Public Dollars, Private Prices: the 2026 reality check for Indiana’s public employers

Here are two numbers every Indiana public official should be able to recite.

$744 million — what the Legislative Services Agency projects Indiana’s public schools will lose over three years under SEA 1, the property tax overhaul, starting in 2026.

$18,500 — what it now costs, on average, to insure one employee for one year in an employer health plan, per Mercer’s national survey.

Less money coming in. More money going out. And every dollar in between — every premium, every administrative fee, every rebate somebody quietly kept — is a taxpayer dollar.

Three years of renewals, in one paragraph

In 2024, large employers held health cost increases to about 5.4% — but only after plan cuts — while small, fully insured groups (which is to say: most Indiana towns and many county plans) saw average initial renewals of 7.5%. In 2025, costs actually rose 6.0%, crossing $17,496 per employee. For 2026, Mercer projects 6.7% — the highest increase in fifteen years — and that is after employers take cost-cutting action. The underlying trend is running near 9%, and Segal’s actuaries agree: median medical trend of 9%, with pharmacy in double digits. Compound those three years and the same plan, covering the same people, costs roughly 20% more than it did in 2023. On a $5 million plan, that is an extra million dollars a year of taxpayer money.

The drivers are not mysterious: hospital unit prices (RAND’s employer study puts Indiana’s hospital prices eighth highest in the nation, roughly triple Medicare), prescription drugs (up 9.4% among large employers, with GLP-1s leading), and rising utilisation. None of those levers moves by hoping your renewal letter comes in better.

The carrier map is consolidating while you are not looking

On 31 December 2024, Elevance Health — Anthem’s parent — closed its acquisition of IU Health Plans. One fewer competitor at the bid table. UnitedHealthcare rides into the municipal market through the Aim Medical Trust’s 83 member cities and towns. The State Employee Health Plan (Anthem with CVS Caremark) is now open to all roughly 290 school corporations — and exactly five joined for 2026. Not because the math was run and came out against it. Because in most districts, nobody is paid to run the math.

Meanwhile, HEA 1004 (2025) handed employers real leverage: Indiana’s five largest nonprofit hospital systems must offer direct-to-employer contracts starting September 2026 and bring average prices to 260% of Medicare by 2029 — or lose their state tax exemption. Counties and school corporations are employers. That leverage belongs to you too.

SEA 1: the squeeze is structural

SEA 1 delivers roughly $1.3 billion in homeowner relief through credits that phase in through 2031 — and a credit to a homeowner is a dollar that never arrives at the units levying on that property. For schools, the LSA projects $744.4 million gone over three years, accelerating to $336 million in 2028 alone. Tuition support is rising about 2% a year; districts say they need 7.6% to tread water. In one survey, 95% of districts expected negative impacts immediately, and over 99% in future years. One superintendent told legislators his operations fund would fall below his utility bill by 2028.

Property taxes fund the operations side — buses, buildings, custodians, security, insurance. After salaries, employee benefits are the largest controllable line in a school budget, and in many districts that line has compounded six to seven percent a year for a decade without ever facing a rigorous independent market test. If SEA 1 takes a million dollars off your levy and a real benefits review recovers three to five hundred thousand, that is the difference between cutting bus routes and not cutting them.

The questions Aim Medical Trust members should be asking

The Aim Medical Trust solves a real problem for small towns, and some members may be well served. But consider what its own published materials describe: a three-year commitment, withdrawal provisions you must follow precisely, renewals set by a banding formula members cannot see, and a claim of renewals “below medical trend in 10 of the last 12 years.”

Below trend is not below market — trend is 9% right now. In any banding system, somebody’s strong claims experience is subsidising somebody else’s, with taxpayer dollars. And here is what you will not find in any public document we could locate: the Trust’s rates, a published member roster, or the name of the pharmacy benefit manager controlling drug spend for 83 municipalities’ worth of public employees. Broker responsibilities for the entire pool sit with a single consultant retained at the Trust level — so ask yourself who, structurally, is paid to tell your town it could do better outside the pool.

An assessment is not a withdrawal. Ask for your band, your claims experience, and the renewal formula — your employees generated that data and your taxpayers paid for it. Ask who the pharmacy benefit manager is and whether rebates pass through. Then benchmark your group quietly against the open market through an advisor with no stake in the answer. If the Trust wins, you can finally prove it to your council. If it does not, you have just found next year’s budget gap. The only losing move is being too afraid to look.

The law already moved. Most files have not.

Since 1 July 2025, Indiana’s SEA 3 writes a fiduciary standard into state insurance law: third party administrators and pharmacy benefit managers owe a fiduciary duty to plan sponsors — loyalty and care, full disclosure of all fees and commissions, no self-dealing, and transparency in all financial arrangements, prescription benefits expressly included. There is no carve-out for local government. Your county is a plan sponsor. Your school corporation is a plan sponsor.

Now walk into almost any courthouse and ask for the documents that would evidence those duties — the pharmacy contract, an all-in vendor compensation number, the audit rights and whether anyone ever exercised them. The file is usually close to empty. Closing that gap costs a letter.

The fastest savings in public finance

You cannot control medical trend and you cannot control the Statehouse. But a first-time rigorous review of a public employer plan that has not been competitively tested in three-plus years commonly finds five to fifteen percent. On a $5 million plan, that is $250,000 to $750,000 — every year, compounding. The work happens five to seven months before renewal, which for January 1 plan years means now.

We put roads out to bid. We put bond counsel out to bid. Somehow the second-largest expense in the budget earned a permanent exemption from the discipline we apply to asphalt.

In the SEA 1 era, no unit of Indiana government can afford that exemption. Every premium dollar is a taxpayer dollar. Pull your contracts. Ask for your data. Get an independent set of eyes on it.