State health benefits face projected double digit rate hikes amid rising costs

The Assembly Budget Committee of the New Jersey Legislature convened on April 2, 2025, to discuss pressing financial issues related to the state's health benefits plans. The meeting highlighted significant concerns regarding the rising costs of health benefits for state employees, local governments, and school boards.

The discussion began with an overview of the escalating expenses associated with the State Health Benefits Plan (SHBP) and the School Employees Health Benefits Plan (SEHBP). Officials noted that costs have been increasing steadily over the past several years, with expectations for even higher rate increases this year. The rate-setting process, which will begin in late June, is anticipated to reveal double-digit increases, particularly alarming for the local government section of the SHBP.

A key point raised was the trend of healthier towns opting out of the SHBP to seek more affordable health coverage elsewhere. This shift is exacerbating financial issues within the local government section, with projections indicating potential rate increases exceeding 20% for the 2026 plan year. To stabilize claims, a margin of approximately 19.5% would be necessary, not accounting for the rising costs of health benefits.

The committee also discussed the underlying factors contributing to these cost increases, including the rising expenses of healthcare services and the demand for high-cost medications, particularly GLP-1 drugs and specialty drugs. A recent study indicated that the design of public employee health plans—shaped by years of legislative and administrative decisions—plays a significant role in the cost disparities compared to other employer-sponsored plans.

Treasury officials emphasized that they lack the unilateral authority to implement necessary reforms to address these challenges. The committee acknowledged the ongoing fiscal pressures and the need for collaborative efforts among all stakeholders to tackle the increasing costs of health benefits.

In conclusion, the meeting underscored the urgent need for a renewed focus on health benefits reform as the state grapples with rising costs that impact public employees and local governments alike. The committee plans to continue discussions on these issues in future sessions, aiming to find viable solutions to the financial challenges ahead.