The State Employee Benefits Committee (SEBC) gears up to vote on further state health insurance rate increases after this year’s 27% hike.
In order to keep pace with rising prescription drug claims and costs, as well as enrollment growth in the state-provided health insurance plan, the SEBC ultimately decided to increase premiums by 27% for the current fiscal year.
While those changes are in place, further increases will still be needed to avoid future deficits, particularly with the University of Delaware’s decision to leave the state’s health plan.
UD made the announcement on Feb. 28 that it would be leaving the state-run Group Health Insurance Plan (GHIP) effective July 1, 2025.
A release from the university says the decision was made after a year-long process of listening to its Office of Human Resources, benefits broker, faculty, staff and retirees.
"All such efforts addressed concerns about recent, significant and unexpected rate increases in the state’s system: up 9.4% in 2023 and another 27% in 2024, with additional increases anticipated over the next several years. These cost increases are not financially sustainable for the institution or its employees," the release reads.
UD intends to form a university-wide Benefits Advisory Committee to consider future options and recommendations.
Willis Towers Watson consultant Brian Stitzel says although the plan is seeing an ultimate headcount reduction with the loss of UD employees, that group of participants generally ran better than the overall health plan.
“You're not only losing that, call it better than average claims experience in the population, you're also losing the 5% risk load from that population as well," he explained.
While the SEBC looks at potential scenarios for implementing future rate increases overtime, Stitzel says if UD would have stayed on the state’s plan, the needed hikes would have been slightly lower.
Two smoothed approaches being considered are increasing rates by 4.2% each fiscal year, leading to a 15% hike in FY29, or no increase followed by a consistent 8.8% spike for the following three years.
The committee is also considering a non-smoothed approach of no rate increase next fiscal year, but then varied increases each year ranging from 7.3% to 11.2%.
Controller General Ruth Ann Miller says the 27% jump this year hit the state’s budget hard and she believes the committee should strongly consider a phased-in approach every year moving forward.
“Certainly in all of those discussions that happened, I think the lesson learned was that it is much better for us to do some sort of increase each year, even if it's a modest one, so that we don't end up in a situation like that once again," Miller told the committee.
Office of Management and Budget Director Brian Maxwell notes the current governor’s recommended budget (GRB) for FY26 — which is currently in review by the Joint Finance Committee and will ultimately be approved by the General Assembly in June — does not account for the state’s share of a premium increase, so if the 4.2% hike is approved, that will cost the state an additional $27.5 million next fiscal year.
"The GRB that's growing at 6.9% based on Gov. Carney's recommendation — there was no consideration for a health premium increase, so we're at zero percent right now as it stands," Maxwell explained. "But that 4.2% would require $27.5 million General Fund."
Maxwell says while he also supports a smoothed-approach to the increases, he still wants the SEBC to be focusing on potential ways to reduce healthcare premiums.
"Instead of talking about what we can do to bend the cost curve, we just talk about how much more money we have to put in the system. So I'm encouraging everyone to submit their ideas," Maxwell said.
The GHIP is projected to end the fiscal year with just over a $41 million surplus this year following the 27% rate hike and paying back a $7.3 million loan following last year's deficit, but that surplus won't last long.
Depending on which rate increase plan the SEBC ultimately approves, that surplus amount could hit zero as early as FY27, but even more modest premium increases don't equate to the fund maintaining any sort of reserves by FY29.
The SEBC is set to vote on a rate hike model at their March 21 meeting.
