NJ Public Workers' Health Benefits Are NOT Overly Generous: Some More Evidence

Warning: This one's going to get wonky...

The anti-public worker political wing in New Jersey -- which includes nearly all the state's Republicans and the machine Democrats -- spends a good part of its time trying to convince the state's citizens that health care benefits for teachers, cops, and other public workers are way too generous.

You'll hear lots of bemoaning of the "fact" that public worker benefits often fall into the "platinum" level instead of "gold," with no real explanation of what those terms actually mean.* You'll hear that public workers are enjoying a huge advantage in health care while private sector workers get worse care that costs them more.

These analyses leave out a few important details. First, there is a well-documented wage gap for New Jersey teachers and other public workers: when controlling for education, age, time worked, and other factors, these workers earn less than comparable workers in the private sector. Better benefits are an attempt to make up for that wage gap -- an attempt that generally fails, but an attempt nonetheless.

Second, when comparing health benefits, we should take into account three things:

1. What is covered.
2. Where enrollees can seek services.
3. How much they contribute to pay for their premiums.

Balancing these three factors to determine the total generosity of a health care plan is tricky, and the data we have on private health care plans isn't great. Further, we must make an appropriate comparison: looking at a teacher with a masters degree's benefits and comparing them to a part-time worker with only a high school diploma is not a valid comparison, because the workers aren't being drawn from the same labor pool.

This said, it is instructive to look at how one of the factors above -- employee contributions toward health care -- compares between public workers and workers in the private sector. This is, in fact, what Mark Magyar did back in 2014 in an analysis for NJ Spotlight:

Today, however, while the cost of New Jersey public employee health insurance coverage remains the third-highest in the nation, most New Jersey public employees are paying more than the national average for state government workers toward their health insurance costs, an NJ Spotlight analysis shows. 

In fact, the average New Jersey government employee is paying more for individual health insurance coverage than government workers in any other state and the 10th-highest average premium for family coverage in the country.  

Further, state and local government workers are paying a much higher percentage of the cost of their individual health insurance policies than private-sector employees in New Jersey have been paying, and not much less than the percentage paid by the state’s private-sector workers for family coverage. [emphasis mine]

Magyar continues:

A comparison of the federal data for New Jersey private-sector employees with Pew’s state government report shows that private-sector employees paid an average of $374 per month for family health polices costing an average of $1,450, while government workers paid $328 toward policies averaging $1,561 per month.

The real difference in premium and cost share was in individual coverage, where New Jersey public-sector employees pay twice as much toward policies that cost almost one-and-a-half times as much. The average New Jersey private-sector employee last year paid $105 per month toward a policy that cost an average of $517, while state workers would have been paying $220 out of an estimated $758 monthly premium as of July 1, 2014. 

Let's break this down by percentages:

• Public worker, family coverage: 21.0%
• Private worker, family coverage: 25.8%
• Public worker, individual coverage: 29.0%
• Private worker, individual coverage: 20.2%

So the average NJ public worker who gets family coverage paid somewhat less for that coverage -- not enough to make up for the wage gap, but enough so my back of the envelope calculation comes to  an advantage of $552 a year.

An average NJ public worker who gets individual coverage, however, is paying a penalty compared to a private sector worker: $1,380 a year. 

Keep in mind: we're not necessarily comparing equal health benefits in terms of their coverage or their ability to allow enrollees to go out-of-network. In addition, we're not comparing similarly educated and experienced workers. But Magyar's analysis showed that there was little reason to believe New Jersey's private workers were paying a much greater share of the cost of their health care compared to public workers.

I thought it would be useful to take another look at this a few years down the road. My analysis is a bit different than Magyar's: my data source looks at all workers in New Jersey, not just the private sector, so the comparison is not "public-private" but "public-everyone."

I use the Chapter 78 schedule to determine the amount teachers and other public workers pay for health care. Granted Chapter 78 has lapsed; however, the NJ School Boards Association has declared that Chapter 78 is now the "status quo" for negotiations, so the use of the schedules is valid. Chapter 78 requires different contributions from teachers depending on their salaries. I choose three different levels of teacher pay: the 25th, 50th, and 75th percentile (the 50th percentile means half of teachers are above that salary, and half are below; the 25th means 1/4 are below the salary, and 3/4 are above).

