New Jersey’s health insurance crisis is landing on your property tax bill
Municipalities across the state are grappling with the same statewide crisis in different ways. Here's how three neighboring Central Jersey communities are addressing the problem.
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Chris Howell | July 13, 2026
New Jersey’s public health insurance program for local government workers is under serious financial strain, and towns across the state are being forced to respond. In many cases, the result is an increase in property taxes.
Most New Jersey towns get health insurance for their employees through a program called the State Health Benefits Program, or SHBP. The state runs it. Towns pay into it, and in return, their employees, including police officers and firefighters, get coverage.
For years, that system worked well enough. It doesn’t anymore.
The board that sets SHBP’s rates approved a 36.25 percent increase for local governments this year. That follows a 16.4 percent increase in the year before, and jumps of 20 percent and 7.4 percent in the two years before that.
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State officials and the program’s own actuaries point to a specific reason costs keep climbing. Some towns and school districts have started leaving SHBP entirely. They buy private insurance instead, or set up their own self-funded plans. The towns most likely to leave tend to have younger, healthier workforces, the kind that cost less to insure in the first place.
That leaves SHBP with an older, sicker group of remaining members. Insuring them costs more, so the state raises rates again. Every time rates go up, more towns look for the exit. That shrinks the pool further and makes it sicker still.
State officials have a name for this cycle. They call it a “death spiral.” As of March, 560 local governments remained in SHBP, down from 700 just four years ago.
Part of the increase has nothing to do with medical costs at all. The program had to borrow about $200 million just to keep paying its bills, and some of this year’s rate hike goes toward paying back that loan.
The rest comes down to what the insurance is actually paying for. Prescription costs are rising fast. State actuaries point to one category in particular. Spending on weight loss drugs like Wegovy and Ozempic jumped 87 percent in a single year. Drugs for conditions like arthritis and psoriasis rose by another 20 percent.
That statewide pressure is landing differently from town to town. It often comes down to one choice each town has already made, whether to stay in the state’s insurance program or go its own way. Three neighboring communities, Rahway, Edison, and Metuchen, show different versions of the same story.
Rahway and Edison are both still in SHBP, and both are feeling the full force of this year’s rate increase. Rahway’s cost for employee health insurance rose 29 percent this year, to about $13.65 million. That single increase accounts for most of the growth in the city’s entire “other expenses” category, the broad budget line that covers everything besides paychecks.
Business Administrator Matthew Pukavich told the Rahway City Council in July that the city faced “the massive increase in the state employee health benefit plan” as one of its biggest budget pressures this year.
In June, Rahway’s council passed a resolution urging state lawmakers to overhaul the system. It calls the rate increases “unsustainable” for both public employees and property taxpayers. It also asks the state to consider changes like reworking costly insurance plans and controlling prescription drug costs. The resolution closely follows a model version written by the New Jersey State League of Municipalities, and similar resolutions have been surfacing in council meetings across the state.
Edison, a much larger township with more than 100,000 residents, budgeted nearly $39 million for employee health insurance this year, the largest single insurance cost of the three towns in dollar terms.
Much of the added cost still lands on taxpayers. Edison and Metuchen both passed ordinances this year raising the cap on how much their budgets could grow, from the standard 2 percent up to 3.5 percent, a tool available to any New Jersey municipality facing rising costs. Rahway officials said the average taxpayer can expect to pay an additional $84 in property taxes this year. Edison’s mayor also acknowledged a tax increase in an online video posted in April, though the township has not released an official dollar figure for what residents will pay.
Metuchen took a different path years ago. The borough is not part of SHBP at all. Its health coverage is self-funded. That means the borough itself, not the state, carries the financial risk and pays claims directly, rather than pooling that risk with hundreds of other towns.
That choice has not made Metuchen immune to rising health care costs, but it appears to have softened the impact. Borough CFO Becky Cuthbert said in a statement that Metuchen’s health insurance costs rose 16.68 percent this year, less than half the 36.25 percent increase hitting SHBP towns. She said the borough’s own cost-saving measures further lowered the actual budget increase to 12 percent. “The Borough continues to explore and apply health coverage savings measures to contain rising group health care costs,” Cuthbert said.
That 16.68 percent works out to about $236,000, a small piece of Metuchen’s overall budget growth this year, which is driven mostly by other costs. It’s a reminder that avoiding SHBP doesn’t mean avoiding rising health costs. The self-funded plan sidesteps the pool-shrinking cycle hitting SHBP towns, but the same rising drug costs cited earlier apply to every plan, state-run or not.
So far, no statewide fix has arrived. State officials warned this summer that another round of double-digit increases is likely next year, and thousands of public workers rallied outside the Statehouse in June, demanding lawmakers act. Rahway and Edison remain exposed to whatever the state decides next. Metuchen’s experience suggests that opting out of the state system can soften the blow, but it does not solve the underlying cost crisis.
Editor’s note: The Central Jerseyan is free to read and supported by advertising. If you value this kind of local reporting and want to help sustain it, you can become a citizen supporter on Patreon. Your contribution helps fund continued coverage of local government, schools, and community issues.