jersey private-sector employers in 2009, is significantly lower. According to MEPS, the average employee contribution to a family plan is 22.8 percent, considerably lower than the 30 percent national estimate of Kaiser.

Further, a more appropriate comparison for New Jersey is the MEPS estimate of health-plan contributions of employees of large private employers - those with at least 1,000 employees. In these firms, employees on average contribute 20.3 percent of costs for single health care coverage and 19.7 percent of costs for family coverage.

Large employers, such as the state of New Jersey, enjoy significant advantages when providing their employees with health insurance. Many rely on preferred provider organizations, or PPOs, to manage the delivery of health services. Participation in a PPO provides a 6.7 percent savings on premium costs from the all-plan average for family coverage. And a large majority (90 percent) of large employers, including New Jersey, self-fund their health plans, saving 13.3 percent on health-insurance costs.

Finally, for family coverage, the average employee contribution to the health-insurance premium for a PPO in the Northeast is 24 percent compared with 30 percent nationally. Both Christie and Sweeney, however, rely upon the national estimate rather than the Northeast or New Jersey estimates to establish their benchmark for parity, which raises questions about their calculations.

If they are going to use national estimates, what other state and local government employees contribute to their health insurance would be a relevant benchmark. The Kaiser survey reports that state and local public employees with family coverage on average contribute 21 percent of their premium costs, while public employees with single coverage contribute 10 percent of their premium costs.

As I demonstrated in a recent paper - "Are New Jersey Public Employees Over Compensated?" - New Jersey public employees are not overpaid. They are paid differently, receiving better benefits and lower wages.

These, however, are financially challenging times for the state of New Jersey. Asking all parties to contribute to the financial viability of the state makes sense. Christie and Sweeney are demanding that all public employees take a pay cut by raising their health-insurance contributions to bail out the state. They couch their arguments in the misleading rhetoric of equity and fairness by simply comparing private and public health benefits rather than comparing total compensation of similar workers.

Nevertheless, if the goal that Christie and Sweeney seek is private-sector parity, the public employee health care contribution benchmark rate should be 22 percent not 30 percent.

What are the implications of this estimate? The Communications Workers of America New Jersey has begun negotiations with the state. CWA has presented the state with a proposal that the union says would save the state 22 percent.

The governor should negotiate with the CWA. New Jersey leaders need to stop attempting to bargain legislation through dueling press conferences and instead let collective bargaining work. That will produce better quality and more acceptable agreements.

Jeffrey H. Keefe is an associate professor of labor and employment relations at the School of Management and Labor Relations at Rutgers University.

Posted in on Friday, April 22, 2011 12:01 am.

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