The Virgin Islands government is bracing for a sharp rise in health insurance expenses next fiscal year, with lawmakers, health officials and insurance executives spending hours in a legislative hearing this week to examine the reasons behind the increase and debate whether moving to a self-funded insurance model could help control costs.
Beverly Joseph, chair of the Government Employees Service Commission Health Insurance board of trustees, told lawmakers that the total cost for health insurance coverage —including medical, dental, vision, and life insurance — for government employees and retirees is set to rise by $27,259,005.74 in fiscal year 2026. That represents a 13.7% increase over the previous year.
Initially, the board was confronted with a much steeper hike. “When you have losses such as our plan is experiencing, it would be anticipated of having an increase in excess of plus 30% using Cigna’s standard underwriting formula,” Joseph said, referring to the method insurers use to calculate risk and set premiums – the monthly payments made to the insurance company to keep coverage in place.
“Through negotiations, the board was able to negotiate the overall increase to a 17.5% increase,” Joseph testified.
“However, to achieve the savings, this would require the prescription drug plan to add prescription drug utilization management for certain medications, as well as the limitations or exclusion of weight management medications,” she added.
The board’s efforts to limit the increase, she said, were aimed at “providing savings in premiums for both the government and employees’ payroll deductions based upon the proposed premiums.”
The board spent significant time discussing how to balance the needs of active employees and retirees as health plan costs continue to rise. The territory now has more retirees than active workers covered under the plan — a major shift in the last five years, according to Valerie Daley, chief of the Group Health Insurance Division of Personnel.
“Actives are 6915 and retirees are now 7120,” Joseph told the panel.
Officials emphasized that any decisions about premiums, benefits, or plan structure must reflect this growing retiree population. Joseph noted that the shift is ongoing and likely to accelerate as more employees reach retirement age.
“Bear in mind, like Miss Daley said, you have more people going to retire. We haven’t hit the end of December yet, right?” Joseph said, highlighting the need for careful planning as the demographic balance continues to change.
To further control costs, the board explored a high-deductible plan, but employees overwhelmingly rejected the idea. “Overwhelmingly, 91% of employees wanted to keep their existing plan, versus a 5% wanting to move forward with option four, while 3% did not want either option,” Joseph told lawmakers.
Despite the pressures, retirees will see stability next year. United Healthcare agreed to keep Medicare Advantage premiums flat for 2026, with no changes to co-pays or deductibles. “No co-payments or deductibles will be changing in 2026,” Joseph said.
With pharmacy costs rising even faster than other medical expenses, the board is introducing a new prescription drug utilization management program aimed at controlling unnecessary spending.
“The prescription drug utilization management program will help ensure appropriate dosing and safe use, mitigate drug and waste stockpiling, ensure drugs are being taken according to medical necessity, ensure FDA-approved indications and off-label use, reduce waste, error, and unnecessary drug use,” Joseph testified.
Utilization management means that a team of clinicians will review certain prescriptions to confirm they are medically necessary and used according to established guidelines. Cigna officials emphasized that if a medication is initially denied, patients can still access it through an appeal process if their doctor demonstrates it is medically required.
Officials stressed that controlling health care costs will require not just policy changes but personal responsibility. “You gotta stop putting off stuff. You have a plan that gives preventive measures, utilize it, formulate a relationship with a PCP and go to the doctor,” urged Joseph, emphasizing the importance of regular checkups.
Joseph said she is seeing encouraging signs of change: “You are seeing more people getting engaged with their health. You see them from joining the gym, walking on the side of the road, eating better. Yes, we have seen that the participation in the wellness activities have gone up.” But she also cautioned that medication adherence remains a challenge. “We still need to get people to be more engaged with their pharmacy medicine. You know, when the doctor calls it in, keep with your refills. Don’t have the pharmacy fill it and it’s sitting right there.”
Sen. Franklin D. Johnson put the issue in personal terms, saying, “As men, we have our cars and we take them to the finest Body Shop and the finest mechanic shop. We don’t take our body to the doctor … Please pay attention. These rising costs ain’t just because the insurance company wants to just get money. These rising costs are because a lot of us are not going on time seeing our physician.”
“Thank you so much for your testimony. It was an interesting and important discussion,” said Sen. Marvin Blyden. “One thing I can say honestly: we need to change our focus, because good health is wealth … Based on the testimonies, 92% of government employees on a plan are sick, meaning only 8% are not. Those numbers are staggering. Another 13% do not even go to the doctor. That’s key.”
Cindy Richardson, director of Personnel, explained that the Division of Personnel will take over administration of the $1 million wellness fund to ensure programs remain accessible. “We are sitting down and we are going to be reviewing all of the proposals that come in and take a look at what’s being offered and ensuring that there’s diversity, not only for the active employees, but for the retirees as well,” Richardson said.
Officials also shared sobering data about chronic disease, noting that nearly half of members suffer from conditions like diabetes and hypertension, which account for more than half of total medical spending. The most severe cases — just 1% of members — make up over a third of all costs, totaling $65 million annually.
One of the most contentious issues before lawmakers was whether the government should move from its current fully insured health plan — where Cigna assumes all financial risk and the government pays a fixed premium — to a self-funded, or Administrative Services Only, model.
Under a self-funded plan, the government would pay medical claims directly as they arise rather than paying set premiums to an insurer. This approach could cut out insurer profit margins and risk charges, potentially saving money if claims stay low. But officials warned it would also expose the government to significant financial volatility.
“When you go to self-funding, there is no risk [for the carrier]. Under a fully insured plan, premiums are fixed, but claims can come in higher. With self-funding, this month you may pay 16 million, next month it might be 21 million. You gotta have that money in that account to pay for it,” said Joseph.
Cigna underwriter Mark Maynor echoed that warning, saying that while self-funding can offer flexibility and savings, it comes with heavy responsibility. “If you’re unable to fund the claims, Cigna is not going to be able to pay claims. So then your members are affected,” Maynor said, underscoring the danger that employees and retirees could see delays or denials in care if the government’s reserves fall short.
The switch would also mean the government becomes directly responsible for negotiating with hospitals and providers, managing reserves, and setting aside enough funds to cover catastrophic claims — high-cost cases that make up just 1% of members but account for more than a third of all medical spending.
Because of these risks, the Health Insurance Board is conducting a detailed case study to assess whether self-funding is a viable and safe option for the territory. Lawmakers stressed that any transition must be handled carefully to avoid putting employees, retirees and taxpayers at risk. The study’s findings will play a central role in future debates over whether greater control over costs is worth the exposure to unpredictable, and possibly much higher, expenses.
Lawmakers also discussed whether to adjust the current cost-sharing arrangement, in which the government pays 60% of health insurance premiums and employees pay 40%. Shifting to a 65/35 split would save the government $27 million, but would forward those costs onto workers.
Both lawmakers and health officials stressed that any transition to self-funding must be approached with caution. Sen. Milton E Potter said, “One thing I am cautious about is that, based on our trends, Miss Joseph is saying there’s an 18.4% rise in medical claims per employee per month. And that is what gives me chills. We ought to have some level of stability before transitioning to a self-funded approach. I love the concept of self-funding and the flexibility, and the cost savings and pharmacy savings. But before making the leap, we need to prepare ourselves and have the reserves that we need so that we don’t put our employees at risk when these high claims come and we don’t have the funds to pay.”
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