McAllen credits Frontier Health with lower medical claims but flags pharmacy surge; staff proposes premium changes

City staff told the McAllen City Commission at a workshop that the city’s direct primary care arrangement with Frontier Health has boosted primary-care access, reduced certain high-cost medical claims and produced large estimated savings, while pharmacy expenses have surged and driven a budget shortfall.

Frontier Health began serving city employees in October 2022, replacing a single preferred clinic model. Staff said Frontier’s direct-care model, combined with cash-based contracting with some specialists and an International Rx pharmacy program, produced higher primary-care utilization and improved outcomes for engaged members.

Staff reported that 60.6% of active members have used Frontier providers; primary-care visits rose about 66% compared with the pre-Frontier period. Staff said members who used Frontier tended to have more clinical conditions but showed substantially lower inpatient admissions and readmissions than members who had not engaged Frontier. “Our sickest population, the 60.6 percent that are going to Frontier, is our sickest population, and those are the ones that are getting more care...and that's what we wanna see,” the presenter said.

According to staff figures, the plan’s unique high-cost claimant count fell from 52 to 30 in the first measurable period after implementation, and total plan claims are estimated to have been $8,150,000 lower than projected over the first two years (staff-presented estimate combining 2022–23 and 2023–24 deltas). Staff credited the combination of direct primary care, referral management and negotiated cash pricing for specialists and labs with those averted claims.

At the same time, pharmacy spending increased 20.4% in FY23–24 and was the primary driver of a net budget gap of about $1.9 million for the year. Staff identified four specific pharmacy contributors: cancer medications (an unexpected $357,000), antivirals such as Paxlovid (about $311,000 after federal subsidies ended), high-cost biologics/anti-inflammatories (roughly $200,000) and increased GLP‑1 (weight-loss/diabetes) medication use (about $167,000). Staff said supply constraints early in the GLP‑1 rollout made historical trend projections unreliable.

Staff said the FY23–24 shortfall also reflected revenue shortfalls tied to turnover and vacancies; approximately $600,000–$700,000 of missing contribution revenue was attributed to empty positions. To address recurring midyear shortfalls, staff said it will continue the practice of midyear budget amendments but recommended building a permanent premium adjustment into the budget.

For discussion, staff proposed increasing employee contributions by $10 per paycheck and increasing the city’s premium contribution by $120 per employee per month (staff presented these as items to be brought for formal action at a future meeting). Staff also said it will bring a midyear budget amendment to close the current fiscal-year gap and will present a separate recommendation to extend Frontier’s contract for an additional two years to complete the original 3+2 award period.

Staff highlighted member satisfaction as part of its assessment. Based on exit surveys, staff reported a net promoter score of 95–96 for Frontier users and contrasted that with negative average NPS scores for large commercial carriers. “Our net promoter score for Frontier based on the exit surveys is at a 95. And I actually checked it today. It’s running 96 in the system as of today,” the presenter said.

Commissioners asked clarifying questions about the 60.6% engagement figure, the peer comparison used for premium benchmarking (41 public entities, mostly comparable in size and all self‑insured), whether the shortfall would have been smaller if vacancies had been filled, and the timing of possible pharmacy interventions. Staff said pharmacy will be the top priority for next year and that it is exploring progressive pharmacy strategies, some of which may be novel for the Rio Grande Valley; no specific pharmacy policy change was adopted during the workshop.

No formal vote occurred on the premium recommendation or the proposed two‑year extension; staff said both items will return to the commission for formal action.