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The Public Education Employees’ Health Insurance Plan Board of Control heard reports on the healthcare provider’s 2024 finances and future funding concerns due to increasing medical costs, during their Dec. 3 meeting.
The Retirement Systems of Alabama CFO Diane Scott presented a report to the board regarding PEEHIP’s finances as of the fiscal year’s end on Sept. 30.
Scott reported PEEHIP has received $800 per month per active employee since 2017, and will continue to do so in the 2025 fiscal year. Scott said, however, for the 2026 fiscal year, PEEHIP will be requesting the legislature grant them $904 per active employee per month.
Overviewing the growth of PEEHIP’s medical and pharmaceutical costs since 2003, Scott reported that, until 2007, total costs increased yearly by 4.7 percent—a number she said, “Is not out of line honestly for the—for the growth in healthcare expenses. It’s just that we are facing some more treacherous waters than we usually are in the next three years.”
Scott projected that, based on PEEHIP’s current funding and the proposed increase in monthly revenue from members, 2024’s expected $370 million in reserve funds will decrease to just $142 million by 2027. This would leave the PEEHIP’s financial reserve at a deficit of $8 million by the year’s end.
These projections are the result of an expected 10 percent increase in PEEHIP’s claims expenses from 2024 to 2025—an expected 8 percent increase from 2025 to 2026 and an expected 6 percent increase from 2026 to 2027—upon which the cost of claims expenses would be greater than PEEHIP’s financial reserve.
“That’s in a nutshell why our costs—our reserves are going down is because you can see clearly there that the costs are eclipsing the revenues that we have coming in,” Scott said.
These projections come despite the board voting at their last meeting to transfer roughly $119 million from the Alabama Retired Education Employee’s Health Care Trust to PEEHIP in 2026.
Scott reported that, if the projections are correct and no new revenue is found, PEEHIP will need to increase costs to around $1,114 to $1,159 monthly per active member in 2027.
“So, here’s what I’m hoping, okay, I’m hoping that we are just wrong and way too high on the claims increase,” Scott said. “I’m hoping that we find some cost saving ideas, okay? Cause we’re looking under every rock, every leaf for these sorts of things.”
PEEHIP director David Wales presented the board an overview of gene therapy treatments which medical providers expect to begin offering in 2025, citing them as a major factor in the projected increases in medical expenses.
Wales described gene therapy as, “where genetic material is infused into someone’s body and it either adds a new gene that they didn’t have before that’s gonna help them cure a disease or treat a disease, it’s going to turn off a gene in their body that’s causing a disease or it’s going to fix a gene in their body that’s broken.”
“It’s a really, really exciting science, It’s also really, really overwhelmingly expensive, millions of dollars for one person’s treatment,” Wales said, continuing, “So, as these are approaching us, they’re gonna be very, very difficult to wrap management around it that’s gonna be able to deliver this therapy to the people that need it and be able to afford it.”
Wales said PEEHIP expects to save $285,223 in the first financial quarter of 2025 by establishing preferred generic equivalents for five listed pharmaceutical drugs.
Wales reported that in 2024 PEEHIP’s generic fill rate was 91.7 percent, saying, “Each incremental tenth of a percentage point there drives real savings, as you move away from costly brand drugs to their generic equivalents.”
Wales reported on the PEEHIP Wellness Program, which asks select members to undergo a wellness screening once a year by Aug. 31 in exchange for a waiver paying their $50 monthly wellness premium.
Wales said of the 145,775 members asked to complete the screening, 91.4 percent did so.
Describing the benefits of the program for patients, Wales said, “It gets information in front of them like their glucose, their cholesterol, their triglycerides, blood pressure. The idea is so that they will be aware of any underlying health issues that can be harmful early so that they can see a healthcare provider and do something about that on the front end of that continuum.”
PEEHIP Director Erica Thomas presented updates on PEEHIP member benefits to the board.
These included “Let’s Move Activities” offered by United Healthcare for PEEHIP United Healthcare Medicare retirees during 2024’s fourth financial quarter.
Online wellness events included yoga, dance and nutritional information sessions. In person events included tickets to the Sweet Creek Farmers Market in Pike Road on Nov. 12, as well as therapeutic horticulture sessions in partnership with the Mobile Urban Growers Network, set to be held in Oneonta on Dec. 11 and in Clanton on Dec. 12.
In her report on the 2024 fiscal year, Scott said PEEHIP’s non-current assets, or those which cannot be easily converted to cash within a year, amounted to $371 million worth of investments at fair value. Total assets amounted to roughly $455 million.
Scott reported that for the fiscal year, PEEHIP received roughly $1.2 billion in revenue from premiums from active members, as well as $3.5 million in American Rescue Plan Act funding.
PEEHIP’s claims and administrative costs for active members came out to roughly $22.4 million more than their operating revenue, a deficit Scott said was corrected by around $2.5 million worth of investment revenues from short term investments in commercial paper and money market securities.
This leaves PEEHIP’s net position at $277 million as compared to $276 at the beginning of the fiscal year.
Scott said that of PEEHIP’s total funding, 68.2 percent came from the legislature, 26.85 percent came from member contributions, 3 percent came from fees from universities and 1.6 percent came from investment income.
Scott reported that the gross cost of cumulative claims increased by 2.76 percent compared to the end of the 2023 fiscal year. Cumulative optional claims—which include PEEHIP’s optional coverage for cancer, dental, indemnity and vision—decreased by 2.23 percent compared to 2023.
Claims costs for Viva Medical Health Maintenance Organization coverage offered through PEEHIP also decreased in 2024 by 8.11 percent.
Scott reported that overall, PEEHIP served a total of 354,141 individuals in the 2024 fiscal year.
Scott outlined PEEHIP’s operating budget, which she said funds the organization’s “salaries and the benefits and the miscellaneous expenses we have to incur that are not claims based to keep the lights on and keep the system moving.”
Scott reported that of the $5.97 million budgeted for operational costs in the 2024 fiscal year, $5.2 million was spent with $781,049 left over.
Scott went on to outline the Alabama Retired Education Employee’s Health Care Trust’s end of the year finances, reporting that the trust has roughly $2.4 billion in total investments compared to $1.9 billion in 2023.
These investments generated $479 million for the fund during the fiscal year.
Retirees paid an annual total of $271 million into the fund.
The PEEHIP Board of Control meets once per financial quarter. The board’s meetings are open to the public and livestreamed on rsalive.org.
