PEEHIP taps retiree trust fund as healthcare costs continue to rise

MONTGOMERY, Ala. (WBMA) — Alabama’s Public Education Employees’ Health Insurance Plan (PEEHIP) is turning to its retiree trust fund to help cover rising healthcare costs after lawmakers approved less funding than the system requested for the upcoming fiscal year.

PEEHIP officials requested a $380 million increase in funding to maintain current benefits as insurance and healthcare costs continue to climb.

“We submitted a request of 1,209 dollars per member per month for fiscal year 27 for the legislature to consider this past session. Governor set her budget and set that rate a little bit lower, and instead of 380 million was going to increase funding by 210,” said Neah Scott with the Retirement Systems of Alabama Legislative Council.

Healthcare funding for educators became a major topic during the 2026 legislative session as lawmakers worked through competing demands within the Education Trust Fund.

“Here’s the big boogabear in the room. The PEEHIP program expense. You’ve heard about this, and you’ve heard a lot of consternation about the increased employer cost,” Sen. Arthur Orr, R-Decatur, said during legislative budget discussions.

Lawmakers ultimately approved a $180 million increase in fiscal year 2027 funding, about $200 million less than PEEHIP’s original request.

As a result, the PEEHIP Board has approved a $119 million withdrawal from its retiree trust fund and may need to withdraw additional funds in the future.

“You have already approved 119 million, I will probably be back in September to ask for a little bit more. I don’t know what that could range from 25 to 75 or somewhere in there. And then up to 200 for next fiscal year,” said PEEHIP Chief Financial Officer Diane Scott.

If those projections hold, total withdrawals from the retiree trust fund could reach as much as $350 million over the coming years.

The funding issue affects far more than active teachers. PEEHIP provides health insurance coverage for approximately 360,000 Alabamians, including education employees, retirees, spouses, and dependents.

For now, PEEHIP officials say the trust fund withdrawals will help maintain current benefits, but board members have warned that continued increases in healthcare costs could require additional funding solutions in future years.