The transition from fall into winter for many school districts means one thing: collective negotiations. This year, a familiar question will be at the forefront of many minds: what do we do about health insurance? The answer is not an easy one, simply because there are many moving pieces.
First and foremost, school districts must be familiar with the changing legislative landscape. The current applicable law, P.L. 2020, c. 44 (“Chapter 44”) is set to expire on December 31, 2027. Second, and not any less important, school districts must continue to navigate the rising cost of health insurance premiums. These concerns will inform collective bargaining both during the 2025-2026 school year and all subsequent school years. This article seeks to assist school districts in familiarizing themselves with these issues in the hopes of framing potential solutions to an ongoing, and growing, concern.
- I. The History of Health Insurance for Public Entities in New Jersey
In 2010, Governor Chris Christie signed into law P.L. 2010, c. 2, (“Chapter 2”). Pursuant to Chapter 2, public employees were obligated to contribute a minimum of 1.5% of their salary to the cost of health insurance. This legislation was monumental as it was the first time that public employees were statutorily obligated to make any contribution to the cost of their health insurance.
Soon thereafter, the health insurance landscape changed again with the passage of P.L. 2011, c. 78 (“Chapter 78”). Pursuant to Chapter 78, public employees were required to contribute a percentage of the cost of health insurance premiums. Depending on the level of coverage and the employee’s salary, the percentage to be contributed ranged from 3% of premium to 35% of premium. These percentages were phased-in over four (4) years (i.e., Tiers 1 through 4). Once fully phased in, the level of contribution became negotiable.
After this four year phase-in, many associations drafted various proposals to reduce the amount of contribution. Proposals ranged from “rolling back” contributions to Tier 2 levels, capping the percentage of contribution at a particular percentage, or even establishing a dollar value to be contributed.
Then, in 2020, the New Jersey Legislature passed Chapter 44. Chapter 44 mirrored Chapter 78 in that it utilized percentages, but the similarities between the two laws ended there. Unlike Chapter 78 which required employees to contribute a percentage of premium, Chapter 44 requires employees to contribute a percentage of salary. Chapter 44 also mandated that school districts adopt two new health insurance plans, the New Jersey Educators’ Health Plan (“NJEHP”) and the Garden State Health Plan (“GSHP”), and required that new employees mandatorily enroll therein. The Legislature also established the design of these plans, rendering it unmodifiable and, as we have seen, cost-prohibitive.
Overall, Chapter 44 left many school districts holding the proverbial bag as the cost of health insurance premiums began to sky rocket. School districts were unable to modify the design of the NJEHP or GSHP, where a majority of employees were enrolled, and school districts were not permitted to alter the manner of contributions for these plans. By requiring employees to contribute a percentage of salary as opposed to a percentage of premium, the Legislature disconnected the joint partnership between school boards and local associations to keep premium costs down. Instead, Chapter 44 provided no incentive to local associations to reduce costs, as an employee’s share was capped based on his/her salary.
- II. The Impact of the Sunset of Chapter 44
Despite the many limitations imposed under Chapter 44, the Legislature always intended for the law to be temporary. Since its inception, Chapter 44 was set to expire on December 31, 2027. This is embodied in the text of the law. As a result, on December 31, 2027, employees who commenced employment on or after July 1, 2020 are no longer required to enroll in the NJEHP or the GSHP. As of that date, these employees are now permitted to enroll in any other available health insurance plan, including a plan still governed by Chapter 78 contribution rules (i.e. NJ Direct 10). For many school districts, relief based on this change, if any, will not likely appear until the start of the 2027-2028 school year, the first open enrollment after the change.
- III. What Can We Do?
What is not explicitly clear is what happens once December 31, 2027 arrives. In many spheres, there is suspicion that the Legislature will introduce a new law to succeed Chapter 44. At this point, what that law would provide is a matter of pure speculation. In all likelihood, the successor legislation will be majorly impacted by the winner of the 2025 Governor’s election.
But, as a functioning entity, school districts cannot wait to take action until new legislation is introduced. As we enter the upcoming negotiations season, negotiations committees must be aware of the changing legal landscape and be proactive in drafting proposals which target the issues created by Chapter 44. This includes developing proposals which mandate mid-contract changes, eliminate salary-based contributions, and permit renegotiation of plan designs. These tactics are entirely negotiable, and ultimately up to the mutual agreement of boards and local associations.
Ultimately, the lack of clarity regarding health insurance and its rising costs create significant concern as school district revenues continue to reduce. Health insurance premiums are skyrocketing and show no sign of slowing. The most important goal as we continue through this school year must be taking proactive steps to prepare, whether at the negotiating table or in the budgetary process.
Our office remains available to assist in navigating this volatile and unpredictable landscape.
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