State Senate President Stephen Sweeney said Thursday that he plans to pull from his public-worker health-insurance proposal a provision that would bar entry into the state health-benefits pool.

The legislation had been targeted by critics who called the provision a boon to the insurance industry, and noted Sweeney's close relationship to George E. Norcross III, a Democratic powerbroker and founder of the insurance brokerage Conner Strong.

Sweeney (D., Gloucester) said Thursday that he did not want to let that portion of his bill derail the larger issue of bringing down the cost of health insurance for public workers in the state.

"I have always said I wasn't married to it, that it wasn't the most important thing," he said. "The unions have been selling this theory I'm doing this for the wrong reasons."

Sweeney originally proposed the moratorium as a way to stabilize the program, from which local governments go in and out depending on whether they can get a better rate on the open market.

But the prospect of losing that option would have left many municipalities and school districts paying more for insuring their workers, said Bill Dressel, director of the New Jersey League of Municipalities.

"There have been periods where their rates have increased and offerings are not as desirable as what you can get on the private market," he said. "By and large the state plan is a better plan. It has shown that it has been very favorable to communities."

The question of whether those fluctuations render the program financially unstable is a matter of debate, with Sweeney and some experts saying they do and union and state treasury officials arguing the opposite.

There was little doubt, though, that the insurance industry stood to gain new clients from the closure of the state pool.

Conner Strong, the company Norcross founded after he left Commerce Bancorp Inc., where he headed the insurance brokerage subsidiary, is a major player in the public sector insurance market. The company has said that its public sector work in New Jersey is immaterial to its overall business.

"We operate a national business in all 50 states and are not dependent on the outcome of health-care debates in any particular state. The changes being discussed in New Jersey have no real bearing on our national business model one way or another," Conner Strong chief executive officer Michael Tiagwad said in a statement Thursday.

Norcross declined to comment for this story.

Sweeney said Thursday that Norcross had not pushed the legislation and that the two did not talk about it until after the bill was introduced.

"We're friends. We talk a lot," he said. "He thought it was a good piece of legislation."

The senator also downplayed the impact media coverage of his relationship with Norcross had on his decision to pull the moratorium.

But Dudley Burdge, an official with Communications Workers of America Local 1032, had a different interpretation.

He'd been e-mailing members of the media and union officials for months about Sweeney's bill and the benefit it posed for the insurance industry and Conner Strong.

"I'm a little surprised he pulled it," Burdge said. "But I don't know what else it could be other than the fact it's gotten this attention."

Contact staff writer James Osborne at 856-779-3876 or jaosborne@phillynews.com.