Costs of state employee health benefits continue steep rise

SPRINGFIELD – Health insurance costs are expected to take a bigger bite out of the state's budget and out of state employees' pocketbooks next year.

Officials from the Department of Central Management Services told a legislative panel Tuesday they expect to see an increase of $380 million, or 9%, in total costs to the system in fiscal year 2027. That would bring total expenses paid by all funding sources to about $4.6 billion.

That would be a slightly lower rate of inflation than the state has seen in recent years. Costs increased this fiscal year by an estimated $402.8 million, or 10.5%, over fiscal year 2025. That year was almost 15% higher than fiscal year 2024.

CMS Director Raven DeVaughn said the increases have been due to several factors, including growth in the state's workforce. Since 2019, she said, the state has added about 10,000 employees. She said the health plan now covers about 470,000 lives, including employees, retirees and qualifying dependents.

But DeVaughn also cited general inflation in the health care industry as a contributing factor.

"Certainly, there's the general idea of inflation that we are all just fighting through as a country," she said. "We can't quite point to one specific thing that has increased our liabilities."

According to CMS data, the average cost per participant is expected to grow 8.3% next year, to $12,051. That would represent a 45.7% increase over fiscal year 2018.

As an employer, the state offers its employees a variety of different health benefit plans. They are funded through a combination of state funds, employee premiums, prescription drug rebates and other miscellaneous revenues.

The state's general revenue fund is the largest single source of funding, accounting for about 62% of the system's total revenues. That cost is expected to rise 12.8%, to $2.8 billion in the upcoming fiscal year. Contributions from the road fund are expected to decline 10%, to $155.5 million, while funding from university funds is expected to remain even at $45 million.

Member contributions are expected to increase $30 million, or 4.9%, to $637 million. Member contributions make up about 14% of the system's total revenues.

Premiums, which are largely a function of collective bargaining agreements, are expected to rise $8 per month for employees and $4 per month for all dependents in both fiscal year 2026 and 2027, the last year of the current labor contract.