NJ school districts are facing a 34% health insurance hike — and kids could pay the price

New Jersey’s public school districts could be hit with a nearly 35% jump in health insurance costs for teachers and other employees next year, a jump school leaders warn could trigger budget cuts and layoffs.

The state’s actuary recommended raising health insurance premiums for active employees in the School Employees’ Health Benefits Program by 34.4% in 2027, according to an analysis presented July 15 to the program’s oversight commission.

If the commission accepts the recommendations from Aon, the firm that serves as the state’s actuary, it would be the second straight year of double-digit premium increases.

The commission is expected to vote on the rates on Monday. The increases would take effect in January — in the middle of the school year.

However, the 34% increase would not hit most school employees’ paychecks directly. Under a 2020 law, active school workers pay a set percentage of their salaries for health coverage. So school districts, not individuals, would absorb the bulk of the costs.

With school budgets already stretched, the New Jersey School Boards Association warned that rising insurance costs will force districts into difficult tradeoffs. Schools could see shrinking support services, swelling class sizes and possible cuts to busing, sports and building upgrades.

In March, the association predicted health insurance rates might rise as much as 30%. Districts that heeded the earlier warning may be better prepared for the increases next year. But school districts that assumed a smaller increase could be scrambling to pay the difference.

“In the end, it’s the students who will suffer most,” said Timothy Purnell, the New Jersey School Boards Association’s executive director.

The timing of the increase could leave some districts looking for money to cover the increase in healthcare costs in the middle of the school year.

“If something is not done, because of these increases, there’s going to be more draconian cuts,” said Tony Trongone, a former school superintendent who now serves as executive director of Great Schools of New Jersey, an association of high-needs districts.

“They already went through this last year,” Trongone said.

Many New Jersey school districts that cut programs and staff in budgets approved in the spring blamed rising healthcare costs for helping fuel a financial crisis.

The School Employees’ Health Benefits Program needs to increase premiums to help rebuild the plan’s depleted reserves and repay a loan — expected to top $70 million — used to cover this year’s claims.

The rest of the increase is driven by climbing medical costs and prescription drug spending, including the soaring use of GLP-1 weight loss drugs, state officials said.

According to New Jersey Education Association President Steve Beatty, private insurers poach the healthier, lower-cost districts, leaving the state plan to cover those with older, sicker and costlier workers. That pushes premiums higher, driving still more districts out of the plan— and leaving a shrinking pool with little power to negotiate, he said in a March op-ed on NJ.com.

Enrollment of active school employees in the state plan fell nearly 18% between 2025 and 2026, and Aon projects it will drop another 8.75% in 2027.

Beatty argues the fix isn’t higher deductibles or bigger employee contributions, but confronting costs at their source.

He urged the state to pool districts’ buying power. “While no single school district in New Jersey is large enough to counter the insurance industry on its own, all districts together would have real power,” he wrote. New Jersey has about 600 school districts that insure more than 600,000 people.

He also called for the state to competitively bid its prescription drug contract, which he said saved an estimated $1.6 billion over three years when it was last competitively bid.

The New Jersey School Boards Association is also pressing state leaders for change.

“Once again, we call upon the Governor and Legislature to take bold action and provide both immediate and long-term relief to ALL New Jersey school districts, whether they participate in the State plan or not,” Purnell, the group’s executive director, said in a statement. “Our students and taxpayers deserve it.”

Sherrill’s office did not immediately respond to a request to comment.

The healthcare premium increases remain a recommendation until the School Employees’ Health Benefits Commission votes Monday in a meeting at the New Jersey Division of Taxation in Trenton. The meeting will also be open to the public by phone.

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