Council approves Cigna renewal with plan changes, 9.4% rate increase and higher stop‑loss attachment

Pearland City Council approved a one‑year renewal with Cigna for the city’s employee health, dental, vision and employee assistance plans and accepted plan design changes intended to control sharply rising claims.

Presentation: Wayne Parker of HUB International and city staff presented plan‑year experience and proposed design changes. Year‑to‑date through April, city per‑capita health costs rose sharply, driven by a higher number of large claims: the consultant reported eight large claimants (over $75,000) accounted for roughly 21% of total claims; through June that exposure increased to 10 claimants representing about 22% of costs. To address escalating claims, the renewal proposal increases employee and city premiums by 9.4% for fiscal year 2025‑26 and includes plan changes designed to reduce near‑term cost pressure.

Key plan changes: The renewal includes small IRS‑required HSA adjustments and these substantive design changes effective Oct. 1, 2025: higher out‑of‑pocket maximums (Kelsey 90 and Kelsey 80 plans both increased), ER co‑pay on Kelsey plans raised from $200 to $300, and a move from a standard drug formulary to a value formulary (removing some over‑the‑counter drug coverage). Staff estimated the design changes would generate savings (example: $374,000 for one plan and $127,000 for another) and keep city and employee contribution shares aligned with regional benchmarks.

Stop‑loss and laser exposure: Staff recommended raising the individual stop‑loss attachment from $150,000 to $200,000; advisors warned of a potential conditional “laser” for a projected large claimant that could add roughly $800,000 of uncovered claims in the plan year if that member receives high‑cost treatment during the period. Staff said the city has reserves (about $3 million) to absorb near‑term volatility but that a laser could push the medical fund balance below target and would be addressed in future budgets.

Council vote and context: The council approved the renewal 5‑2. Council members asked for benchmarking details and further explanation of the laser and stop‑loss mechanics; staff agreed to provide comparative benchmarking for future reviews.

Why it matters: The renewal addresses immediate financial pressure in the city’s self‑insured plan but shifts some costs via higher employee contributions and higher out‑of‑pocket exposure. A high‑cost claimant identified by the insurer could produce significant unbudgeted expense if treatment occurs within the plan year.

Next steps: Staff will execute the renewal, notify affected employees, monitor for large‑claim events and report back to council with benchmarking comparisons and any midyear impacts to the medical fund.