Sherrill gives state workers a break as NJ’s health benefits crisis gets worse

🏥 Gov. Mikie Sherrill and 17 unions agreed to freeze state workers’ health contribution rates for 2027 while a new reform effort begins.
💰 The relief doesn’t stop rising costs: Aon recommends a 15.1% premium increase for active state workers in 2027.
⚠️ Years of attempted fixes have failed to stabilize NJ’s public health plans, with one portion officially described as being in a “death spiral.”

Gov. Mikie Sherrill has reached a deal with 17 state employee unions to shield workers from another increase in what they contribute toward health benefits in 2027.

The deal was first reported by New Jersey Globe.

It provides some immediate relief for state workers. It does not, however, fix the increasingly serious financial problems inside New Jersey’s public employee health benefits system.

Under the agreement announced Wednesday, state employee health benefit contribution rates will not increase next year while the administration, unions and other stakeholders launch yet another effort to find a long-term solution.

NJ health benefit costs keep rising

The underlying numbers remain ugly.

Aon, the state’s actuary, has recommended an overall 15.1% premium increase for active state employees in 2027, including a 26.6% increase in prescription drug costs. The projected cost of the state employee and retiree portion of the program alone is approximately $3.9 billion next year.

That comes after years of attempts to rein in spending.

For 2026, Aon initially recommended increases of 21% for state employees, 36.5% for local government plans and 29.7% for school employee plans.

The Murphy administration and unions later approved benefit changes involving deductibles, copays, prescription drugs and other costs. Those changes were expected to produce about $75 million in savings — short of the $100 million originally required by the state budget.

Those changes have not stopped premiums from rising.

A health benefits ‘death spiral’

The problems are particularly severe in the local government portion of the State Health Benefits Program.

A 2025 Treasury report said rising premiums have encouraged healthier and less expensive employers to leave for private coverage. That leaves behind a more expensive pool of workers, which pushes premiums even higher and encourages still more employers to leave.

Treasury called it a self-reinforcing “death spiral.”

The same report warned that even multiple proposed policy changes would not fully correct the plan’s structural problems or halt that spiral. It suggested policymakers may ultimately need to consider an alternative way of providing coverage.

What happens now?

Sherrill’s new agreement creates a working group that will examine everything from vendor contracts and claims to plan design, eligibility, employee contributions and the way the program itself is governed.

There is no deadline for final reforms, and any recommendations will be advisory.

That means the immediate crisis has been softened for state workers, but not solved.

New Jersey has tried higher premiums, benefit changes, new copays, higher deductibles and cost-cutting mandates.

The bills keep going up.

The real question is whether Sherrill can finally repair the broken system — or whether New Jersey will ultimately have to admit the existing model simply doesn’t work anymore.

Report a correction 👈 | 👉 Contact our newsroom