Health benefit premiums for NJ school workers expected to rise by 34%

Active school workers' health insurance premiums on a beleaguered state-run plan should rise by 34% in 2027, state actuaries told the School Employees Health Benefits Commission on Wednesday.

The steep increase follows years of similar rises that have put the School Employees Health Benefits Program on the path to collapse as high costs push healthier workers to cheaper private options in a vicious cycle that pushes costs higher still.

"Public schools and public school employees cannot continue absorbing annual increases of this magnitude without consequences," New Jersey Education Association President Steve Beatty, Vice President Petal Robertson, and Secretary-Treasurer Tina Dare said in a joint statement.

Early retirees' premiums should increase by 11%, actuaries told the commission, while Medicare retirees' rates should rise by 6%.

The increases are largely meant to keep active school workers' plan solvent, whether by rebuilding the program's depleted reserves or by drawing enough funds to repay loans it's expected to take to fund health claims this year.

Gov. Mikie Sherrill last month signed legislation that would allow active workers' plan to take loans from the plan that serves retired school workers if the former plan's reserves fall beneath the level needed to cover 10 days of claims.

The plan for active workers is expected to borrow $78 million to cover health claims in 2026, according to Treasury projections, and that loan must be repaid by premiums collected the following year. The plan's claims stabilization reserve — its surplus — is expected to finish 2026 with a negative balance of $56 million.

The increases unveiled Wednesday for 2027 seek to build reserves up to equal one month of claims, rather than the two months targeted in past years. Premiums for active workers would have risen 40% if the target were two months, Aon, the state's actuary, said in its analysis.

School districts' ability to freely move between the public plan and options in the private market continued to contribute to the increases, said Joe Tappe, a vice president for Aon.

For years, school districts have fled the public plan as costs rose, leaving behind districts with older, sicker workers who are more costly to insure. Those departures push rates up alongside risk, prompting more departures that start the cycle anew.

"The employers who are generally able to find lower cost coverage outside the SEHBP, they tend to have lower costs, and when they leave, it leaves behind a pool of experience that is higher cost than what was in there previously," Tappe said.

The public plan for school workers paid 88% more per employee than plans on New Jersey's health insurance marketplace, Tappe said, partly because the public plans offered significantly more generous benefits, had older workers on average, and typically covered more dependents.

Actuaries last week unveiled their rate recommendations for the public health plans used by state and local government workers. Those workers premiums should also rise by double-digits, the actuaries said, though their proposed increases are smaller.

The State Health Benefits Commission and its schools counterpart will hold their next rate renewal meetings on July 27.

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Courtesy of New Jersey Monitor