Alabama lawmakers will enter the 2026 legislative session facing a major financial decision over public educators’ health insurance.

Speaker of the House Nathaniel Ledbetter (R-Rainsville) warns the rising cost of the Public Education Employees’ Health Insurance Plan (PEEHIP) is squeezing out resources meant for classrooms.

Ledbetter told Yellowhammer News that PEEHIP is “looking at $380 million” in additional costs this year, on top of “an additional $160 [million] last year,” totaling “over $540 million dollars in the last 24 months.”

He also explained how the escalating cost limits what lawmakers can invest elsewhere in public education.

“That’s money that could have gone to the classroom, that’s money that could have paid for teacher pay raises, that’s money that could have paid for more buses or, you know, new construction,” Ledbetter said. “It’s not sustainable at that amount.”

Ledbetter attributed the growth to both increased medical usage and nationwide inflationary pressure in health care. He explained that PEEHIP’s usage has gone up 10% and emphasized that it is a nationwide trend.

Rising Medicare retiree coverage expenses and hospital medical costs are among the largest drivers of the shortfall, WBRC reported this week. Their analysis detailed the cost increases stem, rather than a single factor, from a combination of inflation, higher utilization, and longer hospital stays.

According to Ledbetter, top lawmakers have been meeting with PEEHIP officials and budget leaders to explore options.

“We’ve talked already. I’ve talked with my budget chairs, I have talked with members about it… I think we’ve got an idea of maybe what we can do,” he said.

He added that PEEHIP will likely need to use part of its own reserve to help address the deficit.

“PEEHIP will probably… look into—I think they’ve got a reserve and they may have to put in some themselves,” he said, but noted that lawmakers will still play a key role.

“We will work on it and have already been working on it. We’ll continue to do so.”

Pay raise, insurance, both – or neither?

Last year, lawmakers funded PEEHIP instead of issuing a teacher pay raise, leaving many educators without an increase in salary in order to maintain their health benefits.

As lawmakers return to Montgomery, they must now decide whether to:

• Cover the rising cost of insurance again
• Prioritize a pay raise
• Attempt both
• Or take no action and risk premium increases

PEEHIP officials and legislators will have tough choices to make in the 2026 legislative session, which begins in January.

Sherri Blevins is a staff writer for Yellowhammer News. You may contact her at [email protected].