Governor Mikie Sherrill and 17 unions representing New Jersey state employees announced an agreement Wednesday that will prevent state workers from facing higher health benefit contribution rates in 2027 while launching a broader effort to reform the state’s public employee health benefits system.

Under the agreement, increases in employee health benefit contributions will be waived for 2027. At the same time, the Sherrill administration and participating unions will begin developing longer-term reforms aimed at controlling rising health care costs and improving the financial stability of the State Health Benefits Program.

New Jersey’s public employee health benefits system provides coverage to approximately 690,000 members through state employee, local government and education plans. State officials say rising health care and prescription drug costs, along with structural problems within the system, have placed increasing financial pressure on employees, government employers and taxpayers.

“From Day One, I have been laser focused on making New Jersey more affordable, and that means tackling hard problems. The rising cost of health care is no exception,” Sherrill said.

The governor said the agreement will bring unions, lawmakers, health care experts and other stakeholders together to address rising costs while preserving high-quality benefits.

As part of the agreement, the state will establish a working group by October 1 that will include representatives from the administration and labor unions, along with other stakeholders. The group could also include health plan administrators, insurance carriers, health care providers and independent experts.

The working group will examine potential changes involving vendor contracts, claims reviews, eligibility verification, provider networks, premiums and employee contribution structures, benefit design, participation requirements, governance and data transparency. Its recommendations will ultimately be presented to the governor.

“This is a problem we must address now,” Chief Operating Officer Kellie Doucette said. “The program’s financial instability affects public employees, employers and taxpayers in communities across New Jersey every day.”

Union leaders welcomed the agreement, emphasizing that it protects employees from additional costs next year while giving organized labor a role in developing longer-term changes.

Dennis Trainor, vice president of CWA District 1, said the agreement “protects our state workers from increased health benefit contributions in 2027 and gives labor a real seat at the table on the system’s actual cost drivers.”

Other unions participating in the agreement similarly said the state needs structural reforms rather than continuing to address rising health care expenses by increasing costs for public employees.

The administration said the goal of the new reform effort is to maintain quality health coverage while creating a system that is more affordable and financially sustainable for employees, government employers and New Jersey taxpayers.