Health insurance for state employees could struggle to remain solvent if premiums not increased

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A new report from Florida TaxWatch has detailed how the state could face big deficits if it does not increase the premiums paid by state employees for health insurance.

According to the report, Florida offers comprehensive health benefits through the State Group Insurance Program (SGIP), which is available to current and former state employees, their spouses, children, dependents and retirees. State employees receiving health benefits pay a fixed monthly premium.

The report notes financial outlooks adopted at the beginning of Fiscal Year (FY) 2023-2024 showed an estimated $574.1 million cash balance remaining. Revenues — which include employee premiums — were estimated at $3.085 billion. However, the expenses incurred through claims topped an estimated $3.336 billion, an operating loss of $250.4 million.

Fast forward to FY 2024-2025, with a starting balance of $323.7 million, revenues are estimated to decrease to $3.024 billion, while expenses are set to increase to a projected $3.595 billion. This would mean an overall operating loss of $570.8 million, resulting in a $247.1 million loss coming into FY 2025-2026.

Increases in expenses are set to wildly outpace revenue over the next few years, resulting in an operating loss of $770.8 million in FY 2025-2026, before eventually increasing to a whopping loss of $1.523 billion by FY 2028-2029.

Florida TaxWatch and the Government Efficiency Task Force recommend Florida lawmakers drop the state’s share of premiums to 75% to get more in line with what other states and large private employers are paying if they want SGIP to remain solvent. The state currently pays a 93.9% share of premiums for state employees.

However, if lawmakers implement a 75% cap on the state’s share for both single and family coverage, state employee single coverage premiums would increase from $50 per month to an estimated $203 per month, while family coverage would increase from $180 to approximately $458 per month. That would save Florida an estimated $446 million annually, the report said.

“Two things are certain. First, over the past couple of decades, the cost of health insurance available through the SGIP has more than doubled,” the report said. “Second, the annual premiums paid by the subscriber for both single and family coverage have not changed over this period, leaving the state to bear the additional costs.”

The report said the current practice of supplemental appropriation by the Legislature will make maintaining solvency difficult because it will require an additional $901.6 million per year to keep it afloat. It adds that the Legislature is facing a projected $2.8 billion budget deficit in FY 2025-2026, a $2.8 billion deficit again in FY 2026-2027, and a monumental budget deficit of $6.9 billion by FY 2027-2028.

Florida TaxWatch notes the legislature will have to make some tough decisions and urged state lawmakers to take swift action to avoid “severe budget cuts.”