Yesterday, NJ.COM reported that Governor Christie was prepared to roll out sweeping pension legislation that would overhaul the way in which teacher pensions would be funded in the State of New Jersey.  Presently, teachers pensions in the State of New Jersey are funded by the State and not the School District or Municipality that employs the teachers.  The New Jersey League of Municipalities stated that the overhaul has the potential to cost New Jersey Municipalities hundreds of millions of dollars each year if implemented.  However, those who crafted the governor’s plan have said those costs would be offset by reducing public employee health benefits in the future.

I bring this point to our reader’s attention as it harkens back to collective negotiations I just engaged in with a large Industrial Manufacturing Union (IUE/CWA Local 81455) and a Fortune 500 Company (Ingersoll Rand).  This was the first time that I had negotiated for this Union and the negotiating committee explained to me that their healthcare coverage has been whittled away one contract after another while the cost of coverage was passed on to the employees.  This round of negotiations was no exception as the company proposed what is often referred to as a “Consumer Driven or Directed Health Plan (CDHP).

A CDHP is a health plan that has incredibly high deductibles and maximum out of pocket costs that legislatively allows the employer to offer its employees the ability to participate in a health savings account in an effort to assist defraying the cost of healthcare.  In this instance, the annual deductibles were set at $1,500 for single coverage; and employee/child and family coverage was set at $3,000.  Additionally, the annual maximum out of pocket costs were $3,000 and $6,000 respectively.  In essence, other than a single well visit per year, all other heath expenses would be the employees responsibility to pay until the deductible is reached and then co-insurance (80%/20%) would take over until the maximum out of pocket is reached.  Thereafter, all other health care expenses would be covered at 100%.  While the employee’s cost of premium was decreased, the large deductible and maximum out of pocket was incredibly unpopular and foreign to the Union’s membership.  To help in assisting to defray the large looming deductibles and annual maximums, the employees have the ability to set-aside pretax dollars in a Health Savings Account, as well as participate in a “wellness” program that could garned them additional money from the company for participation.  Despite the fact that the Union offered an actuarial sound “traditional” healthcare plan that would cost the company the same amount of money as the CDHP, Ingersoll Rand wanted nothing to do with the same as the CDHP was being rolled out around the country.

This is not my first experience in collective negotiations with such a health plan as I encountered the introduction of a CDHP several years ago while representing another Manufacturing Union.  While I have only seen this plan offered in the private sector, I am fearful that the State of New Jersey is preparing to roll out such a plan in an effort to save costs with healthcare.  This is especially true when I read articles such as the one mention in the opening paragraph of this article.  Based on this fact, Public Employee Union Leaders and Negotiating Teams should familiarize themselves with these plans.  It is important to note that the costs of these plans are substantially lower for the employer as it drives the cost burdens of healthcare onto the shoulders of the employees.  Therefore, in preparing to negotiate, keep your eyes and ears open for this four letter word (CDHP).