Rising health insurance costs for public employees in New Jersey have frequently been in the news in recent years, leading some government officials to call for restructuring benefit plans, including the School Employees’ Health Benefits Program (SEHBP) that covers many active and retired NJEA members.
While most NJEA members have been protected from those cost increases because of NJEA’s work to pass Ch. 44, which gives members the opportunity to pay a percentage of salary rather than a percentage of ever-rising premiums, school districts have begun to cut staff and programs, threatening both members’ jobs and our ability to provide students the opportunities they need. Boards of education and school district business administrators cite unsustainable increases in health insurance costs as one reason for those cuts.
There are many reasons for increasing health insurance costs. NJEA is focused on finding solutions that respect collective bargaining, prioritize student safety and learning and maintain public education as an attractive career.
The history of public employee health benefits
In 1961, the New Jersey Legislature passed the State Employees Health Benefits Act to provide health insurance coverage for full-time state employees and appointed or elected officials. The legislation aimed to protect public employees from the high cost of health expenses by offering affordable coverage through their public employers. It was also a way for the state to attract and retain qualified staff despite lower public-sector salaries.
By 1964, the program was expanded to allow other public employers, including school districts, to buy into the state’s health insurance program. In 1972, the act was renamed the New Jersey State Health Benefits Program (SHBP). Joining the state program has always been a choice for school districts, with many deciding to purchase health insurance elsewhere.
In 2007, a new law moved education employees from the SHBP to the newly established SEHBP.
While boards of education have always had the right to decide where they purchase insurance coverage, most other aspects of health insurance plans, including the cost employees paid, remained negotiable until 2010. The law imposed increased costs on public employees, including a provision that undermined collective bargaining by mandating that public employees contribute 1.5% of their salary toward their health insurance.
In 2011, Gov. Chris Christie and his allies in the Legislature, including top Democratic leaders, passed and signed Ch. 78. In addition to creating the damaging Tier 5 pension, that law mandated that public employees and retirees pay more toward their health insurance, with contributions ranging to 35% of the ever-rising premium cost, often totaling thousands of dollars each year.
The battle for relief
Public sector salaries could not keep up with skyrocketing health insurance premiums. Many members found themselves working just to pay for their health insurance. Some saw their paychecks decrease year after year because small salary increases were not enough to offset large jumps in health insurance contributions, what we came to call negative net take home pay.
Recognizing that a legislative fix was needed, NJEA leadership, county and local leaders and staff formed a steering committee to launch the Ch. 78 and ESP Job Justice campaign. Members signed petitions and spoke to legislators about the financial hardships created by Ch.78’s imposed health insurance contributions.
In July 2020, Ch.44 was signed by Gov. Phil Murphy. The law provided relief from most of the harmful health insurance mandates of Ch.78. It gave school employees access to two new high-quality health insurance plans, the New Jersey Educators’ Health Plan (NJEHP) and the Garden State Health Plan (GSHP). Under these plans, employees pay a percentage of salary rather than a percentage of the premium, which protected NJEA members from spikes in premium costs and saved many people thousands of dollars per year. Districts that purchase private insurance outside of the SEHBP must offer employees plans equivalent to the NJEHP or GSHP at the same percentage of salary. Ch. 44 achieved fairness and financial relief for NJEA members.
Maintaining quality and affordable health benefits faces many obstacles.
The SEHBP is governed by the School Employees’ Health Benefits Commission (SEHBC) and the Plan Design Committee (PDC). Both the SEHBC and the PDC have representation from NJEA and the American Federation of Teachers (AFT). Other members of the SEHBC and PDC are governor appointees who represent various state departments, such as the Division of Banking and Insurance. Due to the makeup of the bodies governing the SEHBP, state representatives cannot make changes without some labor approval. This has helped us preserve healthcare benefits for our retirees.
Boards of education often shop around for health insurance and only go into the SEHBP if they cannot find cheaper health insurance elsewhere, either in a private plan, self-insuring or joining a health insurance fund (HIF).
Due to the revolving door of school districts coming into and out of the SEHBP and the higher costs of insuring those that remain, the actuaries for the fund must apply an “adverse selection” factor when figuring out the cost of the premium for the next benefit year. This adverse selection, in conjunction with rapid medical inflation and medical and prescription drug innovation, has led to significant cost increases for school districts remaining in the SEHBP.
Furthermore, the Division of Pensions, which is responsible for running the SEHBP and making sure claims are paid correctly, is not prepared or staffed to run such a large and complex health plan. A 2025 settlement with Horizon, one of the third-party administrators for the SHBP and SEHBP, makes that clear. In that case, several individuals filed suit claiming that Horizon was not paying claims per the contract with the state, resulting in millions of overpaid claims. To settle the lawsuit, Horizon was ordered to pay the state $100 million.
Together, we will do what is necessary to protect our members and their families.
NJEA members on the SEHBP and PDC have repeatedly asked the state representatives to investigate creative reforms to the SEHBP that would focus on driving members to the highest quality healthcare at the lowest possible cost. Our inquiries have been met with resistance and outright refusal to make common sense changes. Rather, the state’s only “solution” to the rising cost of the SEHBP is to make plan design changes that shift more of those costs on to members. But that does nothing to stop costs from rising in the first place. NJEA is firmly opposed to most cost shifting.
Ch. 44, the 2020 legislation that locked in many aspects of active and retiree healthcare plan design and cost-sharing, expires at the end of 2027. Once that happens, school districts will likely push to eliminate salary-based health insurance premium contributions and attempt to shift more of the cost to our members.
Combining our power
One solution is to move authority of the SEHBP to an entirely new entity that would be union-led under a state authority governed by a labor-management board. It would function similarly to the Taft-Hartley plans that trade unions set up for members. This new plan would focus on quality providers to improve long-term health and on provider accountability and transparency.
Another solution could be to move to regional Health Insurance Funds (HIF), where all districts in a geographic area are pooled together to leverage purchasing power. Regional HIFs would also have labor representation on their respective boards.
Pooling resources either in one large fund or a few regional funds will allow us to leverage our size to get better rates from providers and for prescription drugs.
Facing the future
Revamping healthcare in New Jersey will not be a simple task. There are many outside interests, particularly insurance companies, hospital systems and insurance brokers, that make a lot of money from our current system. These stakeholders have armies of lobbyists and will put up a fight. Just as we have in the past, NJEA is committed to finding solutions to the high cost of health insurance.