ASSEMBLY STATE AND LOCAL GOVERNMENT COMMITTEE

STATEMENT TO

ASSEMBLY, No. 5903

with committee amendments

STATE OF NEW JERSEY

DATED:  JULY 24, 2025

      The Assembly State and Local Government Committee reports favorably and with committee amendments Assembly Bill No. 5903.

      As amended by the committee, this bill makes various changes to the State Health Benefits Program (SHBP).

State Health Benefits Commission

      The bill revises the structure of the State Health Benefits Commission (SHBC) to include 11 members as follows:

      (1) the State Treasurer; the Commissioner of Banking and Insurance; the Chairperson of the Civil Service Commission, or their designees, who will serve ex officio;

      (2) two members appointed by the Governor;

      (3) a member appointed by the Public Employee Committee of the New Jersey AFL-CIO who is a member of the public employee organization affiliated with the New Jersey AFL-CIO with the largest number of employees participating in the State Health Benefits Program;

      (4) a member appointed by the Public Employee Committee of the New Jersey AFL-CIO who is a member of the public employee organization affiliated with the New Jersey AFL-CIO with the second largest number of employees participating in the State Health Benefits Program;

      (5) a member appointed by the Public Employee Committee of the New Jersey AFL-CIO who is a member of the public employee organization affiliated with the New Jersey AFL-CIO with the public employee organization with the third largest number of employees participating in the State Health Benefits Program;

      (6) a member appointed by the public employee organization that is not affiliated with the New Jersey AFL-CIO, that represents the largest number of employees in the State Health Benefits Program who are not represented by an employee organization affiliated with the New Jersey AFL-CIO;

      (7) a member appointed by the public employee organization that is not affiliated with the New Jersey AFL-CIO, that represents the second largest number of employees in the State Health Benefits Program who are not represented by an employee organization affiliated with the New Jersey AFL-CIO; and

      (8) a member, who will serve as chairperson, appointed by the Governor from among three persons nominated jointly by at least eight of the members appointed.

      The bill specifies that the SHBC will establish the health benefits program and, with respect to plan design, the SHBC will have responsibility for, and authority over, the various health care benefits plans and components of those plans, including medical benefits, prescription drug benefits, dental, vision, and any other health benefits, offered and administered by the SHBP and will have the authority to create, modify, or terminate any plan or component of any health care benefits plan, at its sole discretion.  The bill, as amended, empowers the SHBC to obtain certain information necessary to make informed decisions and to enter into contracts with third-party administrators and consultants.

      The SHBC will also be required to follow the advice and guidance of the program actuary when developing plan designs for the health plans provided by the program.  Whenever the program actuary advises that the anticipated costs of one or more of the plans under the program is likely to exceed the rate of medical or prescription drug inflation for a given plan year, as determined by the program actuary based upon relevant indices and information, the commission will be required to take such actions as may be necessary to appropriately mange such costs and ensure the continued viability of the program, subject to established processes including, but not limited to, collective negotiations agreements.

Actuarial Report

      Additionally, the bill, as amended, requires that within 180 calendar days after the effective date of the bill, the State’s actuary for the SHBP will issue an actuarial report concerning the SHBP health plans.  The report must include the State and public entities other than the State that participate and do not participate in the State Health Benefits Program, inclusive of retirees who are not Medicare-eligible paid for by the State.  The report must make recommendations addressing the cost of higher priced medications, including, but not limited to, glucagon-like peptide-1 drugs utilized for diabetes, weight loss, and cardiovascular disease.  Within 90 calendar days of the commission’s receipt of the actuary’s report and recommendations regarding higher priced medications, including glucagon-like peptide-1 drugs, the commission will undertake actions and plan modifications as may be necessary to appropriately manage the cost of higher priced medications.

      The bill requires the commission to review and consider any prescription medications that have been newly approved by the federal Food and Drug Administration on a quarterly basis and must review such information when considering updates to the prescription drug formularies for each of the plans in the SHBP and those described in the bill.  As amended, the bill provides that prescription medications newly approved by the Food and Drug Administration will only be included on the prescription drug formularies of the SHBP health plans based on a majority vote of commission members.

Plan Design Committee and Arbitration Process

      This bill eliminates the SHBP Plan Design Committee and transfers the powers and functions of the Plan Design Committee to the newly organized SHBC.  With the elimination of the SHBP Plan Design Committee, the bill ends the use of a super conciliator by the SHBP to resolve deadlocked matters before the SHBP Plan Design Committee.  Instead, the bill requires all decisions before the commission to be resolved within 30 days from the date such decisions are placed before the commission.  After the 30 day period, if a decision on a matter before the commission is not reached, or if the commission remains at an impasse, the commission will select a neutral third-party arbitrator with subject matter expertise who will attempt to assist the commission in reaching a voluntary resolution on the matter.

