Healthcare Crisis: New Jersey Firefighters Face Massive Insurance Rate Increases

Atlantic City, NJ – A healthcare affordability crisis is looming for New Jersey's firefighters and other local government employees, as the State Health Benefits Plan (SHBP) proposes unprecedented premium increases of up to 36.9% for the 2026 plan year, potentially erasing years of hard-won salary gains and threatening retirement security.

Dave Krueger, a member of the SHBP Plan Design Committee, and Vice President Michael Zaynor from the New Jersey State Police Superior Officers Association delivered the sobering news to convention delegates on September 17, 2025, outlining the financial pressures driving the increases and the limited options available to mitigate the impact.

The proposed increases vary by coverage type: 36.9% for active local government employees, 35.4% for early retirees not yet eligible for Medicare, and 32.4% for Medicare-eligible retirees. The dramatic rate hikes stem from multiple factors unique to the local government side of the SHBP, creating a perfect storm of cost pressures.

"Local rate increases are driven by two key differences from state employees," Zaynor explained. "First, there's a $120 million loan taken out years ago, which accounts for about 10% of the increase. Second, the claim stabilization reserve fund has been exhausted—when premiums don't cover claims, they tap this fund, and it's now empty."

The state employee side of the SHBP operates on a pay-as-you-go basis without requiring reserve funds or loan repayment, insulating state workers from the dramatic increases facing municipal employees. This disparity has created resentment among local government workers who feel they're subsidizing state employee benefits.

Adding to the crisis, the legislature and governor's office needed to identify $100 million in savings to balance the state budget under Chapter 74 requirements, with healthcare cost-shifting emerging as a convenient solution. The decision to extract savings from local employee health plans rather than finding alternative budget cuts has intensified the financial pressure on municipalities and their workers.

Healthcare utilization has remained relatively flat, but prices are escalating exponentially, driven by consolidation in New Jersey's hospital system. The acquisition of independent practices by large hospital networks has shifted negotiating power dramatically, allowing healthcare systems to demand higher reimbursement rates from insurers.

Pharmaceutical costs represent another major cost driver, particularly GLP-1 medications (including popular weight-loss drugs like Ozempic and Wegovy). While per-unit prices have decreased, lower costs have sparked demand increases that more than offset the savings, creating a net increase in pharmaceutical spending.

"We're seeing prices go up exponentially even though utilization stays flat," Krueger noted. "The consolidation of NJ hospitals into a few large systems has shifted the balance of power completely."

The Plan Design Committee explored various cost-containment strategies employed for state employees, including benefit modifications and introduction of high-deductible health plans paired with Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs). However, these changes would require complex negotiations with hundreds of local governments and unions.

Many municipalities are exploring alternatives to the SHBP, with some leaving the state plan for private insurance vendors. This exodus threatens to create a death spiral, where the departure of healthier, lower-cost populations leaves the remaining risk pool more expensive to insure, driving further rate increases and additional departures.

For firefighters approaching retirement, the healthcare situation presents a particularly acute crisis. Many had planned their retirement finances based on predictable healthcare costs, and sudden premium increases of 30-35% could make retirement unaffordable or significantly reduce retirement living standards.

President Donnelly emphasized that healthcare affordability would be a top priority in negotiations with the next governor, regardless of who wins the 2026 election. The FMBA plans to propose comprehensive reforms addressing both cost drivers and revenue sources to stabilize the system long-term.