NJ Temporary Disability Benefits (NJ TDB) can be a confusing benefit given the complex nature of the law. At Nelligan Associates, we’ve pretty much seen it all – the good, the bad, and the ugly. We will periodically be sending out information on the most frequently asked NJ TDB questions/topics we come across. If you have any questions, please let us know. Enjoy!
Why doesn’t every group elect to be in a PRIVATE plan if the cost and experience is better than the STATE?
While most New Jersey employers are better off in a private plan, here are the top reasons why they remain in the state fund:
- Client INERTIA
We all know those groups that view any change as negative even if that change has obvious benefits. The client who passes up a six-figure savings with enhanced hospitalization coverage on group health probably isn’t the best candidate.
- Poor Claims Experience
The state caps the employer rate at .75/$100 so groups with very high claims, ie. hospital systems, may be better off with the state. Ironically, these are the same groups who would benefit the most from a private plan but it usually comes down to financials. Insurance carriers may not be able to offer a savings based on claims experience.
- Small Group
As a general rule of thumb, groups with less than 20 employees tend to have minimal claims and could be at a low price point with the state. The potential savings of going private may not be worth making the switch. This is not to say we don’t see smaller groups switching- our book includes many clients with 2, 5, 10, etc. employees. All it takes it one bad claims experience with the state to motivate a group to move.
- Employee Signatures
When moving to a private plan, the state requires 50% +1 employee signatures before approving. This can be difficult for groups with a large remote population or several locations.
The above challenges only apply to a small number of employers. Most groups are intrigued by the enhanced claims/service experience and/or cost savings.