Nebraska’s health insurance program for state employees and their families could be headed toward serious financial trouble if costs continue to rise and oversight is not strengthened, according to State Auditor Mike Foley.
In a letter released Wednesday, Foley said the Nebraska State Employee Insurance Program, which covers about 13,500 employees and up to 28,000 total participants, has seen its financial reserves drop sharply in recent years. The program’s balance had steadily grown between 2016 and 2022, reaching a high of more than 83 million dollars, but has since fallen to just over 7 million dollars by the end of 2025—the lowest level recorded in at least a decade.
State officials have already increased monthly premiums to boost funding, adding nearly 25 million dollars to the program between mid-2025 and early 2026. However, Foley said simply raising premiums will not solve the problem, noting that more significant administrative changes are needed to stabilize the program.
The audit reviewed a ten-year period and found that medical claims began rising sharply starting in 2023. After relatively modest increases in earlier years, claims jumped by 12 percent in 2023, followed by additional increases of nearly 10 percent in 2024 and more than 14 percent in 2025. Monthly payouts from the insurance fund have climbed steadily, reaching an average of 26.5 million dollars per month during the current fiscal year.
The Department of Administrative Services, which oversees the program, has taken steps to slow the decline, including transferring 19 million dollars from a related fund and approving larger-than-planned premium increases of about 14.6 percent. Department officials said the financial strain has been driven by rising health care costs, expensive prescription medications, and a number of high-cost medical cases.
According to the audit, the total amount paid in claims has grown significantly over time—from about 178 million dollars in 2016 to roughly 293 million dollars in 2025. The report also noted that just 20 individuals accounted for more than 12.7 million dollars in medical claims last year.
Foley also raised concerns about oversight practices within the program. The audit found that some claims were duplicated or submitted for individuals who were not eligible for coverage. In addition, tens of millions of dollars in pharmaceutical rebates owed to the state were not fully reviewed for accuracy.
The Department of Administrative Services acknowledged some of the findings and said it is exploring options to strengthen claims monitoring and improve financial controls moving forward.
Foley warned that without stronger management and cost controls, the insurance program’s financial position could continue to worsen in the years ahead.
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