Officials ask House appropriations to approve $18.5M general‑fund transfer to stabilize state employee medical insurance fund

Adam Gresham, commissioner of Finance and Management, told the House Appropriations Committee on Jan. 29 that the administration included an $18.5 million general‑fund transfer to the state’s medical insurance fund in the proposed budget adjustment act to address a growing deficit.

“We didn't have there were really 2 choices. 1, we could do it the old fashioned way ... or we could fill it through a general fund transfer,” Gresham said, explaining that without the transfer the state likely would have to raise premiums further to cover claims. The commissioner said spreading the cost through premiums would shift some of the burden to employees and to other state funds.

Beth Fastygy, human resources commissioner, described the fund as an internal service, self‑insured plan that pays claims and contracts with Blue Cross Blue Shield and pharmacy benefit managers. “Health care expenses have definitely gone way up over the past couple of years,” Fastygy told the committee, and she showed committee materials that chart a decline from roughly a $60 million surplus in 2021 to approximately a $40 million deficit at the time of testimony.

Clark Collins, deputy director for benefits and wellness, said the state is self‑insured: “we're self insured. And because we're self insured, we are considered an insurer of the state.” Collins and other DHR officials described actuarial work, the need to fund incurred‑but‑not‑reported (IBNR) claims and a target reserve equal to an IBNR plus roughly 20 percent to 30 percent for comfort against spikes.

Committee members asked about alternatives. Gresham and Fastygy said the transfer was intended to blunt the size of premium increases for employees — the administration embedded a 15% premium increase in the FY26 budget and estimated that, without the transfer, next year’s premiums might rise an additional 5–10 million dollars or about 7 percentage points on top of the planned increase. Officials also noted federal funding rules limit building an excessive surplus because part of the fund’s revenue includes federal dollars.

Officials discussed plan mechanics and oversight. DFR (Department of Financial Regulation) does not routinely regulate the plan but can serve as an external appeal process; the plan’s claims are paid via contracted carriers. Committee members and administration witnesses discussed longer‑term strategies to slow health care cost growth, including statewide payment reforms and the AHEAD model the administration is pursuing across Medicare and Medicaid.

The committee did not take a vote in the hearing. Members said they would continue deliberations during budget markup in the coming days.