For the third consecutive year, government employees covered by the State Health Benefits Program will have to absorb double-digit increases in their insurance premiums, which have collectively soared 59% for municipal and county workers and 40% for state workers since 2022.

Now a report the State Department of Treasury released Tuesday forecasts three more years of painful premiums hikes as rising costs and uncertainty threaten to send the program into a “death spiral.”

The State Health Benefits Program serves a combined 450,000 state, county and local government workers and retirees. But it is the local government portion of the program, serving 156,000 of these employees who work for a total of 689 municipal, local authority and county entities, that is running a deficit.

The local government insurance program “faces shrinking enrollment, escalating costs and premiums and concerns about long-term sustainability,” according to Treasury’s report.

“Without meaningful intervention, current trends in enrollment, utilization, and health care cost inflation will continue to drive unsustainable premium increases,” the report said.

The local government portion of the program collects $2 billion in annual premiums, but claims are running so high that the state has loaned the program $258 million since November, according to the report. Just $138 million of that money has been repaid, the report said.

Weight loss drugs, inflation and “greed”

What’s went wrong? It depends on whom you ask.

State Treasurer Liz Muoio has testified at budget hearings that Wegovy, Ozempic and other popular diabetes drugs that have worked wonders for millions of people trying to lose weight also have the unintended side effect of swelling public sector insurance premiums.

Also, more people continue to use their health insurance, especially for outpatient procedures, at a steady clip that is not let up in the post-pandemic era, Muoio said. And the price of most medical procedures simply cost more.

But the demand for appetite-suppressing GLP-1 drugs stands out. Twice the number of people are using these prescriptions from the previous year, according to a report by Optum RX, the state’s pharmacy benefit manager.

Between worker co-pays and the state and local government’s share, these drugs cost $286.5 million from January 2024 through September 2024, Optum RX’s analysis said. Employee co-pays are only about $16 a month, which means the government-employers bears two-thirds of the expense.

Unions leaders representing public workers acknowledge these medications are both pricey and popular, but they deny they are the biggest cost driver.

Tammy Carr, vice president for Local 1084 Communications Workers of America, points the finger at the hospitals, doctors and other medical providers who are driving up the cost of care.

“So basically, this is about greed,” Carr said during a Statehouse protest in Trenton last month that drew about 150 chanting people in union red hats and shirts. Some of her colleagues pay $1,000 a month for premiums, she said.

“We have a problem, and it begins with a broken promise,” Carr told the crowd. “See, there was a time when health care was a perk — an extremely valuable incentive that attracted dedicated individuals to public service. We were promised that in exchange for our commitment to serving our communities, we will have access to quality, affordable health care for ourselves and our family in New Jersey. That promise has been broken."

“This isn’t because we’re receiving better care or seeing improved outcomes. The simple truth is that greed has driven the cost to unsustainable levels,“ Carr said. ”We can’t shoulder it anymore.”

No one disputes the health insurance package isn’t generous in terms of the options available and what is covered.

The annual cost of public worker coverage in New Jersey was $22,000 in 2023, the Treasury report said. That’s 60% more than average cost of private and public sector plans nationally.

New Jersey is one of just 11 states that cover weight loss drugs for the employees, according to Multistate, a national lobbying firm.

Nobody is suggesting yet that the state drop this coverage, because these drugs could help prevent heart disease other diseases that would cost far more to treat, said Michael Cerra, executive director for the New Jersey League of Municipalities, which lobbies on behalf of local governments.

But something has to give if employees and government employees want to head off projected catastrophic increases.

Ward Sanders, president of the New Jersey Association of Health Plans, the problems stem from the program’s “very rich” benefits package, including the weight-loss drugs, and members “over-utilizing services due to a lack of financial responsibility, citing the state’s actuarial reports.

Another problem, Sanders said, is “the ability for local governments to move in and out of (the program) at will.”

The Treasury analysis agrees, saying the problem is compounded by the hundreds of municipalities, counties and other government entities that have fled the state program for a cheaper alternative.

in the last five years, there has been a net decline of 76 municipalities and other local entities leaving the program, according to the most recent data cited in Treasury’s report.

The towns that can’t find a better deal because their members are sicker and more expensive to insure, stick around. Each plan is supposed to keep a surplus, or a claims stabilization reserve, to bail them out if medical claims pile up. But the entire reserve was spent last year, the report said.

There are solutions, they may be too late to avoid more pain

The unions want state lawmakers to sponsor a bill that would cap premiums based on a percentage of an employee’s salary.

Spokespeople for Senate President Nicholas Scutari, D-Union and Assembly Speaker Craig Coughlin, D-Middlesex, declined to comment on the unions’ proposals.

Cerra from the League of Municipalities said only the plan design Committee and the state Legislature have the power to change the program. That’s a problem, he said.

“We want a seat at the table, but we don’t have that right,” Cerra said. “We are at the meetings and listen in on Zoom and phone calls. But we don’t have an opportunity to influence of the process.”

There are an even number of union and employer seats on the committee, which has resulted in “a stalemate” when reforms have been discussed, he said.

The design plan committee should examine why the cost of prescription drugs is so expensive, Cerra said. “Why aren’t the economies of scale working for us?”

Treasury’s report offers suggestions to help mitigate the “stark and deteriorating landscape” of the program, which will require action by the state Legislature and the plan design committee that governs the programs.

One long-term idea is to phase out the local government portion of the program and “transition into self-governed collectives” with the state’s help.

Another idea would require local government employers that have left the state plan to wait three to five years before being allowed to rejoin. This would minimize the volatility and dramatic spikes in cost associated with some returning. A bill was introduced in the past week to impose a 5-year waiting period.

The program also could require a surplus of two months of claim payments to avoid operating in the red, the report said.

“Even the most aggressive plan design changes will likely not be enough to reverse the systemic unraveling now underway,” according to the report.

New Jersey State PBA President Peter Andreyev responded dismissively to the report, saying it unfairly blames public employees for the sorry state of the state benefits plan.

“Let’s be very clear: the only consistent strategy offered by this Administration has been to shift more and more costs onto public employers and employees — ignoring the root causes of the crisis entirely," Andreyev said.

“There has been no meaningful effort to confront the outrageous hospital prices driving these costs. No attempt to rein in the bloated, opaque, and dishonest middlemen siphoning value out of the system. Just more premium hikes, more blame, and more delays,” he said.

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Susan K. Livio may be reached at [email protected]. Follow her on X @SusanKLivio.