Governor Murphy and 17 public sector unions representing State workers have announced an agreement designed to achieve approximately $75 million in recurring health benefit savings for the final six months of Fiscal Year 2026. While this agreement does not include local governments in the SHBP and represents a short-term remedy, it is our hope that this agreement influences discussions for the SHBP Local Government Employere Group. It is likely that legislation will be required to apply these savings to the Local Employer Group and avoid bargaining with local units.
The Memorandum of Agreement, which outlines the agreed-upon changes will be proposed and voted on by the State Health Benefits Plan Design Committee later this month. It will mean the State can begin implementing changes, and realizing savings, as close as possible to the start of the new Plan Year on January 1, 2026. This agreement the first update in nearly 15 years includes:
- A $110 in-network deductible for individuals and $220 in-network deductible for families for all plans that currently have lower deductibles.
- A $750 out-of-network deductible for individuals and $1,500 out-of-network deductible for families for all plans that currently have lower deductibles.
- A $2,500 out-of-network, out-of-pocket maximum for individuals and $6,000 out-of-network, out-of-pocket maximum for families for all plans that currently have lower out-of-network, out-of-pocket maximums.
- New co-pays on GLP-1, generic, brand, non-preferred brand, and specialty medications across all plans.
- New co-pays on lab visits and imaging across all plans.
- Incentivizing use of in-network ambulatory surgical centers for certain procedures across all plans.
- Limits on out-of-network physical therapy visits across all plans.
- Expansion of the forthcoming Centers of Excellence pilot program for all plans.
The State has also agreed to continue to work with the unions on identifying longer-term, significant cost containment strategies.
Item number 10 of the Memorandum of Agreement state that due to the cost savings agreed to by the unions, no escalator will be applied to the members’ contributions to the cost benefits for plan year 2026.
Per the terms of the agreement, the Governor’s Office has agreed to send a letter to the Legislature expressing its willingness to sign into law legislation repealing budget language in the Fiscal Year 2026 Budget that sought to achieve $100 million in recurring health care benefit savings through the Plan Design Committee.
The League and its State Health Benefits Task Force are reviewing the agreement and will report more information as necessary. For municipalities in the State Health Benefit Program, we encourage you to review the Memorandum of Agreement with your professionals to determine what cost savings may be achieved if these parameters are applied to local governments.