Amy Jenks, the healthcare and benefits administrator at the Montana Department of Administration, explained to a legislative interim committee Tuesday the simple reason state employees’ health insurance costs are scheduled to spike in January.
“We need more funding,” Jenks told lawmakers.
About 28,000 people use the state healthcare plan, including current state employees and retirees and their families. The Montana Department of Administration announced in late August a dramatic increase in insurance costs — tripled deductibles and doubled out-of-pocket maximums — beginning in January 2027. According to DOA, funds the state uses to pay claims are running low. The Montana Federation of Public Employees, the union that represents about 6,000 state employees, is looking for ways to head off the increases before open enrollment begins Oct. 21.
To pay for state employees’ healthcare, the Montana Department of Administration maintains a pot of money primarily funded by state employer and state employee contributions. When plan members incur medical claims, the plan pays them out of that pool.
To keep the pool viable, the state and MFPE set a threshold value that acts as a tripwire. If DOA projects that the pool will dip below that level, a collective bargaining agreement between MFPE and the state gives the agency authority to change employee contribution levels and benefits.
Jenks told Montana Free Press in early September that “by the end of 2026, we will fall below that threshold level.”
So DOA made changes at the end of August. Full-time employees’ monthly contributions will increase by either $60 or $100, depending on whether the plan covers an additional family member. Deductibles will rise from $1,000 to $3,000. Out-of-pocket maximums will rise from $4,000 to $8,000 or, for families, from $8,000 to $16,000.
Jenks is quick to clarify that DOA just manages the pool of money — the agency doesn’t control how much goes into it.
“We have to manage the plan based upon the funding levels that we get from the state of Montana through the employer contribution, as well as through the employee contributions,” Jenks said.
The state’s approach to funding the plan has varied over the past decade. Rep. Terry Falk, R-Kalispell, who chairs the General Government Interim Budget Committee, called the funding pool’s history “chaotic and volatile” at the hearing’s Wednesday session.
In 2018 and 2021, the state reduced its contributions by $26 million and $28 million, respectively. In 2023, the Legislature reversed course and injected $30 million.
During the 2025 legislative session, the Department of Administration projected that the fund will fall below the threshold by 2028 even if the Legislature passes a perennial bill setting state employee pay and benefits.
The Legislature passed the bill, but the healthcare pool’s reserves shrank faster than DOA anticipated.
On Tuesday, lawmakers on the General Government Interim Budget Committee pressed Jenks about how the fund got into dire straits.
Jenks told the committee that the price of healthcare is rising nationwide and state employees incurred higher costs than the department anticipated.
In the first six months of 2026, for instance, the state shelled out $8 million to pay 53,000 claims for hour-long doctor office visits. That’s almost double the $4.3 million the state spent on roughly 28,000 claims during all of 2021.
The number of plan members who incurred $100,000 or more in annual healthcare claims increased by 54% between 2020 and 2025, according to DOA. Total healthcare expenses for the same group grew by 67%.
“It’s really these complex cases that have treatments available that have never been available before. And thank goodness for our plan members and us as people that we have access to that care and access to those treatments. But they come at a cost, and they’re not slowing,” Jenks told the committee.
Also in the first six months of 2026, the state spent $8 million to cover prescriptions for Mounjaro and Ozempic, GLP-1 medications used to treat Type 2 diabetes. In 2021, it spent nothing on either drug.
In June 2026, DOA leadership, including Jenks and Giles, updated the General Government Interim Budget Committee on the fund’s deteriorating condition.
“This portion of the presentation, you will see some numbers that probably raise some questions and some alarms,” Giles said.
The director told the committee that “we are not going to discuss options as to what we are going to do to rectify the financial situation of the plan.”
“That has to be bargained. That bargaining process goes along with my office and the budget throughout the summer and the fall,” Giles said.
Two months later, in late August, DOA announced the rate hikes. Biennial bargaining between MFPE and the executive branch over state employee compensation, including benefits, was set to begin the following week.
Those negotiations are usually forward-looking, rather than focused on short-term issues. Most years, after the two sides strike a deal, the governor puts the compromise in his proposed budget. After the two sides reach an agreement on wages and benefits, the agreement is incorporated into House Bill 13 and sent through the legislative process.
This year, MFPE is negotiating on a tighter timeline. The union hopes to find a stopgap measure to prevent rate hikes from hitting state employees’ pocketbooks before open enrollment begins Oct. 21.
Despite the urgency of the bargaining landscape, MFPE negotiator Kate Darnell, a probation and parole officer, described the first bargaining session, which took place at Helena’s Delta Hotel in early September, as “cool, calm and collected.”
With glasses of ice water arranged on the table between them, MFPE negotiators sat across from a team representing the state’s executive branch. Between the two tables, Darnell said, the state put on a presentation filled with “doom and gloom” health insurance statistics.
A week into the negotiations, MFPE asked the state to maintain health insurance premiums at their current level in 2027. The state countered with a $30 million infusion and an increase in the state’s employer contribution that would reduce the planned deductible and out-of-pocket increases, but leave DOA’s planned employee premium increases in place.
Negotiations are ongoing. The governor’s office did not respond to requests for an interview.
Mike Kern, a 45-year-old who services cars for the Department of Transportation’s motor pool in Helena, said he plans to enroll whether MFPE ultimately lands a better deal or not. Kern told MTFP two weeks ago that he’s “getting to an age where health insurance is a necessity.”
If DOA’s currently proposed changes go into effect, his monthly contribution will go up by $60.
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