Medicare Advantage plans are receiving less federal funding and paying more for prescription drugs.
Changes by the federal government affecting Medicare Advantage plans are driving up Alabama’s cost for health insurance for teachers and education employees.
PEEHIP’s request for more funding comes after years of stable funding or modest increases. The amount requested per active employee per month increased from $917 in 2015 to $998 in 2025, a 9% increase. Wales said there were two main factors that increased costs. Medicare cut federal funds to Medicare Advantage plans. And Congress increased the share of prescription drug costs paid by Medicare Advantage plans when it passed the Inflation Reduction Act.
Diane Scott, chief accountant and financial officer for the Retirement Systems of Alabama, which operates PEEHIP under the board’s direction, said PEEHIP would seek a new Medicare Advantage contract that will start in 2026. She said the outlook could be affected by changes in the federal administration after the presidential election.
State Superintendent Eric Mackey proposed eliminating the premium increases and offsetting that by taking more from the trust fund. The board voted to approve Mackey’s alternative.
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