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  • John DiMartino

"The Difference Card" Controversy

"Bureaucracy defends the status quo long past the time when the quo has lost its status"

- Laurence J. Peter

UPDATE: The ability to use the Difference Card in the SHBP/SEHBP has been questioned since it hit the NJ scene. We are receiving information that the Newark solution has been reversed. As shared on, here is the letter sent to the City of Newark. As always, check with your board attorney for details regarding your individual situation.

In a previous post we discussed the rise of The Difference Card, a health reimbursement account used to provide rate relief to both employers and employees, while maintaining benefit levels. As with any company that challenges the status quo, it seems that The Difference Card is surrounded by as much controversy as it is interest. Let's investigate...


You may be aware that health broker compensation is typically paid as a percentage of the total premium, most commonly between 1% - 5%. Since The Difference Card reduces the annual premiums by as much as 20%+... you can guess what else it lowers. Given the nature of the broker compensation model, there is little incentive for the market leaders to introduce this solution.

This conflict of interest begs the question.. what's more important? Fiduciary responsibility to represent your clients' interests, or duty as an employee to maximize stockholder profits?


The collective bargaining units have done a great job ensuring that public employees have access to the best health care plans available. In some instances, bargaining units have gone as far as preventing the addition of lower cost health options for fear that they may one day become the new base plan. The introduction of The Difference Card stirs up those fears. In order to work, the current base plan (usually Direct 10 or 15) transitions to the 2030 plan. The funds from The Difference Card are used to reimburse the difference between the Direct 10 and 2030, thus providing equal-to-or-better-than benefits.

Does The Difference Card have to be negotiated?

The answer is unclear since thus far it has only been implemented with support from the union. With that said, I expect that at some point a board or council will unilaterally try to implement The Difference Card. Since the collective bargaining agreements commonly dictate the level of benefits that must be offered, not necessarily the means by which they are offered. For example, lets say the agreement calls for a $10 primary care copay. With The Difference Card, the employee has a $20 copay, swipes The Difference Card for $10, and pays the remaining $10 with their own funds. Is that not essentially the same thing?


This one is hotly debated. In a private health plan, if an HRA is implemented, the insurance company has the ability to "re-rate" the group. In short, the insurance company can increase the premium if an HRA is used. Obviously, this lowers the amount of savings available to the employees and the board/council.

In the SEHBP/SHBP however, the rates are filed with the State of NJ and cannot be changed. This provides a huge incentive for SEHBP/SHBP participants to use The Difference Card, since they would be able to achieve the maximum amount of savings for employees and the board/council.

While this is a great strategy for participants, it may distress an already under funded SEHBP/SHBP. In the short term, the State Plan would have to issue large increases to make up the money it lost. In the long term, this could fuel the adverse selection death spiral and push more groups into the private marketplace.

Keeping that in mind we have been given our first clue. On 8/1/2017 the City of Newark transitioned from a private health plan to the SHBP. The collective bargaining agreement guaranteed retirees richer benefits than were available in the SHBP. To make up the difference, and after some debate, the council decided to use The Difference Card. The Council was required to issue "a request for approval" with the Division of Pension and Benefits. They received approval from the Department of Community Affairs and went ahead with the implementation.

While the Division of Pension and Benefits has not provided clarity on the use of The Difference Card, as of now it appears to be an option for those with distressed budgets, regardless of your participation in the SEHBP/SHBP.

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