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KATY ISD health plan posts multi‑year losses; district seeks new plan administration and pharmacy bids
Summary
KATY ISD presented a semiannual health plan update May 12 showing operating losses in 2023 and 2024 and a projected 2025 shortfall. District officials said they have issued requests for proposals for plan administration and pharmacy services and expect vendor evaluations in coming weeks.
KATY ISD officials reported a multi‑year operating shortfall in the district’s self‑funded health plan and outlined steps the district is taking to contain costs and solicit new vendor proposals.
Director of Risk Management Lance Nauman said the plan recorded operating losses of $13.7 million in both 2023 and 2024. Baldwin Group, the district’s benefits consultant, projected a 2025 operating loss of roughly $10.8 million, Nauman told trustees at the May 12 meeting. Nauman tied the losses to a combination of claims inflation, increased pharmacy specialty drug spending and enrollment migration between plan options.
"On an average day, per day, we spend a hundred and $47,000 in medical bills," Nauman said during the presentation, citing plan claims data. He described a rising share of specialty pharmacy drugs (GLP‑1 and similar agents) and higher frequency of mid‑sized large claims as drivers of the trend. Nauman also reported per‑covered‑employee costs of about $10,103 and per‑covered‑member costs near $6,200 for the most recent plan year.
To respond, the district said it has solicited proposals for health‑plan administration and pharmacy services. Nauman said six respondents replied to the health administration request; the pharmacy request closes imminently and the district expects to evaluate responses and return to the board with recommendations in June. He noted the district has also negotiated expanded virtual care and pharmacy support programs intended to keep members out of emergency rooms and improve medication adherence.
Nauman and the board discussed migration among plan options during open enrollment: an approximate 20% drop from the broad POS plan with a partial shift into the Memorial Hermann ACO plan and the high‑deductible option. The district reported a continuing emphasis on consumer‑driven care and specialty‑drug management (prior authorizations, step therapy and manufacturer assistance programs).
The board did not take action at the meeting beyond authorizing staff to continue the procurement and report back. Trustees asked staff to return with premium and detailed RFP results ahead of the next budget cycle.
Why it matters: health‑plan costs are a major component of district personnel compensation and have a direct impact on take‑home pay for staff. District officials said they will continue to present detailed financials and vendor recommendations before any final plan changes.
