Katy ISD recommends switching health plan administration to Aetna and pharmacy services to H‑E‑B to lower benefits costs

KATY, Texas — Katy ISD risk management officials recommended the board approve two major changes to district employee benefits: contract the district’s self‑insured medical plan administration and stop‑loss coverage to Aetna and move pharmacy benefit services to an H‑E‑B‑based model. Risk director Lance Nauman and the district’s consultant from Baldwin Group told trustees they solicited proposals for program oversight and pharmacy services, received multiple responses and concluded the Aetna/H‑E‑B combination offers the best long‑term financial and operational result. Key points staff presented: - Program administration and stop‑loss: The district received five proposals for program oversight and individual stop‑loss. Aetna’s proposal included lower program oversight fees (district staff cited a reduction from about $36.02 per employee per month to $25.50) and the benefit of no network interruption for members; staff recommended an annual contract (plan year 2026) with up to four renewals. Staff said selecting Aetna for both program administration and stop‑loss removes the need to purchase separate “tail” coverage for incurred but not reported claims from the previous vendor. - Pharmacy services: The district’s RFP for pharmacy services produced four finalists. Baldwin Group’s utilization modelling compared 2024 pharmacy spend (the district’s fully developed pharmacy spend) to proposed net spend from H‑E‑B; the analysis projected a net annual savings of roughly $10.6 million under the H‑E‑B narrow‑network model. H‑E‑B’s proposal would make H‑E‑B the primary provider with a fallback broad network for members without nearby H‑E‑B pharmacies, and staff said H‑E‑B does not propose immediate formulary changes that would disrupt medications. The contract is annual with two renewal options. Trustees asked how savings would be used and whether the savings would be shared with staff through plan design changes. Nauman and consultant Tommy Harris said the savings would reduce the plan’s net cost and acknowledged the board could choose to apply savings to premium reduction, benefit enhancements, or to set aside reserve funding for future claims volatility. Harris said pharmacy market dynamics have shifted rapidly in recent years and urged the board to reassess pharmacy procurement each year. Why it matters: employee health‑plan costs are a major recurring district expense. District staff told trustees the Aetna/H‑E‑B approach could materially reduce medical and pharmacy inflation for the district and create room to stabilize premiums and/or expand benefits for employees. Next steps: staff requested authority to proceed with contract awards and regulatory review; the board will consider formal contract approval at a future business meeting.