Local School Employee Health Premiums Could Jump 34%

School district employees across New Jersey could face a dramatic 34% increase in health insurance premiums next year, according to recommendations presented to state officials last week.

The Aon company, serving as actuary for the State Health Benefits Commission, delivered the sobering projections at a July 15 meeting. The proposed hikes would affect active education workers most severely, while early retirees not yet eligible for Medicare would see an 11% increase, and Medicare-eligible retirees would face a 6% rise.

The New Jersey Education Association responded swiftly to the recommendations, warning that the increases threaten both school budgets and employees.

"Public schools and public school employees cannot continue absorbing annual increases of this magnitude without consequences," the organization said in a statement. The union called for immediate legislative intervention "to address the rapidly escalating cost of health insurance for public school employees and school districts across New Jersey."

"The rates proposed this week should remove any doubt that New Jersey faces a healthcare cost crisis that demands immediate attention," the statement added.

These latest recommendations compound years of escalating premium costs that have raised serious questions about whether the state plan can remain viable. The parallel program serving municipal workers has experienced similar financial strain.

A 2025 Treasury Department report painted an alarming picture, declaring that the local government workers health plan (SHBP-LG) was entering a "death spiral" that endangered state plan options for municipalities statewide. The same report warned that the education workers plan (SEHBP) appeared headed down a similar path.

"The SEHBP now faces significant financial and actuarial risks and may be on a similar trajectory as SHBP-LG - potentially entering a death spiral in the medium term or experiencing serious affordability issues for its members," the report said.

The crisis has been accelerated by an exodus of participants. Numerous municipalities and school districts have abandoned the state plans in recent years, seeking relief from the relentless premium increases. Many have formed joint insurance funds—essentially pooling resources for self-insurance—while others have turned to private coverage.

Those departures have created a vicious cycle. When municipalities and school districts with the healthiest employee populations leave for private options, the state plans are left covering workers who tend to require more expensive care. This dynamic drives premiums even higher, prompting more defections.

Entities that have left the state plan generally report significant savings, though they too are experiencing premium increases—just not as severe as those remaining in the state system.

School districts still enrolled in the state plan often remain because their loss ratios make them unattractive to private insurers. The remaining pool of workers represents those most expensive to cover, further straining the plan's finances.

Aon reported last week that the plan's claims stabilization reserve—essentially its financial cushion—is projected to finish 2026 with a negative balance of $56 million.

The actuary also noted a stark cost disparity: the public plan for school workers paid 88% more per employee than plans available through New Jersey's health insurance marketplace. That gap reflects the significantly more generous benefits offered by the public plans compared to private alternatives.