Gov. Phil Murphy's proposal to revamp the health benefits program for government workers would shift costs away from premiums and onto health care visits. The state's largest public-sector union is opposed. (Hal Brown for New Jersey Monitor)
By Nikita Biryukov
Reprinted with permission
New Jersey Monitor
Gov. Phil Murphy proposed an overhaul of the state’s public worker health plans for local governments on Thursday that would flatten the number of plans offered to government workers, shift more costs for health care visits onto workers, and inject $260 million in a bid to attract local governments that have fled the public plan over years of steep premium hikes.
Murphy’s proposal comes as the local part of the State Health Benefits Program threatens to collapse amid a dwindling pool of subscribers driven ever smaller by rising rates that spur more departures and, in turn, more rate increases. And it comes as Murphy, a Democrat, is nearing the end of his two terms as governor. Gov.-elect Mikie Sherrill (D) succeeds him in January.
“Unless we take sweeping action now to shore up this program, there are tens of thousands of New Jerseyans whose access to health care will be in serious jeopardy, and next June’s rate increases will be astronomical,” Murphy said during a speech at the New Jersey League of Municipalities’ annual conference.
The State Health Benefits Program covers both state and some local government workers, and the local part is technically insolvent. Even after years of double-digit rate increases — including a 37% increase approved in September — the premiums it collects from local and county governments and their workers are not enough to cover its costs.
Its reserves, which actuaries say should hold enough to cover two months of claims, are depleted, and the local part has been taking loans from state workers’ better-funded plan to continue offering health benefits to nearly 146,000 workers across New Jersey.
That number is falling every year as surging rates push local governments with younger, healthier workforces to cheaper options in the private market, pushing rates up as the program’s insurance pool grows older, sicker, and riskier to insure.
“This program provides health care coverage to our state’s valiant, and often under-appreciated, public servants,” Murphy said, adding, “These New Jerseyans — along with our state’s taxpayers — are counting on us to prevent the SHBP for local government from collapsing.”
The governor acknowledged passing the reforms before he leaves office on Jan. 20 would be difficult.
In a bid to lower premiums, Murphy’s plan would increase workers’ share of health care visit costs, and the proposal has already drawn opposition from the Communications Workers of America, the state’s largest public-sector union.
“This proposal, as it is, is a nonstarter,” said CWA District 1 New Jersey Area Director Tonya Hodges. “The SHBP Stabilization Act of 2025 is nothing but an egregious attempt to dismantle local government health care, continue shifting costs onto the backs of public workers, and perpetuate a system that allows insurance carriers and [pharmacy benefit managers] to increase prices with impunity.”
Senate President Nicholas Scutari said he believes a compromise is possible to address the problems plaguing the State Health Benefits Program. (Hal Brown for New Jersey Monitor) Senate President Nicholas Scutari (D-Union) in a statement said Murphy’s proposal underscores the key tenets needed for reform.
“The foundational principles that are needed to enable the plans to operate effectively and efficiently are the stabilization of local governments going in and out of the system, reducing the number of health plan options, and breaking the stalemate between management and labor. Although the proposals from the Governor and the Assembly address these principles differently, the Senate Workgroup that I charged with addressing this issue believes there is an opportunity for a compromise that preserves vital health care for workers while protecting municipal and county taxpayers,” Scutari said.
Assembly Speaker Craig Coughlin (D-Middlesex), meanwhile, said in a statement that he welcomes discussions on how to lower costs for taxpayers and municipalities “while providing quality, affordable health insurance to public workers.”
Key to Murphy’s pitch is a one-time $260 million appropriation that would be used to pay down money loaned from the state worker side of the State Health Benefits Program. That balance is projected to reach $180 million by the end of 2025, and whatever remains of the appropriation would go into the plan’s reserve.
The appropriation is significant, accounting for about 11.5% of the nearly $2.3 billion that the local government workers’ health plan is expected to spend in 2025, and could allow the state to lower the rates approved in September in early 2026, long before a slew of other reforms take effect in 2027.
At present, the program’s premiums include added charges to repay loans to the state workers’ plan and rebuild the local part’s depleted reserves.
Murphy administration officials hope that rate reduction will encourage local units that have left the plan over rising costs to return, driving rates down as the insurance pool’s risk falls.
“Our administration is willing to provide a quarter-billion dollars, in the short-term, to keep the SHBP for local government solvent in exchange for smart, structural reforms that will stabilize the program in the long-term,” Murphy said.
The governor’s proposal would require local governments to stay inside the State Health Benefits Program for five years once they join and stay out for the same period if they leave. The provision is meant to keep the plan’s insurance pool stable.
Local government workers’ health plans would become less generous under Murphy’s proposed changes, and there would be far fewer plans presented to workers.
At present, the local part of the State Health Benefits Program offers 50 plans, though as many as 95% of local government workers are enrolled in plans that cover at least 97% of health care visit costs, meaning most workers are responsible for paying just 3% of their health care expenses through coinsurance, copays, or deductibles.
That figure, called an actuarial value, does not include premiums and would fall significantly under the three health plans the governor’s proposal would create beginning in 2027.
It would drop to a statutorily mandated 88% under a PPO plan, or 78% under a high-deductible plan. The actuarial value of a proposed tiered-network plan was unclear.
Administration officials hope shifting costs away from premiums will help keep healthier workers in the public plan, and they hope raising workers’ share of health care visit costs will discourage them from seeking unnecessary or excessive care.
That framework would necessarily raise costs for some of the plan’s members, especially those with chronic conditions who require frequent care. Morgan, the Communications Workers of America official, said the proposal would lock government workers “into inferior plans.”
“We should be moving toward more oversight and more affordable benefits,” Hodges said.
Murphy’s plan would also alter governance over local government workers’ health plans.
A new seven-member commission would oversee rate setting and plan design, though they would be bound to keep actuarial values at the levels set in statute.
It would include four cabinet heads from the Departments of Treasury, Banking and Insurance, Community Affairs, and the Civil Service Commission or their designees, giving the state government a majority on the commission.
The governor would appoint the three remaining members, with one each recommended by the New Jersey League of Municipalities, the AFL-CIO, and the state’s largest police and firefighter unions.
Local governments have long sought representation on the bodies that oversee New Jersey’s public worker health plans. They have none under current law.
Treasury officials have said the frequent deadlocks in the state’s plan design committees, whose membership is evenly split between state and labor representatives, have contributed to rising premiums.
Murphy’s proposal would allow the state treasurer to act as tiebreaker if plan design committees that set rules for the state part of State Health Benefits Program deadlock.
