What is the A4 Surcharge?
C.52:14-17.38C Surcharge Payable to the State Health Benefits
Program
The insurance company, hospital service corporation, medical
service corporation, health service corporation, or health
maintenance organization shall annually pay to the State Health
Benefits Program a surcharge in form of a percentage of a claims
paid by the insurance company, etc., etc., which are attributable to
the coverage of the employees of the Board and their dependents for
the time period from July 1 through the following June 30. The
Surcharge shall be paid on or before December 31st of the time
period for which it is payable in the manner prescribed hereinafter.
The initial surcharge percentage for the time period July 1, 1993
through June 30, 1994 shall be 3.25%. The State Treasurer shall
thereafter annually re-determine the Surcharge percentage, which
shall be the percentage of total claims paid for active employees
and for retired employees receiving health care coverage under the
State Health Benefits Program. Pursuant to Section 3 of P.L. 1997
C.384.
Approved January 14, 1993.
Recent Developments:
February 27, 2001
Grinspec faxed and emailed the following
to both clients & non-clients:
We are calling your attention to the proposed legislation to
repeal the A-4 Surcharge. As you are aware, in September 1999 the
State Treasurer decreased the rates to 3.6% for fiscal year
07/01/00, and 2.2% for fiscal years 07/01/01 and 07/01/02.
Senate Bill S-943 and Assembly Bill A-753 call for the Surcharge
to be abolished and refunds to be given for the years of 1997 -
2000. Senate Bill S-943 was voted unanimously from the Senate State
Government Committee on December 14, 2000. The Assembly Bill A-753
is awaiting action before the Assembly State Government Committee.
The Senate Bill is scheduled before the Senate Budget Appropriations
Committee on March 15, 2001.
In the past, NJEA has opposed the elimination of the A-4
Surcharge, implying that retirees may lose their free health
benefits. This is far from the truth. In reality, it is important to
note that the premiums for retiree coverage are paid directly to the
State Health Benefits Program by the Teachers-Pension and Annuity
Fund. The Surcharge funds actually helped to reduce the premiums for
active employees in the State Health Benefits Program. Also, as of
June 30, 1999, the balance in the post-retirement medical fund
account of the Teachers Pension and Annuity Fund Plan Net Assets was
$262,353,192. That money is available to fund premiums for retirees.
We urge you to write to Senators Littell and Cardinale and
Assemblymen Zecker and Augustine, as well as your own legislators,
in support of this bill.
Grinspec's Involvement on the A4 Surcharge
Grinspec has aggressively fought the Surcharge since its
inception as part of the Quality Education Act of 1993. This
includes the following chronology of events:
- Developed a "White Paper" on the Surcharge and "Legislative
Alerts" in December of 1992 - prior to the passage of the QEA Act.
Sent letters to affected boards asking them to oppose it.
- Testified in collaboration with insurance companies before
Senate Committees - prior to the passage of the Act.
- Employed a Lobbyist in the Spring of 1998 to coordinate
efforts to obtain legislation to amend or repeal the Surcharge.
- On April 20, 1998 and June 8, 1998 sent "Legislative Alerts"
to all school districts affected by the Surcharge.
- In October, 1998 obtained Legislative Bills from Assemblyman
Christopher "Kip" Bateman and Senator Martha Bark to cap the
Surcharge at 2%.
- At the October 28-30, 1998 NJSBA workshop, received 350
signatures opposing the Surcharge. This petition was submitted to
Assemblyman Augustine's Committee on February 11, 1999.
- On February 11, 1999 testified before Assemblyman Augustine's
State Government Committee.
- On February 25, 1999 met and presented a position paper
opposing the Surcharge to the State Pension and Health Benefits
Review Commission.
- On April 8, 1999 met with management and attorneys for the
insurance companies affected by the Surcharge.
- In September, 1999 were notified that the State Treasurer had
reduced the Surcharge over the next three fiscal years:
Fiscal year 1999 - 3.6%
Fiscal year 2000 - 2.2%
Fiscal year 2001 - 2.2%
- On September 14, 1999 faxed a memo to all districts notifying
them of the A-4 Surcharge reductions.
- While we applaud the Treasurer's actions, Grinspec will still
pursue the repeal of the A-4 Surcharge. The financial condition of
the pension fund, especially the surplus in the Retiree Health
Benefits account obviates any reason to keep the Surcharge.
In summary, we believe the above represents the ongoing efforts
of Grinspec in saving our clients money in the second largest line
item of their budget. All of these efforts are beyond the normal
scope of a consultant or a broker and we are proud to say that it
represents the spirit of Grinspec in servicing our clients.
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