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2.  Since June 28, 2011, the effective date of S. 2937, also know as Chapter 78, the right to bargain over health care has been severely curtailed.  Unions are about to regain their right to bargain over the level of employee contributions.  Before discussing our approach to the “sunset” of the sections of Chapter 78 mandating specific levels of employee contributions, it is useful to recap Chapter 78 and predecessor healthcare legislation. 2

3.  Public Workers have had the legal right to bargain over terms and conditions, including health care, since 1968  NJSA 52:14-17.28a, enacted in 1988, provides: "Notwithstanding the provisions of any other law to the contrary, the [State Health Benefits] commission shall not enter into a contract under the NJ State Health Benefits Program Act... for benefits provided pursuant to the contract in effect on October 1, 1988, including but not limited to basic benefits, and major medical benefits, unless the level of the benefits provided under the contract entered into is equal to or exceeds the level of benefits provided for in the contract in effect on October 1, 1988, or unless the benefits in effect on October 1, 1988 are modified by an authorized collective bargaining agreement made on behalf of the State."

4.  New Jersey’s courts recognize that “employees have a strong interest in having health insurance and in obtaining that insurance on an affordable group basis. The State can protect its budgetary interest in the negotiation process.” In re Council of New Jersey State College Locals, AFT, AFL-CIO, 336 N.J.Super. 167, 170 (App. Div. 2001).

5.  Summer of 2006 - Corzine was Governor and Dems held a majority in Legislature – Codey was the Senate President and Roberts was the Speaker of the Assembly.  Legislature wanted to impose changes in pension and healthcare benefits.  The unions forced these issues to the bargaining table.

6.  Spring 2010 – Christie had just taken office, Steve Sweeney was the Senate President and Shelia Oliver was the Speaker of the Assembly.  Legislation was enacted that imposed a contribution of 1.5% on all public employees, regardless of their healthcare plan.  While CWA and the State Unions bargained the employee contribution, the legislation imposed the 1.5% on all other public employees, outside of negotiations, upon expiration of collective bargaining agreements.

7.  The Legislation also imposed on local government employees in the SHBP or the SEHBP whatever terms the State Unions bargain with the Governor.  All new employees immediately paid 1.5% of monthly pension benefit for healthcare  Unions could negotiate contributions for healthcare for employees with less than 25 years of service and who retire. 7

8.  One year later the Legislature and Governor revisited healthcare.  A proposal was introduced to significantly increase employee contributions well above the 1.5% floor imposed by the 2010 statute.  The legislation effectively eviscerated bargaining over employee contributions.  Legislation was opposed by all public sector unions. 8

9.  Unions maintained health benefits had to be bargained  Bargaining had worked to produce cost savings for employers.  No reason to eliminate bargaining over health care.  Christie was already calling for all public employees to pay 30% of premiums for health benefits.  In February 2011 a health care bill introduced – S 2937  Healthcare provisions of the bill were a direct and unwarranted an attack on our right to bargain health benefits 9

10. “If Senate bill 2718 becomes law it will be illegal for a union to propose or an employer to agree to any deviation from that law. For example, this bill will make it illegal for a union and an employer to develop a joint health care cost containment plan that incentivizes healthy lifestyle choices and participation in wellness programs in order to lower employee health care contributions. It would also make it unlawful for an employer to agree to lower employee contributions in exchange for a wage freeze or other concessions…Bargaining over health care benefits should not be illegal in New Jersey.” Letter signed by 48 New Jersey Labor Lawyers March 4, 2011 March 4, 2011

11.  The new law required all active employees to pay contributions toward the cost of health benefits based on a percentage of premium  The percentage of premium depended on an employee’s base salary. The percent of premium increased for every additional $5,000 in base salary  The top rate for a family plan ranges for 5% of premium for an employee making $30,000 to 35% of premium for an employee making $110,000.  Employees making between $45,000 and $65,000 would pay from 12% to 19% of premium. 11

12.  Premium contribution phased in over four years.  Employees required to pay a minimum of 1.5% of their base salary as a contribution  Using a family plan premium of $19,000 in year one a worker earning $50,000 paid either 3% of premium or 1.5 of salary, whichever is greater.  3% of premium = $570; 1.5% of salary = $750  Therefore the worker paid $750 the first year 12

