The Public Education Employees’ Health Insurance Board of Control (PEEHIP), which oversees health insurance for public education employees, passed a partial list of recommendations Wednesday aiming at avoiding a “crisis position” next year. The Alabama State Employee Insurance Board (SEIB) approved recommendations that could decrease its budgeting shortfalls. (Getty Images)
The two boards overseeing health insurance for state and education employees ended separate meetings on Wednesday with sharply contrasting views of their respective financial futures.
The Public Education Employees’ Health Insurance Board of Control (PEEHIP), which oversees health insurance for public education employees, passed a partial list of recommendations Wednesday aiming at avoiding a “crisis position” next year. But the Alabama State Employee Insurance Board (SEIB), after months of pessimism, approved recommendations that could decrease its budgeting shortfalls.
“Those numbers are still concerning moving forward, but we do have a plan that gets us through this year, as well as feel pretty confident that we’ll be okay next year, but it’s that third year out that is really going to be something we got to take a look at,” said CEO of SEIB William Ashmore after the meeting.
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SEIB approved a health insurance premium changes only to the spousal surcharge and will remove a waiver. Prior to 2024, spouses who received the waiver did not pay the surcharge, but SEIB started phasing out the waiver in the beginning of the year, with the waiver only covering $25 of the $50 surcharge.
Starting in 2025, there will be no waiver, but all Medicare spousals will pay a $25 surcharge and non-Medicare spousals will pay $50. The board recommended no changes to benefits for 2026 but will ask for the state to increase its contribution by 5%.
PEEHIP was another story.
Diane Scott, chief financial officer of the Retirement Systems of Alabama, made recommendations to PEEHIP for four items that required board approval:
- A fiscal year 2026 request to the Alabama Legislature of $904 per active for Employer contribution, up from $800;
- A recommendation to the Retiree Trust Board the transfer of up to $79.4 million in fiscal year 2026 to PEEHIP;
- A reversion of Medicare eligible dependent premiums effective Jan. 1 that would have included non-spousal premiums raising from $65 to $114 per month, spousal premiums with no other dependents from $65 to $114 per month and increase Surviving Spouse premiums to updated cost;
- An increase to the primary care physician and specialist office visit copays by $5 effective Jan. 1 for Medicare eligible retirees and dependents.
The updated costs for surviving spouse premiums would be surviving spouse under 65 would remain at $1,001; surviving spouse under 65, dependent under 65 would remain at $1,586; surviving spouse under 65, dependent over 65 would go from $1,172 to $1,367; surviving spouse over 65 would go from 65 to 260; surviving spouse over 65, dependent under 65 would go from 896 to 1,091; and surviving spouse over 65, dependent over 65 would go from 130 to 520.
Scott’s presentation included slides about increasing medical and pharmaceutical costs .
“We looked at what we felt like was a balanced approach to funding,” she said.
State Superintendent Eric Mackey made a motion to approve the first item, modify the second item and eliminate the third and fourth items at the current time.
“I think we can let the Retiree Trust Board adjust that amount, ask the Legislature for $904 next spring, and get through ‘25 and if we are in a crisis position next summer, and feel like for ‘27 we have to do something else, give retirees more notice about what’s coming, and hopefully between now and then the dust settles some more and things will get better,” he said.
The motion passed 14-1. The second item was modified to be limited to what the law says with the Retiree Trust Board determining the number, which came out to up to $118.9 million in the Alabama Retired Education Employees’ Health Care Trust Board of Control meeting which occurred right after the PEEHIB meeting.
The increase to Surviving Spouse premiums had to occur because of Alabama law.
Neah Scott, legislative counsel for RSA, wrote in an email that the premiums had to be updated from the slide in the meeting because the board did not adopt the staff-recommended $5 copay increase.
“These premiums are not for employees or retirees but are for surviving spouses who elect to continue coverage after the death of the PEEHIP member and are governed by Ala. Code 16-25A-8(e),” she wrote. “This statute provides that the PEEHIP Board may provide coverage to surviving spouses and dependents after the death of the employee or retiree, provided ‘that the spouse and dependents shall pay the full cost of their coverage.’ Because the premium amounts must cover the full cost of coverage, by law they must increase when the cost of coverage increases.”
The largest increase for surviving spouse premiums would be for surviving spouse, dependent over 65, with an increase from $390 to $520 Jan. 1.
In the SEIB meeting, Ashmore said that as of July 31, the board’s net balance was just under $70 million. Despite its apparent financial stability, the board faces ongoing challenges with negative operating costs projected in the coming years, which could cause the reserve to be exhausted by the end of 2026.
The board’s financials also improved due to SEIB projecting a $35 million loss due to insurance claims but will end up ending about $22.7 million, about $10.8 million in total revenues, largely due to an increase in state employee enrollment. While operating expenses are increasing at about 3.6% year over year, employee contribution is outpacing expenses at 7.4%.
“On one hand, we’re operating at a deficit relative to the general revenue. On the other hand, we do have some level of a positive trend year over year. Our revenues are growing faster than our expenses,” said Department of Finance director Bill Poole during the meeting.
The executive committee also approved a $10 premium increase for Medicare-eligible retirees with individual coverage, from $15 to $25.
Neah Scott wrote in a Thursday email that PEEHIP is approximately three times the size of SEIB, so the dollar amounts will necessarily be larger.
The SEIB will reconvene in two weeks to finalize its recommendations.
PEEHIP is funded through the Education Trust Fund, the state’s education budget. SEIB is funded by the General Fund, the budget for non-education expenses.
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This story was updated Thursday with more information about SEIB’s approvals and context about the size of the organizations.
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