Gov. Phil Murphy signed legislation that will allow the state’s health insurance program to make loans from a fund covering state workers to a fund covering local government employees, the latter being faced with a financial spiral stimulated by the flight of municipalities towards other health insurance schemes in a context of high premiums. increase.

The invoicewhich was signed into law Wednesday, less than a week after it was introduced, allows the state Division of Pensions and Benefits to make interest-free loans from the state fund to the local government fund if reserves of the latter fall too low to cover 10 days of expenses.

“While today’s legislation is a necessary step, the broader issues surrounding health insurance coverage for local government employees concern my administration and a large number of districts,” Gov. Phil Murphy said in a statement.

The loans could cover up to 30 days of health benefit costs for local governments and must be repaid within 120 days of issuance, although the division could extend that deadline to 365 days.

The bill signing comes about a month after state officials approved the last tower of double-digit premium increases for state benefit plans.

In September, the State Health Benefits Commission approved a 10.1 percent rate hike for state workers’ health premiums and a 16.3 percent increase for their local government counterparts.

Contractual provisions limit the increase in civil servant contributions to 4.5%but municipal and county employees will face the full brunt of their bigger increase, which follows an increase of 7.4% last year and more than 20% the year before.

“Republicans have warned of the looming death spiral facing our public health systems,” said Sen. Declan O’Scanlon (R-Monmouth). in the Senate on Monday. “As evidenced by the urgent needapparently, of this legislation, it is no longer imminent. This hits us here and now and should horrify and frighten every public servant and taxpayer in New Jersey.

The consecutive strong increases stimulated a few local governments to turn to private health care plans. Active employee registrations in the local government plan part fell about 18% in the two years after authorities approved double-digit increases in 2022.

Health insurance plans work by diluting risk. Generally speaking, premiums paid by workers who are healthier and less likely to get sick help fund the medical care of others, but as enrollment declines, risks and premiums rise.

This dynamic has fueled fears of a cycle that could see rates balloon as more local units turn to private options in the face of rising premiums, ultimately sending the state’s plan into a tailspin. spiral of rising costs.

“We’ve been shouting about this in all caps, underlines, bold and italics for years,” said Mike Cerra, executive director of the League of New Jersey Municipalities. “It escalated a few years ago when it was an increase of over 20%, and now it’s 16% – that’s not sustainable.”

Departures from municipalities with large workforces – like Newark, which moved its approximately 8,000 employees to a private plan last year – are particularly damaging.

Leaving the state-run plan is not feasible for all local governments, Cerra said, and those with few employees, an older workforce or particularly sick workers would have no option. no choice but to confront escalating costs head on.

“Employers who can’t leave are currently experiencing a double or triple whammy,” Cerra said.

He called the bill a “necessary band-aid” but I said changes Proposals proposed by union members on committees charged with designing public workers’ health plans — such as one that would tie some public plan prices to Medicare rates — were necessary to reduce costs.

Treasury officials are fixed meet with local leaders to discuss health benefit costs in the coming days.