Alabama's PEEHIP Health Insurance Faces $380M Shortfall

State lawmakers asked to cover full gap as medical and drug costs surge

Published on Mar. 4, 2026

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Officials with Alabama's Public Education Employee Health Insurance Program (PEEHIP) say the state's insurance plan is headed toward a $380 million shortfall in fiscal year 2027, with medical and pharmaceutical costs more than tripling since 2003 and projected to approach $2 billion by 2028. The PEEHIP board has requested lawmakers cover the full shortfall, but the governor's proposed budget would provide less, leading to concerns about the program's long-term financial stability.

Why it matters

PEEHIP provides health insurance to over 100,000 active public education employees in Alabama, and the looming budget gap raises concerns about potential premium hikes or coverage cuts for teachers and other school staff if the full shortfall is not addressed by the state legislature.

The details

The projected $380 million gap for fiscal year 2027 is driven by surging medical and pharmaceutical costs covered by the plan. PEEHIP currently receives $904 per active member per month from state-funded employers, but the board has requested that amount be increased to $1,209. The governor's proposed budget would provide $1,073 per member, leaving a roughly $136 per employee per month difference. Lawmakers are expected to take up the education budget, which includes PEEHIP funding, in the coming weeks.

  • The projected $380 million shortfall applies to fiscal year 2027, which begins on October 1, 2026.
  • PEEHIP's medical and pharmaceutical costs have more than tripled since 2003 and are projected to approach $2 billion by 2028.

The players

Public Education Employee Health Insurance Program (PEEHIP)

Alabama's state-run health insurance program that provides coverage to over 104,000 active public education employees.

Kay Ivey

The Governor of Alabama, whose proposed budget would provide $1,073 per PEEHIP member per month, less than the $1,209 requested by the PEEHIP board.

Diane Scott

The Chief Financial Officer of the Retirement Systems of Alabama, which oversees PEEHIP.

Neah Scott

The legislative counsel for the Retirement Systems of Alabama, who has heard 'rumblings' that lawmakers could appropriate about $190 million to address the PEEHIP shortfall.

David Bronner

The chairman of the Retirement Systems of Alabama, who says the PEEHIP program can meet its obligations in the short term if lawmakers do not fully fund the board's request.

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What they’re saying

“There's no panic. There's plenty of money in the trust fund.”

— David Bronner, Chairman, Retirement Systems of Alabama (aldailynews.com)

“My objective is to be able to say to you as members and the people you represent that your health care is covered for this year. Hopefully … if we get the help from the Legislature again, we can cover it next year.”

— David Bronner, Chairman, Retirement Systems of Alabama (aldailynews.com)

What’s next

Lawmakers are expected to take up the education budget, which includes PEEHIP funding, in the next few weeks.

The takeaway

The looming $380 million shortfall for Alabama's public education employee health insurance program highlights the growing financial pressures on state-run health plans, raising concerns about potential premium hikes or coverage cuts for teachers and other school staff if the full gap is not addressed by the legislature.