Municipalities and school districts across New Jersey owed nearly $50.5 million in overdue payments to state-administered health plans for public employees earlier this year, adding another layer of financial pressure to a system already struggling with rapidly rising health care costs.
NEW JERSEY — Millions of dollars that should have been paid into New Jersey’s health benefit programs for public workers remain outstanding, and some of the debt has accumulated for years.
According to records reviewed by New Jersey Monitor, 35 local governments and 13 school districts owed nearly $50.5 million in arrears to the state’s public employee health programs earlier this year.
The largest outstanding balance belonged to Paterson, which owed approximately $11.8 million as of April to the State Health Benefits Program.
The unpaid bills come at a particularly difficult time for New Jersey’s public health benefit system, where the cost of providing medical and prescription drug coverage has been climbing sharply.
When a Local Bill Becomes a Statewide Problem
New Jersey operates major health benefit programs covering state and local government workers as well as school employees and retirees.
Municipalities and school districts participating in those programs are responsible for making required premium payments.
When those payments are delayed, however, the medical bills do not disappear.
Doctors, hospitals, pharmacies and other providers still have to be paid, meaning unpaid contributions by participating employers can place additional strain on the financial health of the overall system.
The issue therefore extends beyond the towns or districts that owe the money.
It ultimately raises a larger question: who carries the cost when a public employer falls behind?
The Timing Could Hardly Be Worse
The arrears come as New Jersey is already confronting another major health-benefit problem: rapidly increasing premiums.
The state Division of Pensions & Benefits has already published its rate-setting analyses for Plan Year 2027 for both the State Health Benefits Program and the School Employees’ Health Benefits Program.
For school employees in particular, the financial picture has become increasingly difficult. The active-worker health plan is expected to need significant borrowing to cover claims during 2026 as officials attempt to stabilize its finances.
New Jersey has faced steep increases before. For the 2026 plan year, the state’s actuary recommended a 29.7% overall premium increase for the School Employees’ Health Benefits Program and a 36.5% increase for the local-government portion of the State Health Benefits Program, citing sharp increases in both medical and prescription-drug costs.
Those pressures have continued into the discussions over 2027 rates.
Schools Are Already Under Pressure
For school districts, health insurance is only one part of an increasingly difficult financial equation.
Districts must simultaneously pay salaries, transportation costs, special-education expenses, building costs and other obligations while trying to keep class sizes manageable and programs intact.
A large increase in health-benefit expenses can mean millions of additional dollars in a single budget.
If a district is also carrying unpaid health-plan bills from previous months or years, the pressure becomes even greater.
And eventually, those financial problems can reach the classroom through staffing reductions, unfilled vacancies, program cuts or higher local taxes.
Workers Paid Their Share. Where Did the Money Go?
The arrears also raise an uncomfortable question for public employees.
Workers enrolled in these health plans typically contribute toward the cost of their insurance through payroll deductions or other required contributions.
Yet some participating public employers have fallen significantly behind on the payments they owe to the state program.
That does not automatically mean employee contributions were mishandled, and the circumstances can differ from one municipality or school district to another.
But a multimillion-dollar backlog inevitably raises questions about financial management and oversight, particularly when some balances remain unpaid for extended periods.
Paterson Again at the Center of a Financial Story
Paterson’s approximately $11.8 million outstanding balance is particularly notable because the city and its school system have already faced intense budget pressure.
The figure represents nearly one-quarter of the approximately $50.5 million identified across all delinquent municipalities and school districts combined.
It also illustrates just how quickly health-benefit obligations can become major liabilities for local governments.
What might initially appear to be a late monthly payment can, over time, turn into millions of dollars owed.
Who Ultimately Pays?
That may be the most important question in this story.
Public health plans cannot simply stop paying medical claims because a municipality or school district is late with its contribution.
If costs continue increasing while participating employers accumulate unpaid balances, the financial pressure has to be absorbed somewhere.
That could eventually mean higher contributions, higher taxes, cuts elsewhere in municipal or school budgets, additional state funding or some combination of all of them.
For residents, the $50.5 million figure may sound like another distant number buried in government accounting.
But health insurance costs have a way of moving quickly from spreadsheets into household budgets.
When towns and schools cannot keep up with their obligations while the price of coverage continues to climb, the unpaid bill does not simply disappear. Someone eventually has to pay it.
Sources: New Jersey Monitor; New Jersey Department of the Treasury, Division of Pensions & Benefits
By NJ RADAR Team