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State Employee Benefits Committee votes to increase insurance premiums over next three years

Delaware’s State Employee Benefits Committee votes to raise health insurance premiums for state employees by roughly nine percent in the next year.

The Committee left insurance premiums for active state employees untouched for five years after the last substantial premium increase provided enough revenue to keep up with rising insurance claims.

But last year, the Committee raised them 8 percent. That increase was not enough to account for recent inflation and other forces, including the growing number of retired state employees, driving insurance claim costs even higher; in recent, years, total claims increased by roughly five percent annually.

Facing an estimated $28 million gap between premium revenues and claims by the end of this fiscal year, the Committee considered two options: raise premiums more than 16 percent in the coming fiscal year or smaller annual increases over three years.

The Committee chose the three-year option, arguing it offers a chance to find savings — negotiating lower prescription drug pricing, for instance — that could reduce the size of future premium increases.

While the Committee expects to raise premiums by roughly nine percent in the subsequent two years, Human Resources Secretary Claire DeMatteis noted that their decision doesn't prevent the Committee from changing course before 2026.

Insurance Commissioner Trinidad Navarro explains while raising premiums for state employees during a workforce shortage seems onerous, it could avert a future crisis or more drastic one-time increases.

"We knew that a premium increase was warranted years ago, but we had a surplus, so nobody wanted to vote to raise premiums when we still had money left over," he said. “Nobody wants to increase rates for anyone. We’d love to find the magic potion to fix this without having to do that, but the longer we push this out, it makes it more difficult in the future.”

Labor representatives on the Committee also backed the three-year option.

"To be blunt, I want to keep the pressure on us to look at the pricing problems that we face and try to look for solutions to ameliorate some of this," said American Federation of State, County and Municipal Employees Policy Director Shaun O’Brien.

But the consulting firm Willis Towers Watson noted that the strategy will require the state to spend from its reserves, and that any unexpected increase in claims could drain the reserve entirely.

In that event, DeMatteis said, "we would have to go to the General Assembly with our head in our hands and say, 'can you please help us?'"

The three-year option will still require the state to add $45 million to the 2024 budget to spend on additional contributions to employees’ health insurance. "We have the cash," said Office of Management and Budget Director Cerron Cade. "It's just going to have an impact on the budget growth number as we move a large sum into the operating budget."

The Committee's decision was nearly unanimous, with only one member opting to abstain. The only voice of opposition came from Casey Montigney, the Vice President of the Christina Education Association, who testified before the vote that the premium increase could undermine the value of coming salary raises for educators — a move by Gov. John Carney intended to improve teacher recruitment and retention amid a statewide educator shortage.

"Our educators are really just keeping up with inflation through this raise, and that's not counting all the years when our salaries did not keep up with inflation," she said. "Just remember the people you're impacting every time you vote to increase the costs for employees."

The Committee estimated that the premium increase could cost employees as little as an additional $30 or as much as $330 per year. The increases would only impact active employees and retirees under the age of 65.

Paul Kiefer comes to Delaware from Seattle, where he covered policing, prisons and public safety for the local news site PubliCola.