      The bill requires the arbitrator to promptly schedule investigatory proceedings to investigate and acquire all relevant information regarding the committee’s failure to render a decision; discuss with the members of the committee their differences, and utilize means and mechanisms, including but not limited to requiring 24-hour per day negotiations, until a voluntary settlement is reached, and provide recommendations to resolve the members’ differences; and institute any other non-binding procedures deemed appropriate by the arbitrator.  If the actions taken by the arbitrator fail to resolve the dispute after 30 days, the arbitrator will issue a final binding decision, which will be provided to the commission promptly and made available to the public within 10 days thereafter.

Medical Claims Review

      This bill, as amended, also requires SHBC to require that the third-party medical claims reviewer will utilize appropriate data analytics to determine the most effective methodology for conducting annual reviews of in-network claims and out-of-network claims, as must be determined through the utilization of appropriate methods of data analytics, to ensure that the SHBP is being properly charged for in-network and out-of-network provider services.  The claims review program will utilize data analytics to determine the most effective approach for reviewing claims reimbursed to providers located in New York and Pennsylvania, with a focus on claims resulting from higher cost services, including, but not limited to, services provided by specialty physicians.  The State Treasurer is required to adopt, pursuant to the “Administrative Procedure Act,” such rules and regulations as may be necessary to implement the provisions of this section.  The regulations must specify any additional quantitative and qualitative criteria that will apply to the claims review requirements established by this section.

SHBP-Local Plans

      The bill requires that the SHBP offer five plans that provide medical and prescription drug benefits for local government employees of employers other than the State that participate in the SHBP and retirees who are not Medicare-eligible, and their dependents, if any.  However, under the bill as amended, these provisions will not increase the contribution rates of employees who had 20 or more years of creditable service in one or more State or locally-administered retirement systems on the effective date of section 77 of P.L.2011, c.78 (C.52:14-17.28e). Under the bill, as amended, this section will not apply to State colleges or universities, Rutgers, The State University, New Jersey Institute of Technology, Rowan University, Montclair State University, Kean University and any other State college or university now or hereafter established or authorized by law, or to University Hospital.

      The five plans will be:

      (1) the SHBP Unity 2019 PPO plan as offered by the State Health Benefits Commission effective July 1, 2019, except that the commission and employers other than the State will require employee contribution rates as set forth in the bill, as amended, which will be the default plan for employees and retirees who fail to affirmatively select a plan during the open enrollment period;

      (2) the SHBP Tiered Network plan as offered by the State Health Benefits Commission as of the effective date of this bill, except that the commission and employers other than the State will require employee contribution rates to equate to 75 percent of the rates paid by employees of employers other than the State enrolled in the SHBP Unity 2019 PPO plan pursuant to the amended bill;

      (3) the SHBP PPO 2030 plan as offered by the State Health Benefits Commission as of the effective date of this bill;

      (4) the SHBP PPO 2035 plan offered by the State Health Benefits Commission as of the effective date this bill; and

      (5) the NJ Gold plan.

      The NJ Gold plan will be developed by the SHBC in a manner which does not require employee contributions in the form of withholding from the employee’s base salary, or the retirement allowance of retirees.  The NJ Gold plan will provide benefits that are actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the plan.

      The bill provides for the escalation or de-escalation of employee contribution rates depending on the anticipated increase or decrease in premium costs, as applicable. The bill directs the State Health Benefits Commission to annually track and calculate the actual premium costs of each plan offered, inclusive of medical and prescription drug costs, following each plan’s initial offering after the effective date of the bill, and to compare such costs to trends of health care costs at the national, regional, and State levels.  After the commission’s review of any mid-year report the commission will meet annually between March 1 and April 15 to discuss actual and projected utilization and costs for plans in which active and retiree members are enrolled.  Such meeting may also include representatives from the New Jersey Division of Pensions and Benefits.  Any cost sharing of any increases or decreases in the premium costs of the health plans offered in each plan year will be subject to adjustment, pursuant to the escalator and de-escalator provisions provided in the bill.

      Under the bill, every year prior to the renewal of each plan, the commission will determine whether the blended premium, defined in the bill as the premiums for medical and prescription drug rates for all levels of coverage, of a plan in a plan year exceeds the baseline premium, defined in the bill as the blended premium for the current plan year plus one percent. If so, the commission will determine how to manage the plan to lower the premium, reduce the rate of premium increases, or both.  If the commission cannot agree upon plan design changes or other cost saving measures that would reduce the actuary’s recommendations for premiums for the upcoming plan year to the preliminary baseline premium by the September 1 preceding the start of the next plan year, then an escalator will be applied to employee contribution rates.

      If the renewal premium is six percent or more above the preliminary baseline premium, the escalator to be applied to employee contribution rates will be equal to the rate of inflation as determined by the Consumer Price Index.  Any increase in employee contributions will be effective the first pay period of the new plan year.

      If the renewal premium is six percent or more below the preliminary baseline premium, the commission will determine how to manage the plan to share the savings in reduced costs or to improve the quality of the plan through design changes or other measures.  If the commission cannot agree to either reduce costs or improve the quality of the plan, or agree upon a reduction in the employee contribution rates by September 1 preceding the start of the plan year, then contribution rates will be reduced by the application of a de-escalator.  The de-escalator will be the amount of the decrease in the renewal premium. Any decrease in employee contributions will be effective the first pay period of the new plan year.

