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City recommends health‑plan changes and higher retiree premiums as claims, stop‑loss costs rise
Summary
City HR and benefits staff recommended an 11% budgetary increase for health and pharmacy claims in FY2025–26, proposed rebalancing employee/retiree contributions across plans and asked council to consider a plan modification to stabilize reserves and cover rising stop‑loss costs.
Human Resources Director Linda DeNante presented projected health‑insurance costs for the next fiscal year and recommended changes to the city’s benefit structure to reduce pressure on the self‑funded health plan.
DeNante told council that the city’s health‑benefit fund is self‑insured and that staff and outside consultants are projecting higher medical and prescription costs in FY2025–26. Staff presented a conservative projection of about $48.4 million in total health‑benefit expenditures (medical claims, prescriptions, stop‑loss and administrative fees), representing an increase staff estimated at roughly 11% from current costs.
To manage the increase, staff proposed a series of measures: rebalancing employer/employee contributions across the city’s four plans (high‑deductible/PPO, HMO and a preferred provider option), standardizing dependent cost sharing so the city pays roughly 50% of dependent premiums across plans, and harmonizing retiree contributions. DeNante said the city currently pays a varying share depending on plan and employee group; proposed changes aim to make dependent contributions equitable and to maintain 75% employer coverage for employee‑only premiums while adjusting dependent and retiree shares where necessary.
DeNante said the city operates an on‑site clinic for employees and that clinic usage offsets some claims; staff also recommended a working reserve equal to roughly 20% of expected annual plan costs to ensure cash flow and to cover the $300,000 per‑claim self‑insured retention before stop‑loss coverage takes effect. She recommended that council approve staff’s preferred plan changes but offered a fallback: a uniform 10% across‑the‑board rate increase for all plans if council declines the structure change.
Council members asked for detail on how changes would affect employee paychecks, retiree premiums and plan design. DeNante agreed to bring back written tables that show per‑pay‑period impacts and said staff would present the proposal on the Monday agenda for formal council action before the budget is finalized.
