Nebraska's Fix for Its Sinking Health Fund Was More Money

Nebraska's self-funded health insurance program for state employees is nearly out of money.▸ A letter from the state's Auditor of Public Accounts⧉, released April 15, 2026, found the Program's combined fund balance collapsed from $83.2 million at the close of fiscal year 2022 to just $7.08 million by the close of fiscal year 2025 -- the lowest level in at least a decade. The Department of Administrative Services' (DAS) response was to charge the state's own employing agencies $24.8 million in additional premiums between July 2025 and February 2026. The audit tested a different question: whether that money addresses what actually drained the fund. Mostly, it found, it doesn't.

DAS's message to agencies, in a June 13, 2025 memo reproduced in the audit letter⧉, was that medical and pharmacy claims were running above market trends, so agencies would contribute 18.5 percentage points more toward premiums -- bringing the State's employer share to 81.7% of total premium costs.▸ It raised $24.8 million. The State Auditor was not convinced that solved anything: "The answer is not simply pumping more taxpayer dollars, in the form of increased State premium contributions, into the program," Mike Foley said in the accompanying release⧉. "Fundamental administrative renovations are needed."

His office had reason to say so: its own contracted actuary had warned DAS in a December 2024 email⧉ that a single-digit premium increase wouldn't be enough and that the fund would fall to dangerously low levels without either a bigger increase or an outside cash infusion -- DAS proceeded with the smaller increase anyway, then had to come back for the $24.8 million mid-year.

Two of the audit's specific findings test claims made about the Program, and neither claim held up once checked.▸ First: comparing claims data to State employment records, auditors found $49,442 paid for two people no longer eligible for coverage⧉ -- $45,442 of it paid over three years to the spouse of a retiree who had died in 2019, after the spouse kept signing the dead retiree's name to early-retirement enrollment forms. DAS told auditors the Department "became aware of the situation internally" and was coordinating with legal counsel because the matter "involves fraudulent activity." The Auditor's office checked that claim by phone. Department staff, it reported, said they hadn't known about the ineligible claims until the APA brought the case to them.

Second: auditors compiled a list of $688,435 in apparently duplicate claims⧉ paid during fiscal year 2025 and sent ten sampled cases to UnitedHealthcare (UHC), the Program's claims administrator, for explanation.▸ For one -- two identical $20,909 surgery claims at UNMC Physicians Corp. -- UHC's first answer was that a billing modifier made them separate procedures. Auditors checked: only two of the three procedure codes actually carried that modifier. On follow-up, the claim was confirmed duplicate, and UHC reversed $11,081.77 of it on March 16, 2026 -- fourteen months after the original service date, and only after the State asked twice.

The individually-tested claims are a small sample of a bigger pattern.▸ In fiscal year 2025 the Department received more than $30.6 million in pharmacy and medical rebates from UHC⧉ and $1.5 million more in contractual performance-guarantee payouts, including a $1,080,779 penalty UHC itself calculated for missing a guaranteed 40% inpatient-facility discount (it delivered 39.5%). For both, the only backup the Department had on file was a summary report and reconciliation UHC itself produced -- the same company being checked was the only source checking it.

Separately, the Department paid UHC $5,693,790 in administrative fees⧉ tied to its count of active employees; comparing one month's invoice to its own HR system, the APA found 357 billed individuals who weren't on the Department's employee list, and the Department never resolved 185 of them.▸ And the Department paid its actuary $349,000⧉ for a contract that included an annual report on the wellness program's return on investment. No one -- not the actuary, not the Department -- seems to have remembered that clause existed. The report was never written.

The common thread, in the APA's own framing, is that DAS delegated the job of watching the money to the company being paid to spend it.▸ When the Department asked UHC, at the APA's urging, for the detailed claims data -- billed amounts, procedure codes, drug names -- needed to check for duplicates and eligibility in real time, UHC declined on February 23, 2026⧉, even though the State's own contract grants it an unlimited right to that information. "DAS must immediately stop allowing the fox to guard the henhouse," Foley said⧉, "and aggressively insert itself in the task of controlling State employee health insurance costs."

UHC's role ends this summer regardless: DAS awarded the next administrative-services contract to Blue Cross and Blue Shield of Nebraska, effective July 1, 2026.▸ A new vendor does not, by itself, answer whether the Department will ask for the data next time -- or take a department's own claim of having caught a problem at face value.