Active Connecticut state employees burned through their entire healthcare appropriation; state retiree healthcare is facing a $60 million deficit for the 2026 fiscal year, and both accounts have negative balances in the tens of millions for Funds Awaiting Distribution (FAD), which are used to pay healthcare claims, according to numbers presented to the Health Care Cost Containment Committee (HCCCC) in October.
The General Assembly appropriated $553.8 million toward active state employee healthcare and $790.5 million toward retiree healthcare in the FY 2026 budget. As of the end of the fiscal year, there was only $421,691.56 of the active state employee healthcare appropriation remaining, and retiree healthcare was in deficit by $59.9 million, according to the HCCCC’s October 13, 2026, presentation.
Furthermore, FAD accounts for prescription medications for both active and retired employees are in deficit by $36.6 million and $76.4 million, respectively.
On the medical side, the active employee FAD account is very low, with only $16.2 million remaining, and the FAD account for prescriptions was negative $36.4 million, putting the combined FAD balance $20.2 million in the red. Although retirees had a negative $76.4 million prescription FAD account, their medical FAD was $226.2 million, leaving a healthy combined balance of $176 million.
According to HCCCC meeting minutes from August, the retiree healthcare account will have to be boosted with a transfer from the OPEB Trust Fund, a move that will have to be approved by Connecticut’s state employee unions. The OPEB Trust Fund had roughly $3.1 billion in assets and $16.1 billion in unfunded liabilities as of the latest 2025 valuation.
“On the retiree side, we are still projecting a $56 million deficit in the retiree health appropriation,” Roy said. “We intend to take a deduction from the OPEB trust fund to cover this balance, and we are working on the policy details with the relevant parties.”
Additionally, the HCCCC noted that the State Partnership Plan 2.0, which allows municipalities to piggyback on the state employee health plan, started the fiscal year with its FAD account $45 million in the negative and ended the fiscal year the same way, with a deficit of $32 million.
The Partnership Plan, which has grown to include 207 municipal groups and 75,000 members, paid out more in claims last year than it received in premium payments, and this year is apparently no different. Following another such year in 2022, when the Partnership faced uncertainty, the plan had to increase premiums to keep the program viable.
According to meeting minutes, as new towns join the Partnership, there is usually a spike in claims, but overall healthcare costs, particularly prescription medications, have been increasing steadily, putting strain not only on Connecticut residents’ healthcare costs but also on the state’s costs.
Reached for comment, spokeswoman for the Office of the Comptroller Madi Csejka said the trend in rising healthcare costs, particularly drug spending, “put considerable pressure on plan funding and contributed to the declining account balances we’re seeing today,” and that the state’s current $708 million appropriation for active state employees this fiscal year is sufficient to cover costs for the remainder of the year.
“With respect to the active employee appropriation, we currently have sufficient funding available within the General Fund appropriation to meet the plan’s needs for the remainder of this fiscal year,” Csejka wrote in an emailed statement. “For the retiree appropriation, we identified the projected funding shortfall in advance and have been clear with OPM and the Finance Advisory Committee about the additional funding needed to meet this year’s obligations. OSC has continuously stressed to our partners in the legislature and state government that we need to more adequately fund state retiree healthcare costs. Our submitted budget requests highlighted the need for additional funding when projections first indicated that the retiree appropriation would fall short. This is not a newly identified concern, and we have continued to communicate the need to ensure adequate funding is available.”
Although retiree healthcare will likely need a boost from the OPEB Trust Fund, Csejka indicated that premiums for both active state employees and the Partnership Plan had to increase “to bring the accounts back in line with actual claims costs, recover prior-year shortfalls, and begin rebuilding appropriate reserves to help support future costs.”
The healthcare losses for both active and retired state employees are almost entirely due to prescription medication costs, and although there is no current report regarding the costs and spending for specific prescription drugs in the state’s health plan, figures from 2025 show that for both active and retired employees, the two most costly drugs to the health plans were both GLP-1s designed for weight loss and reductions in diabetes.
According to those 2025 figures, prescriptions for Ozempic and Mounjaro accounted for $31.1 million in costs for the active state employee plan and $10.7 million for retirees.
The use of GLP-1s among active and retired state employees surged in recent years, at one point seeing 54 percent year-over-year growth in utilization and costs. However, the Comptroller’s Office indicates that new cost-saving measures have stunted the utilization and cost growth of the expensive drugs, including requiring those using GLP-1s to enroll in an online health management program called Flyte.
According to a May 21, 2026, press release from the Comptroller’s Office, more than 11,000 active state employees were enrolled in Flyte, and Csejka says the program “slowed GLP-1 growth,” and saved roughly $16.8 million per year.
Additionally, a partnership with TrueDataRx, a company that identifies lower-cost medications, has resulted in a further $29.7 million in savings, and, lastly, OSC conducted the state’s “first comprehensive dependent eligibility verification audit, which found approximately 1,400 individuals who were no longer eligible or no longer required coverage, and saved $14.5 million/year,” Csejka wrote.
The $790.5 million healthcare appropriation for retirees is part of Connecticut’s fixed costs, which, along with Medicaid, pensions, debt service, and adjudicated claims, make up 55 percent of the entire state budget. According to the Office of Fiscal Analysis, retiree healthcare costs are expected to grow at roughly 11.4 percent each year.
State lawmakers budgeted significantly more for active and retiree healthcare costs for the 2027 fiscal year, according to the state budget. Active state employees were budgeted $708 million, and retirees were budgeted $957.1 million for the 2027 fiscal year; the Comptroller’s Office says that, so far, this year’s claims experience is coming in below projections.
“It is important to recognize that the negative balances currently being projected are just that – projections, not final figures,” Cejka wrote. “As we continue to see actual claims costs coming in below earlier projections, there is an opportunity for those anticipated shortfalls to improve substantially. Our goal remains the same: to make sure the plans are appropriately funded while continuing to provide comprehensive, affordable healthcare coverage to our members.”
“We will continue to closely monitor claims experience, adjusting our financial projections as new information becomes available, and continue our work to find opportunities to manage healthcare costs without compromising access to care,” Cejka said.
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