13.  The second year the worker paid 6% of premium or $1,140 – assuming the premium does not increase – the equivalent of 2.3% of salary.  The third year the worker paid 9% of premium or $1,710 – the equivalent of 3.4% of pay.  The fourth year the worker paid 12% of premium or $2,280 – the equivalent of 4.5% of pay.  The increase in contributions from year one to year four was 300% 13

14.  For employees in the SHBP and the SEHBP the cost of coverage is the premium for the medical and prescription drug plans, but not for dental, vision or other benefits  For employees in any other plan the cost of coverage is the premium for medical, prescription drugs, dental, vision and all other health benefits. 14

15.  Employees with 20 years of service on the effective date of the act were not subject to the contribution requirements of the act.  Employees who accrued 25 years of service prior to the expiration of a collective bargaining agreement and who retired after the effective date of the act were not subject to the contribution requirements. 15

16.  Employees with fewer than 20 years of service on the effective date of the act are required to contribute to the cost of retiree healthcare based on the schedule in the act.  The percent of premium is based on the retiree’s monthly pension allowance.  All employees with fewer than 20 years of service upon retirement will contribute at least 1.5% of their pension allowance.  There is no phase in for retirees who will be required to contribute under the act.  Current retirees were not affected. 16

17.  Using an average salary of $50,000 and assuming a pension of $25,000 the retiree will pay 4% of premium.  Unlikely the retiree has a family plan so if we assume a premium of $10,000, the retiree will pay $400.  If paying 1.5% of benefit would pay $375. 17

18.  Contributions commenced immediately upon expiration of a collective bargaining agreement that was in force on the effective date of the act.  Upon expiration, employees paid the first year rate and contributions increased until they reached the fourth year rate. 18

19.  The contribution sections of the act expire four years after the effective date or June 28, 2015.  If a contract in effect when the act was passed expired on December 31, 2013, on January 1, 2014 employees began paying contributions based on year one rates.  On January 1, 2018 employees under the contract will be paying year 4 rates even though the contribution sections of the act expired two and a half years ago on June 28, 2015. 19

20.  For local units that are not in the SHBP, upon contract expiration the four year phase in of contribution rates began.  Parties could agree to an employee contribution that was different than the contributions in the act if “the total aggregate savings” during the term of the agreement from employee contributions or plan design equal or exceed the annual savings that would have resulted had employees made the required contributions plus the annual savings resulting to the plans within the SHBP as a result of plan design changes made pursuant to the bill. 20

21.  Local unit had to certify savings to DCA and Division of Pensions.  DCA required to review and approve or reject in 30 days.  Could not execute contract until 30 day period ran or receive approval. 21

22.  12 member committee of SHBC  6 members appointed by the Governor  3 members by the Public Employee Committee of the State AFL-CIO  1 by PBA, 1 by FMBA and 1 by Troopers 22

23.  Committee has authority to create, modify or terminate any plan or component of any plan in its sole discretion  If any matter receives seven votes the SHBC shall approve and implement the Committee’s decision  Beginning January 1, 2012, the Committee had to provide the option of selecting from three levels of coverage for the family, individual and spouse or individual and dependent plans.  The different levels of coverage will be based on different out-of-pocket costs, including co-pays and deductibles.  Committee must establish a high deductible plan. 23

24.  The Committee deadlocked the co-pays for the retiree prescription drug plan.  Under Chapter 78 there is no binding way to break deadlock.  Based on the deadlock, the Division of Pensions and Benefits claimed that a regulation in effect prior to Chapter 78 that provided for automatic escalators to co-pays was the default.  The union members of the Design Committee claim that the regulation that predated Chapter 78 is no longer operative and that in the event of a deadlock co-pays cannot be increased.  This issue is pending in the Appellate Division. Oral argument is to be scheduled. 24

25.  Certain employers are claiming that we cannot negotiate lower employee contribution rates unless the negotiations are for an agreement to commence after June 28, 2015.  In other words, if a union is currently in negotiations, certain employers may claim that a contract with an effective date prior to June 28, 2015, cannot contain an agreement to reduce employee contribution rates. ◦ That is the case even if the reduction is effective after June 28, 2015. 25

26.  Once the employee contribution sections of Chapter 78 sunset, the 2010 requirement that employees contribute at least 1.5% of base salary becomes the default and is the minimum employees must contribute.  For plans other than the SHBP and the SEHBP, the design of the plan continues to be negotiable. 26