BY PATRICK DUNCAN
Chapter 78, the 2011 health benefits reform law for New Jersey’s public sector, brought some welcome relief to boards of education. For years, boards had struggled to contain the escalating cost of providing employee health coverage. The landmark law, effective beginning with the 2011-2012 school year, requires school employees to pay a portion of health insurance premiums. The exact amount of the employee share is a function of the employee’s salary and the plan that they choose.
Depending on plan choices and salary, the employee contribution ranges from 3 percent of the premium to 35 percent of the premium and is never less than 1.5 percent of the employee’s base salary.
For non-unionized staff, the contribution started to phase in immediately. Unionized employees did not have to start the new contributions until the collective negotiation agreement that was in force when the law was enacted expired. The employee contribution has a four year phase-in period. In the first year, the employee pays a quarter of the employee contribution requirement and that percent is increased an equal percent amount in the next three years until in the fourth year, the employee will pay the entire contribution called for under Chapter 78.
The employee contribution component of the law expires after the four year phase-in is complete. Districts and their employees are bound by the contribution levels required in the law until the contributions are fully phased-in and in effect for an entire calendar year.
For many districts, now in or approaching negotiations, the contributions began in July 2011 and the four-year phase-in will be complete on June 30, 2015. So districts could begin negotiating over the topic of health benefit contributions as early as July 1, 2015. (The table below shows when your district may begin negotiating on this.)
How should health benefit negotiations be handled in the dusk before sunset and after sunset? Below are some points to keep in mind.
The Status Quo for Negotiations Purposes is the Fully Phased-In Employee Contributions
First, and most importantly, the fully phased-in premium sharing rates are the basis for future negotiations. The starting point is not the amount set forth in the contract prior to the law. Here it is worth quoting the law at length:
“A public employer and employees who are in negotiations for the next collective negotiation agreement to be executed after the employees in that unit have reached full implementation of the premium share set forth in [Chapter 78] shall conduct negotiations concerning contributions for health care benefits as if the full premium share was included in the prior contract…After full implementation, those contribution levels shall become part of the parties’ collective negotiations and shall then be subject to collective negotiations in a manner similar to other negotiable items between the parties.” N.J.S.A. 18A:16-17.2.
It is clear that it requires the approval of the board to reduce employee contributions below those required under Chapter 78.
When Do Health Care Contributions Become Negotiable?
Health care contribution negotiations that result in lesser employee contributions cannot take place until after the fully phased-in employee contributions have been in place for a year. In other words, you cannot pre-negotiate the premium sharing to take effect in the second or third year of a three-year agreement when the Chapter 78 sunsets in the middle of that contract.
Again, quoting:
N.J.S.A. 18A:16-17.2 : parties “who are in negotiations for the next collective negotiation agreement to be executed after the employees in that unit have reached full implementation of the premium share set forth in [Chapter 78] shall conduct negotiations concerning contributions for health care benefits as if the full premium share was included in the prior contract.”
Guidance from the state reiterates the non-negotiability of health insurance premiums prior to full implementation. Local Finance Notice 2011-20R, VII- 2 (July 25, 2011) reads: “Once the fourth year has been completed (100 percent of the required contribution has been paid for a year), the law provides that: (a) Negotiations for the next contract shall be conducted as if the full contribution was a part of the previous contract; (b) [the contributions] remain in place until fully phased in; and, (c) Once [the contributions] are fully implemented, the contribution structure is negotiable, starting from the point of full implementation
Negotiating Beyond the Sunset
When the parties are negotiating the next collective negotiations agreement to be executed after Chapter 78 sunsets, the board and the union are legally permitted, but in no way obligated, to negotiate some other cost-sharing arrangement. Remember, to reduce employee contributions below those required under Chapter 78 requires the approval of the board. The board can say no. In considering the inevitable proposal from the union to reduce employee health insurance contributions, the board should think long and hard. Prior to Chapter 78 unions were very, very reluctant to open the door to employee’s sharing of premium costs. In fact, in 2009-2010, the last school year before Chapter 78 was adopted, only 13 percent of the contracts analyzed by NJSBA had any employee contribution at all.
As the sun sets on Chapter 78, boards need to remember three important points.
- The fully phased in employee contributions are the status quo for negotiations purposes – in order for the employee contributions to be reduced, the board must agree to do so;
- A reduction in employee health care contributions is not negotiable until the next contract executed after Chapter 78 is fully implemented; and
- Once, employee contributions become negotiable, boards need to carefully consider the long term implications of moving away from the cost structure dictated by Chapter 78.
Good luck with your negotiations. If you have questions, contact NJSBA’s labor relations professionals at (609) 278-5219.
View an Education Matters video of the author discussing the Chapter 78 sunset provisions.
Patrick Duncan is manager of NJSBA’s labor relations unit.