Council adopts phased changes to employee health plan after staff warning on reserves

City of Laredo elected leaders on July 1 adopted a revised employee health insurance package and a plan to phase in premium and benefit changes after city staff and consultants warned the plan’s reserve is near depletion.

Why it matters: Human resources and outside consultants said that medical and prescription cost trends, combined with a year of unusually large claims, left the city’s self‑insured fund with insufficient reserves unless the city takes corrective action.

Human resources director Linda Teneyto told council the city must “do something to our plan this year” because otherwise “next year at this time, we're not gonna have the funding to sustain that program.” Teneyto presented staff recommendations developed with consultant Gallagher and the city’s broker to reprice three plan options — a PPO, an HMO and a high‑deductible health plan (HDHP) — and to increase employee premium contributions for some tiers while funding other plans at higher employer share.

Consultant Natalie Haskett of Gallagher said cost drivers include a spike in catastrophic claims and rising prescription drug trend; she described a recommended rebalancing that increases the spread between the PPO, HMO and HDHP so plan costs more closely reflect expected utilization. “Pharmacy trend is knocking on 13%,” Haskett told the council.

Council members raised concerns about higher employee out‑of‑pocket costs, especially for police, fire and families. Several members asked staff to consider alternatives, including a multi‑year phase‑in and stronger demand‑management measures such as expanded on‑site clinic use, telemedicine and preventive care. HR and the insurer described current steps to curb avoidable spending — waiving primary‑care copays, promoting a nurse hotline and offering telemedicine services — and proposed a campaign to increase preventive‑care participation.

Action taken: Council voted to adopt a revised plan structure and to implement changes on a three‑year phase‑in schedule to reduce immediate cost shock to employees while restoring plan reserves. The council also asked staff to return by the July 14 deadline with final plan language and cost estimates. City budget staff estimated the near‑term fiscal impact of the adopted package at approximately $1.3 million across city funds (about $800,000 to general fund), and proposed a combination of funding from the health benefits fund balance and limited general‑fund support to cover the first‑year shortfall.

What staff will do next: Human resources, Gallagher and budget staff will finalize plan documents for open enrollment and produce an updated five‑year forecast showing reserve replenishment under the planned phase‑in. HR committed to targeted education and stepped‑up preventive care outreach, including expanded use of the city clinic and local public‑health services.

Council context: The vote followed about an hour of council discussion and public testimony, including remarks from the Railroad Firefighters Association in support of protecting employees and minimizing immediate premium shocks. Several councilmembers said they sought revisions while protecting employees’ access to care.