Alabama's two major health insurance boards, which oversee coverage for state and public education employees, have approved plans to request significant funding increases from the Legislature. The moves come amid rising healthcare costs and a challenging state budget forecast. The State Employees Insurance Board (SEIB) on Tuesday afternoon also approved a recommendation to increase premiums for all benefit plans by $20, marking the first across-the-board increase in 11 years if approved by the full board, according to SEIB CEO Stephanie Azar.
The Public Education Employee Health Insurance Plan (PEEHIP) board, which covers public school employees and retirees, unanimously approved a plan Wednesday morning to ask the Legislature for a $222 million increase for fiscal year 2028. This request aims to raise the per member per month rate to $1,226 for FY28, up from the $1,048 per member per month rate approved this spring for FY27. Diane Scott, chief financial officer for PEEHIP, attributed the request directly to rising healthcare costs. She noted that PEEHIP’s state rate had been stable at $800 for nine years before increasing to $904 in FY26 and then to $1,048 for FY27. PEEHIP covers over 106,000 active members, with calculations using approximately 104,000 for "conservatism," Scott said.
To address immediate coverage needs, the PEEHIP board also unanimously approved a withdrawal of $25 million from the Alabama Retired Education Employees’ Healthcare Trust Fund for fiscal year 2026 on Tuesday. This action is intended to ensure compliance with the board’s rules and maintain about 8% of the year's expenses in surplus, according to Scott, who expressed concern about not having enough to pay all of the costs otherwise. Scott also indicated that PEEHIP will likely need to withdraw up to $200 million from the trust fund to meet coverage needs for its members in the future. As of Monday, the trust was valued at $2.955 billion. State Finance Director Bill Poole warned that PEEHIP may have to continue to rely on trust fund withdrawals or make program changes if revenues do not increase. Previous withdrawals included $92 million in 2015 and $32 million in 2016.
For state employees, the SEIB board’s recommendation for a $20 premium increase will go before the full board for final approval on Sept. 10, with any changes taking effect Jan. 1. SEIB CEO Stephanie Azar acknowledged that "difficult decisions that must be made" were necessary, but stated that SEIB would remain a comprehensive benefit plan even with the changes. Azar also recommended the Legislature grant a $75 per member per month increase for FY28, bringing the state rate to $1,250 per member per month. This request would represent an estimated $480 million impact to the General Fund budget for SEIB’s roughly 32,000 active members. The SEIB covers approximately 102,000 people.
Beyond the premium increase, the SEIB board also approved other plan changes estimated to save the program $17.4 million in the partial FY27, which Azar said would prevent a deficit for the year. A full year of savings would amount to about $23.2 million. However, not all board members were in full agreement on the premium hike. Board member Connie Grier abstained from the recommendation, highlighting that households where both spouses are state employees would see a $40 increase because policies do not allow independent coverage for state employees married to each other. Lindsey Ward, executive director of the Alabama Retired State Employees Association, expressed that the across-the-board premium increase would be unfair and painful for retirees, who have not received a cost-of-living adjustment since 2007.
State Finance Director Bill Poole, who serves on the SEIB executive board, cautioned both boards that securing the requested funding from the Legislature may be challenging. Poole noted that healthcare costs were creating significant difficulties. He anticipated tightening budgets for the Education Trust Fund and a very challenging budget next year for the General Fund, which he said could lead to potential agency cost reductions. PEEHIP is funded by the Education Trust Fund (ETF), while SEIB relies on the General Fund Budget. Carolyn Middleton, an SEIB board member, expressed an expectation of legislative pushback on SEIB's request, similar to what PEEHIP experienced last spring. Neah Scott, legislative counsel for PEEHIP, recognized that the board’s request might be substantial in a year with less projected revenue, indicating that further decisions, including additional trust withdrawals or benefit plan adjustments, would be made as needed. Poole stressed that this is a moment of inflection for all health plans, suggesting that boards would have to either continue to rely on the trust or make some difficult decisions.