School insurance authority warns of growing deficits, plans supplemental FY26 request

The Legislative Education Study Committee on Tuesday heard a detailed briefing on rising public‑school insurance costs and a request for supplemental funding beginning in fiscal year 2026. LESC staff and officials from the Public Schools Insurance Authority said medical and risk premiums have climbed substantially in recent years and that COVID‑era expenditures and a small number of very high‑cost claimants have driven large draws on fund balances.

LEESC staff member Daniel told the committee that "medical premiums are now over 80% higher in FY25 than they were 11 years ago" and noted risk premiums have risen unevenly, with spikes in recent fiscal years. He said the authority initially proposed "an increase of 15.25% for medical and 32% for risk," but that LESC, LFC, DFA and PED negotiated reductions to roughly 10% for medical and about 15.5% for risk, with the authority indicating it would seek a supplemental appropriation in the coming legislative session.

The authority's director, Patrick Sandoval, described the membership and the fiscal pressure on fund balances. He said the authority insures 88 public‑school districts, 99 charter schools and other educational entities, covering roughly 46,567 lives on the medical plan. Patrick outlined the FY26 expenditure request that would increase authority spending in benefits, risk and program support and showed a projected FY26 fiscal impact on public‑school support of approximately $39.7 million (about $22.1 million for benefits and $17.7 million for risk).

Panelists attributed the recent increases to several factors: concentrated high‑cost claimants (staff noted that roughly 15% of members account for about 83% of paid medical claims), rising prescription costs including specialty and GLP‑1 medications, inflation and large property claims from hail and wind. The authority reported that a series of hail/wind losses produced substantial payouts and contributed to higher self‑insured retentions (wind/hail retention rose from $2.5 million to $10 million).

Officials also described COVID‑related expenditures for testing, treatment and vaccine administration that drew down the medical fund balance. Daniel said the authority sought FEMA reimbursement of about $20 million but those requests were denied, and the authority received a separate special appropriation of $15 million in FY22. Quintana, the authority's deputy director, told members that additional requests to cover remaining COVID‑related spending were not approved.

Quintana outlined a package of cost‑containment and member‑support programs the authority has implemented or expanded, including a Transform Diabetes Care program through CVS Caremark, point‑of‑sale rebate checks that search for lower prices for members at pharmacies, increased use of biosimilars (replacing Humira with alternatives), utilization management and a specialty pharmacy program that captures manufacturer discounts. She said audit, PBM market‑check and claims‑integrity efforts are underway, and the authority is exploring mobile clinics and a musculoskeletal episode‑of‑care program (Lantern) to reduce costs.

Members asked about geographic patterns in high‑cost conditions (Representative Arne asked whether asthma and COPD are geographically concentrated) and requested regionally disaggregated data; Quintana said staff would provide those statistics. Representative Buck asked whether federal funding covered vaccine costs; Quintana said the vaccine product was often not the cost driver—administration and related expenses fell to the authority in many cases, and not all federal programs were accessible to the authority.

Staff and the authority emphasized uncertainty around whether appropriations will be granted and noted that FY26 rate increases could vary based on legislative action. Daniel recommended short‑term appropriations to reflect expected premium increases and possible COVID cost support, while pursuing targeted long‑term strategies to achieve savings and greater economies of scale. The authority said it would pursue a supplemental appropriation during the legislative session and work with the LFC to include the request in the budget submission.

The committee did not take formal votes on this item. The authority and staff will provide requested data (regional disease prevalence and enrollment participation details) and return with formal appropriation language through the standard budget process and sponsor bills in the session.