Last week, AON presented its recommended 2027 premium increases to the State Health Benefits Commission (SHBC) and the School Employees’ Health Benefits Commission (SEHBC) — and the numbers are substantial for both medical and Rx premiums:

• SHBP – Local Government (Active Populations):
  • +16.7% medical
  • +20% prescription
• SHBP – Local Government (Early Retiree Populations):
  • +35.5% medical
  • +40.4% prescription
    
• View Aon’s SHBP “Plan Year 2027 Rate Setting Recommendation Analysis” Local Government draft report
• View Aon’s “2027 SHBP Rate Setting Analysis” draft report presentation

• SEHBP – School Boards (Active Populations):
  • +32.4% medical
  • +45.5% prescription
• SEHBP – School Boards (Early Retiree Populations):
  • +9.2% medical
  • +18.1% prescription
    
• View Aon’s SEHBP “Plan Year 2027 Rate Setting Recommendation Analysis” draft report
• View Aon’s “2027 SEHBP Rate Setting Analysis” draft report presentation

Both the SHBP and SEHBP rate-setting analyses raise concerns that the proposed 2027 premium increases may not fully resolve the programs’ underlying financial challenges. In both cases, a portion of the increases is being used to repay prior funding obligations and rebuild depleted reserves, rather than solely cover projected healthcare costs.

Key Concerns

• Premiums exceed projected costs:
  • SHBP: Recommended premiums are set 11.3% above projected costs for Actives and 34.5% above projected costs for Early and Medicare Retirees, including repayment of the remaining $90 million Chapter 86 obligation.
  • SEHBP: Recommended Active premiums are set 15.9% above projected claims costs, including a 4.2% margin to repay the projected $70 million Chapter 28 obligation plus an additional 11.7% to help build the Claims Stabilization Reserve (CSR).
• Reserves remain below target:
  • Despite these significant increases, both programs project CSR balances of only 1 month of plan costs, well below the recommended 2-month target.
• Future increases may be needed:
  • Actuaries for both programs caution that additional margin may be required, signaling the potential for further premium increases in 2027 and beyond.
• Participation risk:
  • The analyses warn that rising costs will likely drive lower-risk employers out of the plans, increasing costs for those who remain and potentially creating additional financial pressure.
    • SHBP: This includes anti-selection assumptions of 5% in 2026, and 3% in 2027 reflecting the increased risk of employers choosing to leave the plan as a result of the additional cost.  This level of anti-selection may be insufficient if attrition from the plan is significant.
    • SEHBP: This includes anti-selection assumptions of 5% in 2026, and 4.75% in 2027 reflecting the increased risk of employers choosing to leave the plan.  Active enrollment is expected to decrease to 8.75% in 2027.

Bottom Line

While these increases are still recommendations and are not yet finalized, they reflect the ongoing financial instability in the state plans. Employers, employees, and retirees risk needing to absorb substantial premium increases, reduced benefits, and more out-of-pocket cost sharing with little confidence that it will be enough to meet targets and avoid future rate hikes—raising concerns about long-term affordability and sustainability.

Benecard will continue to update you on any further developments with the final 2027 rate actions as more information is released.

In the meantime, for plan sponsors enrolled in the SHBP or SEHBP, now is the time to start evaluating alternative options. In this volatile market, Benecard’s fixed-rate prescription benefit model can offer greater predictability and stability. Contact Richard Van Noord, Vice President of Sales, at Richard.VanNoord@benecard.com or (609) 651-5412 to learn about our unique prescription benefit solutions and to start a quote.

Sources:

1. Plan Year 2027 Rate Renewal Reports (recommendations):                                
https://www.nj.gov/treasury/pensions/rate-renewal.shtml

2. Aon’s SHBP “Plan Year 2027 Rate Setting Recommendation Analysis” Local Government draft report: https://www.nj.gov/treasury/pensions/documents/hb/rate-renewal/py2027-rate-setting-analysis-local.pdf

3. Aon’s “2027 SHBP Rate Setting Analysis” draft report presentation: https://www.nj.gov/treasury/pensions/documents/hb/rate-renewal/shbp-2027-rate-setting-analysis.pdf

4. View Aon’s SEHBP “Plan Year 2027 Rate Setting Recommendation Analysis” Education draft report: https://www.nj.gov/treasury/pensions/documents/hb/rate-renewal/py2027-rate-setting-analysis-education.pdf

5. Aon’s “2027 SEHBP Rate Setting Analysis” draft report presentation: https://www.nj.gov/treasury/pensions/documents/hb/rate-renewal/sehbp-2027-rate-setting-analysis.pdf