Public Worker Health Benefits Up For An Overhaul

Leo Migdal

-Dec 3, 2025, 11:24 AM

public worker health benefits up for an overhaul

Murphy wants policy changes to manage costs, prevent ‘death spiral’ John Reitmeyer, Budget/Finance Writer | November 24, 2025 | Health Care, Politics In the final lame duck legislative session of his two terms in office, Gov. Phil Murphy wants lawmakers to pass an ambitious plan to rewrite state policies governing health benefits offered to many government workers in New Jersey. Murphy’s plan — unveiled during a speech delivered at the state League of Municipalities conference in Atlantic City last week — would revise health plans for thousands of county and local government workers whose... The plan also calls for reforming the governance structure of the local section of the benefits program itself, as well as requiring the government employers that join the program to remain in it for...

While delivering his final keynote address today at the New Jersey League of Municipalities Annual Conference, Gov. Phil Murphy proposed a rescue and overhaul of the beleaguered State Health Benefits Program for Local Government Employees (SHBP-LG), which would include providing $260 million in near-term relief to keep the program solvent. SHBP-LG is a state-administered health insurance plan that covers employees of participating local government entities, such as cities, counties and municipalities. The governor noted that as healthcare costs continue to increase – with premiums having gone up by roughly 60% – an increasing number of employers are withdrawing from the program. This has created what actuaries have dubbed a “death spiral.” Murphy said that without reform, tens of thousands of people would be impacted and potentially lose healthcare.

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 BiryukovReprinted with permissionNew 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... 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... 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... Home > Legal News > N.J.’s Public Worker Health Plan Is Broke — and Murphy’s $260M Bailout Could Trigger the Biggest Benefits Fight in a Decade

New Jersey’s health insurance program for nearly 150,000 local government workers is on the brink of financial collapse — and Gov. Phil Murphy says only a $260 million taxpayer-funded bailout can stop it. But his plan comes with a bombshell condition: workers will pay sharply higher premiums, higher deductibles, and lose nearly all of their plan options. Union leaders are calling it an ambush. Economists are calling it a market failure. And lawmakers are now staring down the largest benefits showdown since the Christie-era pension wars.

Murphy’s message to public employees was blunt: the State Health Benefits Program (SHBP) is broke, bleeding members, and will implode next year without sweeping structural changes. Unions had a different message: “This proposal is a joke.” Premiums in the SHBP for local workers have surged 59% in three years, causing major counties and towns to flee to private carriers. That exodus left behind a smaller, sicker pool — driving costs even higher. For hundreds of municipalities and local government entities around New Jersey, the State Health Benefits Program-Local Government provides health coverage to local employees. But as premiums have skyrocketed — rising nearly 60 percent in the last four years — local governments have been withdrawing from the plan, seeking coverage elsewhere.

Those departures have, in turn, caused premiums to rise more. The escalating situation needs significant reforms, Gov. Phil Murphy said at the League of Municipalities conference, to curtail what the state Treasury Department says is a "death spiral" of spiking premiums and government entities leaving the program. There are nearly 650 local government employers and more than 150,000 New Jersey residents, including active employees and retirees, enrolled in the program. A rate increase of 36.5 percent for the SHBP-LG program was recommended to the State Health Benefits Commission by AON, the actuarial firm that examines the trends in claims and what is needed to... That increase was ratified by the commission.

The State Health Benefits Program that insures nearly 150,000 county and municipal employees in New Jersey is broke and headed for collapse next year, unless members agree to pay thousands of dollars more for... Phil Murphy announced Thursday. The Democratic governor proposed spending $260 million in state funds to rescue the program by paying off its debt and creating a reserve fund to pay unforeseen excessive claims. But workers would have to pay much more in premiums and out-of-pocket costs. They will also see their choice of plans reduced from 50 to six, according to the governor’s office. Premiums have risen 59% over the last three years, causing dozens of the largest counties and municipalities to flee for cheaper insurance options.

That’s left behind a weaker, sicker pool of members and a program that is headed for disaster, state officials have said. Murphy outlined the proposal in a speech at the New Jersey League of Municipalities’ annual conference in Atlantic City, which is heavily attended by members of the state Legislature, labor leaders and local government... A majority of the 40-member state Senate and 80-member state Assembly would have to approve a bill containing his proposed changes — and fast. Murphy leaves office after eight years on Jan. 20, when Gov.-elect Mikie Sherrill becomes New Jersey’s chief executive and inherits this problem. Assembly Speaker Craig Coughlin on the Assembly floor on June 30, 2025 (Dana DiFilippo | New Jersey Monitor)

Another fight is brewing over New Jersey’s already beleaguered public worker health plans. A provision in the $58.8 billion budget Gov. Phil Murphy signed into law Monday night calls for the state or its unions to identify $100 million of savings within the state part of the State Health Benefits Program for the first half... It spurred alarm among public-sector unions and a promised fix from Assembly Democrats, all of whom are on the ballot this fall. “It’s clear that there is no immediate need to require state workers to pay more for their health benefits,” said Assembly Majority Leader Lou Greenwald (D-Camden). New Jersey’s public health plans are in distress amid rising health care costs, spiking prescription drug utilization, frequent deadlocks in Plan Design Committees that set coverage rules, and soaring premiums spurred by — and...

NJ state workers could see major changes to their health benefits under a tentative deal announced Thursday by Gov. Phil Murphy and 17 public sector unions. The plan could save the state about $75 million in the final six months of Fiscal Year 2026, but it still requires approval from the State Health Benefits Plan Design Committee later this month. If approved, the proposal would mark the most significant update to state health benefits in more than a decade. It includes higher deductibles and out-of-pocket limits for in-network and out-of-network care, new co-pays for prescriptions, lab work, and imaging, limits on out-of-network physical therapy, and incentives to use in-network surgical centers. Officials say the changes aim to curb costs while maintaining access to care.

The state also agreed to waive premium escalator increases this year, giving employees immediate relief. Union leaders, who have historically clashed with past administrations over health benefits, called the deal a collaborative approach that balances savings with protections for workers. The agreement includes a plan to produce a transition report for the next governor and legislature, identifying longer-term strategies to manage health care costs. While the projected $75 million in savings falls short of the $100 million target outlined in the current state budget, Murphy’s office said it would support repealing that budget language if the committee approves... A vote by the Plan Design Committee is expected later this month. If the proposal passes, the changes would take effect Jan.

1, 2026. Until then, it remains a plan — one that could reshape how tens of thousands of state workers and their families pay for health care.

Public Worker Health Benefits Up For An Overhaul

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