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DOA seeks expanded actuarial work as self-insurance costs rise; officials consider multi-year contracts
Summary
DOA told the finance committee it is expanding actuarial and third-party administration work for the government’s self-insurance program to audit providers, assess Medicare Part D enrollment for pharmacy savings, and evaluate pharmacy benefit management options.
Department of Administration officials told the finance committee that the government’s self-insurance health program is under active review and that actuarial costs are rising because DOA is expanding the consultant scope.
Senators asked why the proposed actuarial contract line rose from about $433,333 in FY25 to $716,000 in FY26. Director Edward Byrne and CFO Theresa Rivers said the increase reflects additional scope: audits of medical providers, assessment of whether the government should enroll Medicare-eligible members in Medicare Part D to reduce pharmacy costs, review of deductibles and pharmacy-benefit-manager options and other analyses. "We are asking them to do more and more," Byrne said.
Why it matters: Self-insurance is funded from government resources and affects employer and benefit costs for active and retired employees. DOA reported it is negotiating third-party administrator (TPA) contracts and is pursuing rules and structures that would permit multi-year contracting for TPAs and potentially a pharmacy benefit manager.
DOA provided an early government-wide estimate for self-insurance costs near $190 million. "Our estimate was something just under 200,000,000. I think the last number I saw out was like a 190,000,000," Byrne told the committee. He said DOA is still negotiating best-and-final offers for TPAs and that the current FY26 negotiations will not be retroactive to affect FY26 unless terms are finalized and approved later.
DOA described exceptions to TPA authority in serious cases: the department may authorize extraordinary payments in life-or-death emergencies. Byrne said such overrides are rare and used mainly for urgent medical flights or trauma cases.
Ending: DOA is negotiating TPA agreements, exploring multi-year contracting options to secure pharmacy benefit management services, and expects to recommend contracting solutions to the governor once negotiations conclude.
