TRENTON, N.J. — New Jersey officials are warning of likely double-digit rate increases for state-administered health plans in 2027, citing ongoing financial and structural challenges.
The Department of the Treasury released two midyear reports prepared by plan actuary Aon indicating that both the State Health Benefits Plan and the Local Government Plan could see significant cost increases in the upcoming plan year. Officials said similar trends are expected for the School Employees Health Benefits Plan.
The reports, presented at a recent State Health Benefits Plan Commission meeting, do not set final rates but provide an overview of financial conditions and cost trends that could lead to higher premiums when recommendations are made later this year.
According to the reports, several factors are contributing to rising costs, including increased medical and prescription drug claims, higher utilization of specialty and behavioral health services, and growing use of high-cost GLP-1 medications.
Another key factor affecting the Local Government Plan is the departure of lower-cost members. Officials said some local government employers with lower health care usage are leaving the plan in favor of private market options, while remaining members are increasingly enrolling in lower-premium plans. These shifts reduce revenue and leave a higher concentration of costly claims within the system.
The report projects a negative balance of $209 million in the Local Government Plan’s claims stabilization reserve for 2026, reflecting accumulated losses that could contribute to higher future rates.
State officials have previously warned about long-term sustainability concerns. In a report issued last year, Treasury noted the Local Government Plan could face an actuarial “death spiral” without reforms to control spending and cost growth.
The latest findings follow a separate report indicating that the School Employees Health Benefits Plan could also experience similar increases due to comparable financial pressures.
Final rate recommendations for 2027 are expected later this year.
