Since we first reported on the topic in June of this year, the financial crisis facing the New Jersey SHBP-LG has only deepened — and NJ Governor Murphy is now proposing a dramatic rescue and reform plan that many labor leaders have already denounced.

The proposal includes a major financial bailout, changes to the benefit offerings and contract requirements, and a revamp to the committee that oversees program reform.

Let’s take a look at the proposal details so far.

$260 Million Bailout

In his final keynote address at the 2025 New Jersey League of Municipalities conference, Governor Phil Murphy laid out a $260 million plan to stabilize the SHBP-LG, with the general expectation that it will allow for a rate reduction in early 2026. The funds would be allocated as follows:

• • • $180 million towards loan forgiveness for past unpaid claims.

  • • $80 million to replenish the already depleted Claims Stabilization Reserve.

Structural Reforms to Coverage

On top of the proposed bailout, there is also a push to change how the SHBP program works and is administered. This would include:

• • • A dramatic dip in the number of health plan options offered.

  • • Limitations set on all offered prescription plans, including a 3-tiered exclusionary formulary (consistent with the NJEHP and GSHP) — plus higher copays, mandatory generic, and separate copays for specialty and weight loss meds.

  • • Likely cost shift, with more costs to employees. For example:
    • Primary care copays could triple (from $10 to $30).
    • Emergency room copays could rise (from $75 to $300).
    • Deductibles would go up sharply. Under the PPO: $2,500 in-network, $5,000 out-of-network.

  • • Proposed “stay-in” and “stay-out” requirements: local governments would be required to stay enrolled for at least five years, and if they choose to leave, will be locked out for five years.

New Oversight Structure

To prevent the governance issues that have bogged down reform efforts in the past, Murphy’s proposal would create a seven-member commission, with representation from municipal employers and employees replacing the old 12-member panel.

Public Reactions

While this proposal has only just become public knowledge following the League of Municipalities Conference, it is already being met with resistance. Union leaders are amongst the most outspoken critics. The CWA (Communications Workers of America) has called the proposal a “non-starter,” arguing it shifts too much cost to workers and weakens benefits. Meanwhile AFSCME (American Federation of State, County, and Municipal Employees) has also blasted the plan, with its executive director calling it “an insurance executive dream.” And one labor leader framed the state’s approach as failing to address root cost drivers, like hospital pricing and drug costs.

As the conditions of the bailout progress and the question of whether the SHBP will still exist in 2026 looms, Benecard will stay connected to all developments and continue to keep our readers updated. If you have questions, please email us at talktous@benecard.com.

Sources:

SHBP-Local Government’s Financial Crisis – Benecard
State Health Benefits Program broke: Murphy proposes $260M bailout – nj.com
https://www.nj.gov/governor/news/news/562025/approved/20251120b.shtml
https://newjerseymonitor.com/2025/11/20/governor-murphy-state-health-benefits/
https://www.lawyer-monthly.com/2025/11/n-j-s-public-worker-health-plan-is-broke-and-murphys-260m-bailout-could-trigger-the-biggest-benefits-fight-in-a-decade/
https://patch.com/new-jersey/across-nj/njs-state-health-benefits-plan-death-spiral-murphy-proposes-260m-fix
https://nj.gov/governor/SHBPProposedLegislation.pdf
https://njbmagazine.com/njb-news-now/murphy-announces-plans-to-reform-public-worker-health-plan-system/