The $333 Million Hole: Why NJ School Health Premiums are Set to Explode

If you thought this year was bad for school budgets, 2027 is asking you to hold its beer.

The state Treasury is warning that the School Employees Health Benefits Plan (SEHBP) will likely be seeing double digit premium increases in a 03/24 warning based on an analysis from the plan’s actuary (Aon).

It’s an ugly picture…
-$126M in losses for 2024
-207M in losses for 2025
-Claim Stabilization reserve projected at a negative 32.3M by the end of 2026

A primary factor connects to healthier districts leaving the SEHBP for lower-cost health benefits plans in the private sector along with rising costs (medical/prescription) as less healthy, more costly employees remain leading to weaker reserves.

The net result is a higher risk pool with fewer resources to cover the costs.

Other variables include…
-12% in medical claims (active)/11.5% increase (early-retirees)
-24% increase in prescription claims (active)/22% increase (early-retirees)

The increase in utilization is paired with higher costs for both inpatient and outpatient care along with increased utilization of specialists and behavioral health services.

Then there the GLP-1 factor – spending on that alone increased 95% (per member/per month) for active and 126% for early retirees. So even though net plan prices for GLP stayed flat or went down, utilization went through the roof.

Lastly, employees are moving to cheaper plans whose lower costs are being wiped out by less premium revenue.

So all of this leads to pretty rough waters for school districts remaining in the SEHBP with some potentially looking at midyear rate increases.

School Districts may need to get much leaner as tax payers are already at a breaking point and are not likely to accept another hit on their wallets – at least not without some effort by Districts to trim costs.

Source