The NJ State Department of Treasury released a report on May 20th confirming that the State Health Benefits Program for Local Government (SHBP-LG) has become financially unsustainable and needs immediate intervention to survive. The report also states that the School Employee Health Benefits Plan (SEHBP) is on the same trajectory and likely to follow the SHBP-LG’s deterioration.

The Immediate Financial Impact

A potential 26.5% increase could be applied as a combination of a mid-year rate increase in 2025 and/or factored into future renewals. This potential 26.5% increase is a culmination of the 7% premium rate increase required to repay the $120 million dollars still owed on a $258 million dollar loan and based on the SHBP-LG exhausting its claim stabilization reserves (CSR) which calls for an additional 19.5% increase.

This increase would be in addition to normal medical and prescription trends. The State’s consulting firm, Aon, projects prescription trends of 18% to 23% for 2026, with medical trends estimated at 8% to 10% based on current SHBP-LG data.  

What This Means for Plan Sponsors in the SHBP-LG

According to the Department of Treasury, immediate action is necessary for the SHBP-LG to survive. These actions require significant rate increases, forced plan design changes, and/or legislative actions. Plan sponsors should begin evaluating alternatives now to avoid compounding rate increases in 2025 and 2026 as well as potential plan design changes.  

Plan sponsors and their brokers should explore private carriers who can offer full risk protection and/or who can offer access to trusts or group purchasing organizations, which provide for greater stability by spreading the risk through such arrangements. While such quotes will likely show double-digit increases, private carriers do not carry the same financial burden as the SHBP does (i.e., debt burden and CSR requirement), which represents a considerable financial reduction for groups who transition sooner rather than later.

NEXT STEPS

Plan sponsors in the SHBP should obtain their most recent claim experience and census as soon as possible which will allow private carriers to provide the most accurate quotes.   If you are currently contracted with a broker, have them contact Benecard’s Vice President of Sales, Richard Van Noord, at (609) 651-5412 or Richard.VanNoord@benecard.com. If you do not have a broker, you can contact Richard directly to explore available solutions.