New Jersey would save about $500 million over two years under proposed changes to public health benefits, Gov. Phil Murphy said Monday.
The Democrat announced the union-backed changes just days after he announced that a task force he formed is touring the state seeking ideas on how to cut costs.
The $496 million in savings over two years represent about 15 percent of the $3.4 billion New Jersey paid this year for 800,000 retirees and active workers. Murphy says the state could save $274 million in 2019 and $222 million in 2020 through encouraging in-network care and the use of generic pharmaceuticals.
"Today's agreement is a testament that this approach works - for the State of New Jersey, for workers, and for our taxpayers," Murphy said in a statement.
The agreement comes as the state grapples with an estimated nearly $152 billion liability for public pensions and health benefits, and soon after a bipartisan legislative commission recommended adopting cuts to benefits to lower taxpayer costs.
Murphy has set up his own commission, made up of administration and labor officials, to hold public hearings across the state to consider cost savings.
According to the freshman governor, active teachers and early retirees would get a new plan that will encourage the use of in-network primary and specialty health care. It's not exactly clear how that would work.
The administration also says that the use of generic pharmaceuticals will help cut costs.
The language of the proposal, which faces a final vote Wednesday before the School Employees' Health Benefits Commission, won't be available until next month, according to the administration.
The state's biggest teachers union, the New Jersey Education Association, hailed the proposal. President Marine Blistan said in a statement that deal is a "win-win."
The agreement contrasts with how Republican former Gov. Chris Christie approached benefits. Christie sparred furiously with labor unions who represent public workers and retirees in negotiations over pensions and benefits. He once compared labor to swine feeding at a trough.
Murphy has been a close and vocal ally of unions and was elected, in part, because of their contributions to his campaign last year.
Republicans, who are in the minority in the Legislature, had a lukewarm reception to the news.
Senate Minority Leader Tom Kean Jr. said in a statement that Republicans were encouraged by the "modest savings," but pushed the governor to support cutting benefits further.