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Mercer briefing: claims trends moderate but 2026–27 projections still pressure health fund and contributions
Summary
Mercer presented a second‑quarter update showing year‑to‑date claims trend at roughly 6.2%, a moderation versus earlier projections, but projected 2026 gross costs up about 9.6% and a preliminary 2027 illustration that would require roughly a 19% increase in employee contributions if the health fund cannot be relied on.
Mercer presented updated health‑plan claims through June and a preliminary financial outlook for plan years 2026 and 2027 at the Sept. 9 board workshop. David Keough, principal at Mercer, said the updated six‑month data showed a modest flattening in trend versus the March update: year‑to‑date trend through June was about 6.2% (previously 6.3%), and the three months added to the dataset grew about 1.1% versus the 2.2% the team had projected.
"The trends were volatile, but generally speaking, upward trending," Keough said. Mercer’s analysis showed a lower inpatient cost component and a reduced intensity among high‑cost claimants (the highest 1% of members historically account for a large share of claims), although the number of high‑cost claimants rose slightly. Keough said Mercer uses a 24‑month smoothing technique (two‑thirds weight on the most recent 12 months) and a 2% margin in its projections.
For 2025 Mercer projects a net draw on the health fund of about $12.4 million (with an estimated year‑end balance of roughly $10.7 million after the remainder of the year). For 2026 Mercer projected gross plan cost growth of about 9.6% and, after the planned cost share, a modestly positive projected health fund balance of approximately $1.0 million under the updated data. For 2027 Mercer provided an illustrative, preliminary projection that assumes the same employer/employee cost share but no health‑fund reliance; that scenario produced a projected employer funding requirement that would reflect roughly a 19% increase in employee contributions in 2027.
Board members asked whether multiple carriers could be offered, how administrative fees are composed and whether retirees and active employees generate different claim patterns. Mercer and school benefits staff said network coverage in the region is similar across major carriers and that plan design and self‑insured structure — not carrier choice alone — drive most differences. Mercer provided a high‑level administrative cost figure for year to date of about $9.8 million, and staff said retiree costs are handled separately in ratemaking and typically result in a higher employer contribution per retiree than for active employees.
Ending: Mercer and benefits staff recommended continued monitoring of claims experience, close review of plan design and benefit committee work in the months ahead to assess options for 2027 funding and contribution strategies; specifics on 2027 will be refined as the benefits committee weighs plan design, funding and budgeting options.