How does this all play out?

Let's start with the family plans. If you are a teacher at the 25th percentile, you're making $57,200 a year. Compared to all workers, your contribution to your health care is relatively small: 14 percent, compared to over 26 percent for all workers (of course, you're also trying to raise a family in one of the costliest states in the nation on less than $60K a year).

If you're a teacher in the 75th percentile -- $84,400 a year -- you're paying substantially more of your premium on a family plan: the difference between you and all other workers is less than 3 percentage points.

The individual plans are another story: here, the lower-paid teacher is paying slightly more of their premium as a percentage than other workers. But higher-paid teachers are paying way more: 34 percent, versus 22.5 percent.

It's very difficult to compare the dollar expenses here, mostly because we don't know how the health insurance the teachers receive differs from the insurance all workers receive. But let's take the data from our source on premium costs and compare it to a plan offered by the state: in this case, NJDIRECT15. This appears to be a fairly generous plan, at least based on its cost: $36,084 for a family plan, and $12,617 for an individual plan. Contrast that to $20,669 for a family plan, and $7,074 for an individual plan, as the average for all workers in the state.

Again, it's hard to say for sure how the plans differ. I would assume the teachers' plan here is more generous based on the cost -- but who knows? Maybe it's just more expensive. In any case, here's how the contributions break down in dollars:

There are a lot of caveats here, starting with this: I couldn't find the 2017 premium costs for NJ teachers, so these figures are high compared to the figures for all workers just because of health care inflation over two years.

But even allowing for some of the difference to be taken up by inflation: in both the family and individual plans, New Jersey's teachers are contributing substantially more for their health care benefits compared to all state workers. Again, I'm using an example with a teacher plan that costs substantially more: it's a safe assumption it's more generous, but we just don't know. But even if it is, the increased cost is being borne, in no small part, by the teacher. In other words: yes, the teacher is probably getting better insurance, but she's paying for at least part of it out of her own pocket.

Let me be very clear: in no way does what I show here comprehensively prove that New Jersey's public workers, including teachers, are paying the similar amounts for similar health care compared to similar workers. What I am showing is that, post-Chapter 78, public employees are paying significant amounts for their benefits.

To recap:

• We know public worker salaries lag behind similarly educated workers.
• We know that good analysis shows any benefits advantages to public workers don't make up for that wage gap.
• We know that public workers, post-Chapter 78, are paying significant amounts for their health insurance.
• We know that the contributions of public workers toward their health insurance is not out of line with the average contribution of all workers.

Given all this: There is very little reason to believe any fiscal woe New Jersey is experiencing is due to public workers -- including teachers -- not paying their fair share for their health care.

I am all for bringing the costs of public employee health care down; after all, I am a taxpayer. We should be looking for savings through a variety of mechanisms, including tough negotiating with drug companies, hospitals, and insurance brokers.

But given the amount public employees are contributing to their own health insurance after Chapter 78, the state shouldn't be demanding more of them as its primary strategy for bringing down costs to the taxpayer. New Jersey's public employees are already doing more than their fair share to get the state's finances under control.


ADDING: There's an important point I should add about the comparison between similar workers' benefits:

For better or for worse, the United States has an employer-based system of health insurance. People with higher levels of educational attainment have a higher likelihood of having health insurance (see Table 3 here). It is, therefore, reasonable to compare the levels of health care benefits for similar workers as a way of determining whether some workers get better coverage than others.

Making this comparison, however, is not an endorsement of the current system -- at least, it isn't for me. I think it's wrong that some people have good health insurance, some have lousy insurance, and some have no insurance at all. I think it's wrong that income or education is a determinate of anyone's access to health care.

Everyone should have access to high quality health care at a price they can afford. I'm not at all a health care expert, and I won't weigh in on the merits of different systems. I'll only say the current system is obviously inadequate, and tying health care coverage to employment is probably one of the reasons why.


* You'll also hear we need to drop down the level of benefits for public workers or those benefits will be subject to a "Cadillac tax." Except that's not true: the tax has been delayed until 2022. Given its bipartisan lack of support, I doubt we'll ever see it implemented.