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Committee warned health insurance costs will rise sharply; FY2027 appropriation recommended up 14%
Summary
Legislative Services Office analysts told JFAC that state medical cost projections require a substantial increase in the FY2027 health insurance appropriation (governor recommends a ~14% increase) and warned that employees could see an average premium rise of about 7.3% if the 20/80 cost split is retained.
Frances Lippett, a budget and policy analyst with the Legislative Services Office, presented the committee with a statewide review of health insurance costs and funding options for FY2027.
Lippett said the state's medical cost per enrollee has historically grown more slowly than projected increases over the next three years; she told the committee that "medical claims are anticipated to increase 7.5% annually" and that the FY2027 appropriation recommended by the governor targets the minimum required reserve level and would raise the per‑FTE appropriation by about 14%.
Why it matters: the state's group insurance plan covers state agencies and, in some cases, participating school districts; rising claim costs and a target reserve policy determine the appropriation the legislature must set. Lippett showed current reserves (about $88.6 million as of December) and explained how those reserves are expected to be drawn down as enrollees meet deductibles and claims are realized.
Funding options and employee impact: the governor's recommended appropriation was described as sufficient to target the minimum required contingency reserve (about 10% of estimated annual premiums), and analysts showed a comparison between funding to the 50th‑percentile scenario and funding that would aim at 90% coverage of potential claim scenarios. Lippett said, to maintain the current employer/employee cost sharing (roughly 80% employer / 20% employee), "employee premiums are projected to increase an average of 7.3%."
Questions and context: legislators asked whether larger school districts that remain self‑insured could be required to join the state plan to enlarge the pool; analysts and the insurance administrator explained participation remains voluntary and that some large districts remain self‑insured because they obtain lower rates or prefer local control.
Next steps: the committee will consider the statewide maintenance appropriation for health insurance during the maintenance budget hearings; staff offered to supply multi‑year trend reports on costs and enrollment to help frame policy choices.
The presentation concluded with members asking for follow‑up data on multi‑year trends and on how different cost‑sharing splits (for example, 70/30) would affect premiums and reserves.
