PEBA tells subcommittee health premiums likely to hold in 2027; asks to remove COVID-era proviso

The Public Employee Benefit Authority told the House Constitutional Subcommittee on Tuesday that state health-plan premiums are not expected to increase for 2027, citing savings from a new pharmacy benefit manager contract and other cost-containment measures.

Peggy Boykin, PEBA’s executive director, told the subcommittee PEBA administers retirement and health benefits for roughly 10% of South Carolina’s population. She said PEBA currently pays about $4.3 billion a year in insurance claims and about $4.3 billion a year in retirement benefits, and that the retirement trust holds just over $50 billion.

Boykin said PEBA does not expect a premium increase for 2027 largely because of a new contract with the PBM (Caremark) and other measures. She said the baseline requirement tied to 2026 premium increases includes an annualization of $34,525,000 plus retiree growth of $2,169,000, for a $36,694,000 baseline impact for 2026 premiums.

The director highlighted demographic figures for the state health plan — just under 312,000 subscribers, about 214,000 active employees, roughly 95,000 retirees, and a total of 553,061 covered lives — and reviewed past pension reforms, including legislation in 2012 and the 2017 funding reform that lowered assumed returns and raised contribution rates. She said those changes, together with favorable investment returns, have reduced the retirement system’s amortization period to about 12 years (and the police officer system to 11).

Representative Richie Yao pressed PEBA on denials of coverage and the financial harm they can cause. Yao described unresolved family claims that imposed large out-of-pocket costs and asked whether PEBA tracks the total cost to families from denied coverage. "I would like to know the total denied cost that we spend in South Carolina," Yao said.

Boykin said PEBA can provide appeals data (how many appeals are approved versus denied) and can estimate what it would cost to add a specific health-care item to coverage, but she emphasized that the General Assembly decides what benefits are included and that PEBA cannot add unfunded coverage on its own. "If you look to add coverage beyond what is currently provided, then the General Assembly has to get a fiscal impact on that and they have to set premiums accordingly," she said.

On the budget side for PEBA’s operating and passthrough items, Boykin said PEBA does not receive direct appropriations for its operations; certain general-fund dollars flow through PEBA for specific items (for example, employer contributions for certain pension programs and OPEB contributions). She asked the subcommittee to delete proviso 108.11, a temporary COVID-era proviso that previously allowed PEBA to retain year-end excesses in the plan to address timing differences caused by postponed procedures. Boykin characterized the proviso as no longer necessary.

The committee chair and members asked clarifying questions about attribution of savings to the PBM contract and about the effect of a separate matter involving per diem treatment for legislators; Boykin said she could not attribute exact savings solely to the PBM and explained statutory treatment of per diem and retirement calculations for members who entered before and after 2012.

No formal vote was taken on PEBA’s requests during the hearing. PEBA offered to supply appeals data and estimated costs to the committee on request.

What happens next: PEBA said it will provide requested appeals data and cost estimates for adding specific coverage items; the committee did not act on the request to delete proviso 108.11 during this session.