Healthcare costs and other operating expenses for the state’s Group Health Insurance Plan (GHIP) is projected to be $1.4 billion for fiscal year 25, nearing $2 billion with the addition of Medicare expenses.
The body in charge of state employee health insurance plans — the State Employee Benefits Committee (SEBC) — is now preparing to vote on new trend increases after ending the year in a $10 million deficit.
The Office of Management and Budget transferred the state’s GHIP $7.3 million to help cover the plan’s fiscal year 24 deficit, but as the new fiscal year begins, the SEBC is leaning towards being less conservative when deciding on new trend increases in medical and pharmacy claims to avoid repeating this year’s shortfalls.
The SEBC already committed to raising state employee health insurance premiums by 27% for FY25, which started July 1, 2024.
The FY24 deficit is largely due to underestimating the rising cost of prescription drugs, the utilization of bundled surgery rates and the growing popularity of weight loss drugs known as GLP-1s.
The state’s pharmacy benefit manager projected the state would pay $2 million for GLP-1s in FY24.
By the end of the fiscal year in June, the state had paid over $14 million for GLP-1s for weight loss purposes and close to $24.7 million for diabetes treatment.
Willis Towers Watson (WTW) Consultant Brian Stitzel presented new trend assumptions for FY25, projecting the state would see a 148% increase in GLP-1 utilization solely for weight loss purposes.
WTW is recommending the state consider approving a 15% aggregate increase in pharmacy claims for FY25, but says GLP-1 usage could eventually decline and aggregate pharmacy spending could reach 11%.
“This down to 11% is just the assumption or the belief that the increase in GLP-1 spend year-over-year will start to wane in FY26, 27, 28, such that it produces an overall aggregate number lower than the 15%," Stitzel said.
Additionally, WTW is recommending an FY25 annual medical claims trend increase of 5% for Medicare state retirees, compared to the current assumption of 3%.
While the SEBC did not raise any concerns about this increase, there was more discussion on the recommended increase for pre-retirees.
WTW is recommending an FY25 annual medical claims trend increase of 6% for active pre-65 state employees, despite the average increase of the prior 4 years being 8%.
“I don't see any harm in an estimate of 8%, perhaps even higher, because I think we've been short in the past. Just looking at what the national numbers are telling us — it's expensive to be cared for here in Delaware, and I don't see the cost, at least on the hospital side, on the provider side, going down," said Insurance Commissioner Trinidad Navarro.
Department of Human Resources Secretary Claire DeMatteis expressed similar concerns, noting she is "personally uncomfortable" with the 6% figure.
The SEBC is expected to vote on approving the trend updates at its upcoming August meeting.
