Alabama state employee insurance plan expects $30 million increase in drug program costs

Disclosure: State of Alabama-based writer. This article is a work from cited sources for informational purposes and is used with permission. No affiliate links are included.

by Jemma Stephenson, Alabama Reflector
August 22, 2024

The CEO of the state board overseeing Alabama state employee insurance Wednesday reiterated his concerns about rising costs and potential funding shortfalls.

The State Employee Insurance Board (SEIB) awarded contracts for medical and dental plans; the Medicare Advantage Prescription Drug Plan and a pharmacy benefit manager. The contract for the Medicare drug plan will only last a year, with potential for renewal, due to volatility in the space. SEIB CEO William Ashmore said that the contract would cost $30 million more than it did last year.

Photo byJOSHUA COLEMANonUnsplash

“Just be aware that we’re doing our budgets and all in September, this is going to be a huge increase in cost that we’re seeing,” said SEIB CEO William Ashmore.

SEIB officials told lawmakers in July that they have a projected loss of around $20 million for fiscal year 2025, which they said was due in part to a growing number of retirees and a shrinking workforce paying less into the retirement system.

The board said they can cover the losses with reserves. But officials expect reserves to be depleted in 2026, when losses are projected to reach $37 to $38 million.

RSA CEO David Bronner said Wednesday that the costs associated with the Medicare Advantage used to be much higher, around $400 per month per person. He said Medicare Advantage costs had come down to $65 but are beginning to rise again.

“Now you blame me and you blame William and I mean, we’ve made a big deal about it in the Legislature,” he said. “We know we’ll make a big deal of it going way up, but there’s a big but here, and the big but is that the last 10 years we’ve had the advantage of that sliding price, which is big dollars, if you think of it.”

Photo byChristina Victoria CraftonUnsplash

After the meeting, Ashmore said the costs associated with the change in the Medicare Advantage program are contributing to SEIB’s financial concerns. He said the federal government was reducing some of the funding.

“We’re seeing our costs double, not (increasing) 10%, not 20%, we’re talking about doubling,” he said.

Ashmore said the major concerns are three years in the future. He said what they’re doing right now is using reserves to make up for shortfalls.

“It’s kind of a wait and see, wait and see what happens but, you know, we’ve got to be prepared for the worst case scenario should it happen,” he said.

In the meeting, Bronner said that they could “pump up the finance director,” Bill Poole, for gambling.

“I bet on it and lost,” said Poole.

his article is republished from The Alabama Reflector under a Creative Commons license.

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