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State Economists: State Employee Insurance Trust Fund Solvent, For Now

Stethoscope on a pile of money.
The Florida Channel
Leon County Judge John Cooper on June 30, 2022, in a screen grab from The Florida Channel.

Despite past worries that the main account that pays for state employees' health-insurance costs will go bust in the next three years, state economists now say that isn't the case. 

The economists this month came up with revised estimates that predict the state employee health-insurance trust fund will grow by hundreds of millions of dollars by 2022.

Economists agreed to increase the estimated cash balance in the trust fund at the end of the 2019-2020 fiscal year to $554.8 million, a near 38 percent jump from the previous estimate.

They also agreed to increase the ending cash balance for the following year to $400.3 million. And what was once expected to be a near $595 million deficit in fiscal year 2021-22 is now projected to be a positive cash balance of $17 million.

The state employee health-insurance trust fund helps pay the health-insurance costs for state employees, retirees, and dependents enrolled in the program. Money for the trust fund comes from premiums paid by employees and money set aside each year in the state budget.

The improved outlook is attributable to a number of factors, including an expected $174.5 million drop in medical claims and lower-than-anticipated enrollment in the state group health-insurance program.

While enrollment in the program continues to increase, it hasn’t grown at the levels that economists estimated when they last examined the program in March. Back then, economists predicted the program would grow by an average 0.96 percent. Now, they estimate an average 0.76 percent annual growth over the next six years.

The cost of providing health care to state workers remains a sizable expense for state government. Lawmakers set aside $2.78 billion for the program this year.  And while the new estimates show positive cash flow for the next three years, economists predict the fund could run a deficit of up to $1 billion by mid-2024.

There have been fears for years that the trust fund would slip into the red if the Legislature didn’t remodel the state group health-insurance program, which is administered by the Department of Management Services.

This spring, the Legislature passed a bill that wiped out a two-decade prohibition on the state establishing a prior-authorization or formulary program for employees.

Generally, a formulary is a list of prescription drugs covered by insurance plans. The change allows the state to stop paying for certain drugs, although the plan would allow physicians to order drugs, if medically necessary.

The 2019 law also requires state officials to analyze current contracts with health maintenance organizations, preferred provider organizations, and prescription drug programs and to develop a plan to procure new contracts for benefits beginning in 2023.

In 2017, the Legislature pushed to redesign the program to encourage more people to participate in high-deductible health-insurance plans, something state employees currently are reluctant to do. According to the economists’ three-year outlook, only 2.5 percent of employees participate in a high-deductible plan.

High-deductible insurance plans place a larger burden of health-care costs on the employee, in exchange for lower monthly premiums.

The state was going to attempt to incentivize participation in the high-deductible plans by promising higher take-home pay for employees who enrolled in them.

But an actuarial analysis obtained by The News Service of Florida indicated it wouldn’t be a cost saver for the state, because the move could entice 29,500 state employees who turned down coverage this year to join the program.

Meanwhile, the positive financial news on the state employee health-insurance front comes as Florida’s economy is projected to worsen.

Economists earlier this month predicted that the state would take in about $867 million less in revenue over two years than earlier anticipated.

Amy Baker, head of the Legislature’s Office of Economic and Demographic Research, told reporters last week that the economy was “winded.”