      The commission’s actions undertaken pursuant to the escalator and de-escalator provisions will not be subject to the commission’s dispute resolution procedures.

Non-SHBP-Local Employers

      The bill, as amended, also requires that within 180 days following the enactment this bill, when a public employer other than the State does not participate in the SHBP, if the public employer does not offer a plan substantially similar in design to the SHBP Unity 2019 PPO Plan and its employees are enrolled in medical and prescription drug plans substantially similar in design to the SHBP Unity 2019 PPO plan but with higher annual premiums than the SHBP Unity 2019 PPO plan, upon request of the collective negotiations representative who represents those employees, the public employer other than the State and the collective negotiations representative will negotiate over offering employees a health care plan substantially similar in design to the 2019 Unity PPO at substantially similar contribution rates and annual premiums, offering employees incentives to select plans with lower costs, or, in the alternative, enrolling in the SHBP.  Modifications to the health benefit provisions of collective negotiations agreements or to health benefit plans, including prescription drug plans, offered to employees, will only be by mutual agreement between the collective negotiations representative and the local employer.  Upon request of the parties, the Public Employment Relations Commission will assign a mediator to assist in the resolution of a dispute.  If mediation is unsuccessful and the parties are unable to reach a mutual agreement, there will be no changes to health benefits provided pursuant to a collective negotiations agreement, practice, or policy.

      The bill clarifies that local government entities that do not participate in the SHBP will be permitted to utilize health reimbursement arrangements pursuant to collective negotiations agreements to offset IRS eligible employee out-of-pocket costs related to eligible medical and prescription drug services.  The bill also specifies that its provisions will not be construed to interfere with or require changes to the health plans offered by a public employer other than the State that does not participate in the State Health Benefits Program.

Local Participation in SHBP

      The bill also requires that, within one year from the effective date of this bill, any employer other than the State will be required to make a determination as to whether or not to participate in the SHBP.  Any employer other than the State which elects to participate in the SHBP will be required to remain enrolled in the program for a minimum period of two consecutive plan years following the election to participate in the program.  Any employer other than the State that elects not to participate in the SHBP will be prohibited from enrolling in the program for a minimum of two consecutive plan years.

COMMITTEE AMENDMENTS:

      The committee amended the bill to:

      (1) delete the requirement for three members of the commission to make a request for information through the chair, and provide instead that the chair of the SHBC will transmit a request for information to the appropriate individual or entity.  In any vote before the commission, the chair may take into account whether legitimate requests for information have been provided as soon as is practicable and in a usable format.  The chair may also take into account whether requests for information have been excessive or unreasonable.  Upon the commencement of binding arbitration proceedings, the arbitrator may take into account whether legitimate requests for information have been provided as soon as is practicable and in a usable format, or whether requests for information were excessive or unreasonable, for the purpose of rendering a final decision on a matter before the arbitrator;

      (2) require the State’s actuary to provide an actuarial report concerning the SHBP health plans within 180 calendar days of the effective date of the bill, rather than 30 days after the end of the first full plan year next following the enactment and implementation of this bill, and provide that within 90 calendar days of the commission’s receipt of the actuary’s report and recommendations regarding higher priced medications, including GLP-1 prescription drugs, the commission must undertake actions and plan modifications as may be necessary to appropriately manage the cost of higher priced medications;

      (3) specify that prescription medications newly approved by the Food and Drug Administration will only be included on the prescription drug formularies of the State Health Benefits Program health plans based on a majority vote of commission members;

      (4) delete the requirement for the SHBC’s third-party medical claims reviewer to review at least 33 percent of in-network and out-of-network claims and claims reimbursed to providers located in New York and Pennsylvania and instead require the reviewer to utilize appropriate data analytics to determine the most effective methodology and approach for conducting annual reviews of those claims and claims reimbursed to providers located in New York and Pennsylvania.

      (5) exempt from certain increases in contribution rates any local government employees who had 20 or more years of creditable service in one or more State or locally-administered retirement system on the effective date of section 77 of P.L.2011, c.78 (C.52:14-17.28e), rather than the effective date of this bill.  The amendments also specify that this section of the bill does not apply to State colleges or universities, including the New Jersey Statutes, Rutgers, The State University, New Jersey Institute of Technology, Rowan University, Montclair State University, Kean University and any other State college or university now or hereafter established or authorized by law.  This section of the bill will also not apply to University Hospital;

      (6) make various adjustments to the contribution rates of those enrolled in the SHBP Unity 2019 PPO plan and specify that those contribution rates will be based upon a percentage of the employee’s salary or retirement allowance; and

      (7) permit collective negotiations to take place as specified in the bill when a public employer other than the State does not participate in the SHBP and if the public employer does not offer a plan substantially similar in design to the SHBP Unity 2019 PPO plan and its employees are enrolled in medical and prescription drug plans with higher annual premiums than that plan.