Delaware state employee insurance to rise as UD splits

Delaware state employees, retirees and those covered under the state health plan will see an increase in their premiums starting July 1, in part due to the departure of more than 1,000 University of Delaware employees from the plan.

The state's General Health Insurance Plan, known as the GHIP, covers nearly 20,000 people, making it Delaware's largest employer-sponsored plan. Already coming off a controversial 27% premium hike last year in the face of rising claims and usage of expensive weight-loss medications known as GLP-1s, the state's insured ratepayers will now see a 4.2% increase for the next fiscal year.

That decision also adds $27.5 million to the state budget to cover the employer share of the insurance premiums. Former Gov. John Carney did not include any increase to the state employee health care in the original Fiscal Year 2026 that was inherited by Gov. Matt Meyer.

The decision for that hike didn't come without its own controversy though. The state board that manages the health plan, the State Employee Benefits Committee, rejected two other proposals while also tabling consideration of forgoing an increase this year before voting for the hike.

It came amid arguments from commissioner Karen Peterson, a former state senator who led the opposition to the Carney administration's attempt to push retirees to a Medicare Advantage plan, that the plan contributions by retirees were subsidizing other ratepayers and therefore breaking state law.

She called for a freeze on rate hikes and the need to implement different contribution levels for active employees, pre-Medicare retirees and Medicare retirees.

The debate over the hike

In the first major vote by the committee since Meyer administration officials took over management of the state health plan, the 11-member body was tasked with figuring out how to structure estimated cost increases over the next four years.

Three proposals were offered by the state's benefits consultant, Willis Tower Watson. Either put off an increase for a year, but then see increases of 7.3%, 11.2% and 8.3% over the following three years; make increases of 4.2% for three years and then 15% in the final year; or do nothing this year and then institute three consecutive increases of 8.8%.

Commissioner Bill Oberle Jr., a former Republican Senate president pro tempore, advocated for no increase this year while the new committee members sought to reform the state's insurance plans.

"I am not prepared to vote for any rate increase until we begin to look at serious solutions to what I consider to be an ongoing problem on the pricing of health care in the state," he said, noting that he thinks the Meyer administration has "a real interest in trying to get to the root cause of the problems on the pricing side."

Brian Maxwell, the director of the state's Office of Management and Budget and the new chair of the committee, admitted that they haven't had time to identify changes that could be made for the plan year that begins July 1, and participants need to be notified of options within a few weeks.

"A zero [percent increase] is a lot. It makes my life a lot easier, but I don't think it's the right thing to do," he said.

A subsequent motion by commissioner Paul Baumbach, who retired from the House of Representatives last year and advocated for state retiree health care while in Dover, to increase premiums by 5.2% for active employees and pre-Medicare retirees only was rejected in a 9-2 vote.

Despite the protests of Peterson and Oberle, the committee ultimately agreed to a 4.2% increase for all plan participants.

Commissioner Steve Costantino, who also serves at the director of health care reform and financing for the state, noted that the decision to increase premiums this year was also important in the face of a federal administration that has been changing daily.

"I'd rather not defer something we owe into the out years, because some of these federal implications are going to be shifting a bill to the state, and I don't think it's wise. I rather deal with the year we have now," he said.

The committee did agree to consider ways to decrease plan costs for future years, which could decrease future rate hikes for the plan.

Brian Stitzel, of Willis Tower Watson, noted that changing the state's coverage of GLP-1s like Ozempic or Wegovy or reducing who would be eligible to receive prescriptions for them, as some states have decided to do, could be the biggest cost reduction for the plan. The pricey drugs now account for 5% of all insured coverage spending by the state, and it's expected to grow, he added.

"We're now starting to see these drugs being used for multiple indications, as opposed to just weight loss. So I think this is certainly a growing problem," he said.

Does the plan break the law?

The discussion around the plan grew tensest when Peterson alleged that the state's health insurance plan violated state code.

Specifically, she pointed to a line that read, "No money shall be disbursed from [the Other Post-Employment Benefits Trust Fund] except for the purpose of payment of the State's premiums for post-retirement health insurance for employees retired." Yet the coordination of federal and state benefits dictates that Medicare pay a patient's initial cost up to limits with OPEB coverage kicking in afterward.

Peterson claimed that a flat premium rate on Medicare-eligible state retirees, some of whom may never reach Medicare coverage limits, results in an overpayment of $26.2 million to the plan, which is used to subsidize the costs of pre-Medicare retirees and active employees.

"In short, these funds may not be used to subsidize non-retiree benefits but they have been for years. And we've objected to this for years," she said, reporting that Medicare retirees have seen their premium skyrocket from $482 a month to $612 a month in just three years.

She proposed that the committee pause consideration of the pending plan year until its consultant could decrease Medicare-eligible participants' premiums by 13.6% -- or the amount of the current estimated overpayment.

"It might be hard in the beginning, but it bring us into compliance with the law," she said.

Peterson's proposal drew support from Oberle and Baumbach, but the remainder of the committee – largely officials within the Meyer administration – were not in favor of rewriting the system.

Deputy Attorney General Michelle Whelan said that she did not believe saying the system violates the law was a fair characterization – a belief shared by others on the committee.

Maxwell expressed frustration around the late hour of attempting to redo the balance of the state's health plan, which would result in cost increases for active and pre-Medicare retirees if a reduction to Medicare retirees was factored in.

Lt. Gov. Kyle Evans Gay proposed moving ahead with planned rate increases and letting future decisions on the legality of the law inform extraordinary changes to the rate structure at a future point in time.

UD leaves plan

The plan hike was precipitated in part by the loss of more than 1,000 participants from the University of Delaware, which was concerned by last year's 27% premium hike and its own lingering operating budget deficit.

UD represented more than half of all external plan participants in the state heath plan, according to Stitzel, and its participants also were generally healthier than other participants on the plan. That headcount loss and increase in plan risk only serves to drive potential costs higher.

The university chose to begin managing its own health and prescription plans in order to better "manage its expenses and also tailor solutions in the future that better meet the changing needs of its employees and community," UD Chief Human Resources Officer Melissa Bard told the university's board of trustees at its March 18 meeting.

Medical insurance options will continue to include Highmark Blue Cross Blue Shield and Aetna plans for university employees, according to UD. The SEBC has heard reports that the university could be seeing a 5% reduction on its premiums from Aetna by forming its own plan.

But UD is not alone in its decision to leave the state plan following two years of significant premium hikes. The city of Milford is also pulling its 256 members from the state's medical and dental plans this year, while the Five Points and Wilmington Manor fire companies are also pulling a combined 40 members.

Those smaller pools of participants could find savings up front, but future increases could be down the line, state officials warned. A three-year waiting period is required for any participating group that terminates involvement from the state plan before it could rejoin in order to prevent yearly changes to the plan.

Meanwhile the towns of Bridgeville and Millville, and the city of New Castle, will be joining the plan.