Conroe ISD projects $9.9M shortfall for 2025–26 health plan; trustees to consider premium increases and a $3.4M one-time transfer

Conroe ISD staff and outside benefits consultants told trustees the district’s self-funded health plan is projecting a material shortfall for 2025–26 and recommended a combined approach of plan-design changes, employee premium increases and a one-time transfer from the general fund to stabilize the plan.

Karen Garza, presenting benefits recommendations with consulting firm Gallagher, said the district has not raised employee premiums in four years. "We've not raised our rates in 4 years," Garza said, noting that the plan enjoyed a multi-year period of favorable performance but is now seeing higher utilization and a sharper rise in high-cost claimants.

Gallagher consultant Derek Eco told the board the plan’s recent cost trajectory exceeded typical market trend assumptions. "Starting in July '24, you see that binned up ... We went up 15% over the course of 12 months," Eco said, describing a steep upswing in paid claims driven by increased inpatient and outpatient service costs and multiple high-cost cases.

Staff reported 2023–24 claims of about $50 million in medical and $7.3 million in pharmacy, along with fixed administration and stop-loss costs of roughly $6.9 million. Garza said the health plan’s fund balance, which peaked in earlier years, is projected to fall to under $500,000 by the plan-year end if activity continues at current levels.

To address the projected $9.9 million gross shortfall, staff proposed a package the employee benefits committee approved (95% in favor) and said they will present to the board for action: plan-design changes that staff and Gallagher estimate would save about $3.4 million (including adding virtual and on-site musculoskeletal programs and a narrower pharmacy formulary), employee premium increases estimated to generate about $3.2 million, and a recommended one-time transfer of $3.4 million from the district general fund to cover the remainder next year.

The recommended employee premium increases presented to the board were: 6% for the high-deductible (HSA-eligible) plan, 8% for the Blue Premier plan and 18% for the Blue Essentials plan (the widest-network plan, where most employees are enrolled). Staff said the premium proposal is intended to share the deficit between employees and the district and to create premium differentials that may encourage migration to better-performing plan options.

Garza said the recommended $3.4 million district contribution would be drawn from general-fund capacity identified in the preliminary budget presentation; staff noted that using one-time general-fund dollars would require addressing the remaining structural shortfall in future plan years either with further plan-design changes or recurring revenue increases.

The board did not take immediate action on the recommendation at the workshop; staff told trustees they will return at the April regular board meeting for formal adoption of plan design changes and plan-year premium schedules and that they may request a general-fund transfer at the August budget adoption meeting depending on year-end claims experience and stop-loss renewals.