BIRMINGHAM, Ala. (WBRC) – Alabama lawmakers will have to choose between lower health care costs or a raise for Alabama’s public school teachers this session. The Public Education Employees’ Health Insurance Plan, or PEEHIP, is seeing a $380 million shortfall for the 2027 fiscal year.
Neah Scott is the legislative council for the Retirement Systems of Alabama (RSA). She said PEEHIP is seeing a rise in health care costs, which has led to this shortfall. Alabama’s public school teachers have not seen an increase in their out-of-pocket cost for health insurance since 2016, and they are hoping to keep it that way.
“We’ve had a really good long stable period. We want to do everything we can to continue it. We want to provide a plan with good benefits at a low cost to the members,” said Scott.
Scott said there are two main drivers adding to the shortfall: a rise in costs to cover Medicare retirees and higher trends for hospital medical coverage.
“And that’s not driven by one thing. That’s inflation, some of it’s higher utilization, some of it’s staying in the hospital longer. It’s kind of across-the-board increases, it’s not just one thing,” Scott said.
PEEHIP is asking state lawmakers to help cover the cost of health insurance, the same request they had last year, but for $124 million. State lawmakers made the choice to fund insurance over giving teachers a raise.
“The legislature didn’t do a pay raise for teachers and funded insurance. So this year, we’ve got another, even larger request in a year where they would likely want to give teachers a pay raise. So it’s a difficult issue,” Scott said.
Richard Franklin, president of the Birmingham chapter of the American Federation of Teachers, said he prefers to see the legislature fund insurance.
“We would love for them to do both, but if we had a choice and just off of past history, I would rather them invest in insurance so the cost is not put on the educators,” Franklin said.
Scott said conversations are happening now to figure out the best way to tackle this problem.
“How can we solve the funding when there’s not a lot of money in the ETF right now and still provide a good rich plan,” Scott said.
Following the state legislature’s decision, the RSA board and PEEHIP will discuss options that would go into effect on Oct. 1, 2026.
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