Murphy Announces Plans to Reform Public Worker Health Plan System

By Jim Pytell, Managing Editor On Nov 20, 2025

While delivering his final keynote address today at the New Jersey League of Municipalities Annual Conference, Gov. Phil Murphy proposed a rescue and overhaul of the beleaguered State Health Benefits Program for Local Government Employees (SHBP-LG), which would include providing $260 million in near-term relief to keep the program solvent.

SHBP-LG is a state-administered health insurance plan that covers employees of participating local government entities, such as cities, counties and municipalities.

The governor noted that as healthcare costs continue to increase – with premiums having gone up by roughly 60% – an increasing number of employers are withdrawing from the program. 

This has created what actuaries have dubbed a “death spiral.”

Murphy said that without reform, tens of thousands of people would be impacted and potentially lose healthcare.

“The State Health Benefits Program for Local Government is on the brink of collapse,” Murphy said during his keynote address in Atlantic City. “Our administration is willing to provide a quarter billion dollars over the short-term to keep the SHBP-LG solvent in exchange for smart structural and governance reforms that will stabilize the program over the long-term. Achieving this goal will require hard decisions. But that is what good government is all about: making reasonable reforms to advance the public good.”

The governor said he is hopeful to pass the reforms before he leaves office on Jan. 20, but conceded that it would certainly be a challenge.

Of the $260 million, $180 million would be in loan balance forgiveness, and $80 million would be in replenishment for the Claims Stabilization Reserve.

In addition to the near-term relief, Murphy’s proposal also includes several structural reforms to plan design, governance, and employer retention to ensure continued solvency.

This includes simplifying and modernizing the number of SHBP-LG healthcare plans by replacing more than 50 plans with three new choices including a PPO, a high-deductible plan with a Health Savings Account, and a tiered network plan.

It would also include establishing a new seven-member State Health Benefits Program – Local Commission to exclusively oversee all matters related to SHBP-LG and local government plan design, with local government and member interests appropriately represented.

Additionally, Murphy said he wants to modify the State Health Benefits Program Plan Design Committee (PDC) to have authority over the state section only, and reduce it to eight members – four members appointed by the governor, three members appointed by the governor upon the recommendation of the Public Employee Committee of the AFL-CIO and one member appointed by the governor upon the recommendation of the State Troopers Fraternal Association (STFA).

The proposal also aims to reduce the volatility caused by unchecked employer exits by requiring local government employers to remain in – or remain out of – the SHBP-LG for at least five years.

Earlier this summer, AON, the actuary that services the various state health benefits plans, released a recommended rate increase of 36.5% for the SHBP-LG to the State Health Benefits Commission (SHBC), which was ultimately ratified. According to Murphy, the annual cost increases experienced by the SHBP-LG outpace those seen in other public employee plans.

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