Governor Murphy's Shocking $250 Million Proposal: Will Local Workers Finally Get Relief? Find Out!

SHBP-LG is Structurally and Financially Unsustainable and Technically Insolvent; Claims Stabilization Reserve is Depleted

Without Significant Legislative Reform, SHBP-LG Will Collapse, Impacting Tens of Thousands of Beneficiaries and Their Families

Rates and Premiums of SHBP-LG Have Increased by Nearly 60% Over the Past Four Years

ATLANTIC CITY — In a pivotal address at the New Jersey League of Municipalities Annual Conference, Governor Phil Murphy sounded the alarm on the precarious state of the State Health Benefits Program for Local Government Employees (SHBP-LG). He emphasized that without significant legislative reform, this crucial health care program risks collapse, potentially affecting tens of thousands of beneficiaries and their families across New Jersey.

Governor Murphy underscored the drastic situation, stating, “The State Health Benefits Program for Local Government is on the brink of collapse. As health care costs have skyrocketed over the past few years, premiums have gone up by roughly 60%. And more and more employers are withdrawing from the program, which has created a ‘death spiral.’ 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. We cannot allow that to happen.”

The Governor's remarks point to alarming trends: the SHBP-LG, which provides health benefits to local government employees, is facing a depletion of its Claims Stabilization Reserve and a structural crisis that could leave countless families without coverage. He proposed a series of legislative solutions aimed at preventing this potential catastrophe.

Among the reforms he suggested, Murphy mentioned a willingness to provide $260 million in near-term relief to maintain the SHBP-LG's solvency. This includes $180 million in loan balance forgiveness and $80 million for replenishment of the Claims Stabilization Reserve. He emphasized that these funds would require smart structural and governance reforms to ensure long-term stability.

The proposed legislative solutions encompass various strategies:

• Near-Term Relief:
  • Providing $260 million in immediate financial support to ensure the program can weather the current crisis.
• Plan Modernization:
  • Simplifying the health care offerings by reducing over 50 plans to three high-quality options: a PPO, a high-deductible plan with a Health Savings Account, and a tiered network plan.
• Governance Improvements:
  • Establishing a new seven-member State Health Benefits Program – Local Commission to oversee all matters related to SHBP-LG.
  • Modifying the State Health Benefits Program Plan Design Committee to enhance decision-making and responsiveness to market changes.
  • Introducing a tie-breaking vote to overcome historical gridlock issues within the governance structure.
• Employer Retention:
  • Stabilizing the program by mandating that local government employers either remain in or withdraw from the SHBP-LG for a minimum of five years to reduce volatility.

These reforms come in the wake of a concerning report from AON, which recommended a rate increase of 36.5% for the SHBP-LG. This increase, approved by the State Health Benefits Commission, reflects broader inflationary trends affecting health care nationwide, yet the SHBP-LG’s annual cost hikes are significantly steeper than those faced by other public employee plans.

In a study released in May, the Division of Pensions and Benefits highlighted several factors contributing to the rising premiums, including the plan's high actuarial values and limited utilization management requirements. The report pointed to the need for modernizing the plan design to encourage more cost-effective health care decisions while still providing quality coverage.

As New Jersey grapples with these challenges, stakeholders must consider the implications of the proposed changes. The SHBP-LG's stability is critical not only for local government employees but also for the broader community that relies on these essential services. Without effective and immediate action, many could face a future without reliable health care access.

Governor Murphy concluded his address stressing the urgency for action, stating, “Achieving this goal will require hard decisions. But that is what good government is all about: making reasonable reforms to advance the public good.” The commitment to reform may very well determine the future of health coverage for tens of thousands in New Jersey, underscoring the importance of proactive governance in times of crisis.