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Rising health‑benefit costs push state and local plans toward plan‑design debate; local government section faces acute pressure
Summary
Treasury officials said state employee health benefit plans are experiencing double‑digit rate pressures and that the local government section of the State Health Benefits Plan (SHBP) may see well‑above‑20% increases for plan year 2026, prompting calls to address plan design and risk‑pool stability.
Treasury officials and plan administrators told the committee the State Health Benefits Plan and the School Employees Health Benefits Plan are facing sharp cost pressures that could cause double‑digit premium increases for 2026, driven by increasing drug costs and utilization.
The Treasurer said actuaries are projecting “increases in the SHBP local government section that will likely be well above 20% for plan year 2026,” and that the state has posted a study examining plan‑design drivers of higher costs. Officials attributed much of the gap to plan design decisions made over many years in law, collective bargaining and administration and said Treasury does not have unilateral authority to change covered services without the plan‑design process or legislative action.
Treasury staff and plan representatives described several levers being discussed: plan‑design committee resolutions (members are evenly split between labor and administration), targeted pilot programs (for example, centers of excellence for high‑cost conditions), requiring generic drug use when available, and potential legislative changes such as minimum participation periods for employers to stabilize risk pools.
Officials warned of a “death spiral” risk if healthier employers continue to exit the local government section, leaving a smaller, higher‑cost pool that drives higher premiums and further exits. The Division of Pensions and Benefits said earlier reforms (for example, Chapter 44 measures for school employees) produced measurable savings but that the local government section needs renewed attention.
Ending: Committee members and Treasury agreed the issue requires continued focus and that the Department of Education, Division of Pensions and Benefits and plan‑design committee conversations would continue through the summer as rate‑setting and actuarial recommendations are finalized.
