N.J. slashes prescription costs for retired public workers

By Samantha Marcus | NJ Advance Media for NJ.com
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on March 25, 2015

TRENTON — Gov. Chris Christie's administration has agreed to drastically roll back prescription copays for thousands of retired public employees after illegally raising them in 2013, NJ Advance Media has learned.

The deal follows a ruling from a state appeals court in December that New Jersey's pension division overstepped its authority when it hiked the drug rates following celebrated pension reforms Christie enacted in 2011.

Two public employee union leaders said the state and the unions have reached a deal to return to 2012 rates. In addition, the state will cut rates more severely, anywhere from 80 to 100 percent, in the last six months of this year to compensate retirees who have been overpaying for more than two years.

"It's a very big win," said Hetty Rosenstein, director of the New Jersey branch of the Communications Workers of America and a plaintiff in the suit. "It actually now requires that the state obey (the 2011 pension law) and that they actually respect the law that they signed."

All told, the state overcharged its retired workers $13.1 million through the end of 2014, and workers will continue to overpay $1.1 million a month until the deal kicks in July 1, according to Kevin Lyons, health benefits coordinator for the New Jersey State Policemen's Benevolent Association.

Lyons estimated the rollback would affect more than 100,000 retirees and their family members enrolled in the state health benefits plans.

"It's a huge break for them," Lyons said.

Spokesmen for Christie and the Department of Treasury did not respond to requests for comment.

The state will slash copays for generic drugs for these state retired workers beginning in July from $14 to zero; preferred, name-brand drugs from $27 to $3; and non preferred from $54 to $11, Lyons said. Figures are slightly different for retirees enrolled in HMO plans.

After the six-months of cut-rate prices, copays will return to their 2012 levels, before the Christie administration "unilaterally" raised them, Lyons said. Out-of-pocket maximums will also be cut.

Rather than reimbursing retirees for the increased cost in their prescriptions, the state will effectively credit them going forward.

A sweeping pension reform package in 2011 shifted authority over state health benefits plans to a 12-person State Health Benefits Plan Design Committee, with representation split equally between union and gubernatorial appointees.

When that panel deadlocked over retiree prescription co-pays, the board that had previously made such decisions -- the State Health Benefits Commission, whose members were appointed by the governor -- voted to approve higher rates and the Division of Pensions made them effective in January 2013.

Union representatives argued that the pension division had overreached, and the court agreed, saying the law "unmistakably gave (State Health Benefits Plan Design Committee) the authority to set, among other things, retiree prescription copayment levels..."

The state should have maintained the status quo while the plan design committee hashed it out, the court said. The ruling forces the design committee to negotiate changes to the health care plan, Lyons added.

"One side can't just unilaterally impose what it wants on the other side," he said.

The higher rates affected thousands of retirees, including Camille Gaeta, a former teacher and staff developer who put in four decades in Newark schools before retiring in 2009.

On her most recent trip to pick up four prescriptions for her ailing husband, Gaeta paid $62 out of pocket, bringing her copays for March to $166. The increases in prescription copays over the years have amounted to "quite a bit of money for us," she said.

She makes those trips regularly, and will reach her more than $1,572 out-of-pocket maximum for prescriptions by May or June.

"We get into the catastrophic levels," said Gaeta, who said that at same time copays have been rising, she hasn't received any cost-of-living increases in her pension -- another feature of the 2011 pension reforms.

"I must struggle to keep vigilant as to every dollar I spend," she said.

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