Roanoke County Schools weigh funding approaches as medical claims spike and pharmacy costs climb

Roanoke County Public Schools officials and outside consultants reviewed the district’s health plan funding options on Feb. 13, describing a recent, unexpected rise in large medical claims and growing pharmacy spending that together are driving double‑digit premium pressure.

“Last year, you had 18 individuals with claims between a hundred and two hundred and fifty thousand dollars. This past 12 months … it had jumped to 42,” USI consultant Beth (USI) told the board, describing a jump in high-but-below-stop‑loss claims that consultants said they had not seen in other clients.

Why it matters: consultants said the spike in mid‑to‑high claims and a rising share of pharmacy spending—particularly specialty drugs—make funding and vendor choices more consequential. The board must decide how much of next year’s increase to cover from the general fund and whether to change plan structure or stop‑loss arrangements to reduce future volatility.

Key details and options - Networks and product types: USI explained the difference between health maintenance organizations (HMOs/HealthKeepers), point‑of‑service plans and the district’s current KeyCare preferred provider organization (PPO). The firm said switching networks can produce savings but may disrupt access for providers not in the smaller network.

- Funding continuum: USI reviewed fully insured versus self‑insured options. “Fully insured is the least risk to the employer,” the consultant said; self‑insurance transfers more near‑term risk to the employer but can reduce carrier margins and premium taxes.

- Stop‑loss and current limits: The district’s current specific stop‑loss (individual claim) attachment is $250,000, up from $200,000 about three to four years ago. USI noted the $250,000 level is similar to peer jurisdictions but said they periodically evaluate whether the market is pricing that limit appropriately.

- Claims drivers and uncertainty: USI listed several possible causes of the rise in mid‑range large claims—delayed diagnoses after COVID‑era care disruptions, health‑system inflation, demographic shifts—but said they could not pinpoint a single cause and called the pattern “frustrating.”

- Pharmacy and PBMs: Consultants reported pharmacy is taking a larger share of total spend and specialty medications now represent a growing share of pharmacy dollars. “We’re seeing pharmacy closer to getting close to 30% in a lot of groups and more,” a USI consultant said, adding that specialty drugs can be 30–50% of pharmacy spend while representing only 1–2% of members.

- Rebates and unbundling: USI said the district’s contract includes measures to capture pharmacy rebates and that the district previously carved pharmacy out to a separate manager; Anthem later regained the business after offering stronger rebates.

What the consultants recommended and the board pressed on - Joint purchasing: USI stressed economies of scale from joint purchasing with Roanoke County and the jail, saying pooled purchasing has reduced administrative and reinsurance fees.

- Market checks: USI said it performs annual renewal‑period analyses of stop‑loss pricing and occasionally runs separate market solicitations; the firm confirmed it had sought independent stop‑loss proposals about four or five years ago and monitors stop‑loss pricing at renewal.

- Next steps: consultants and staff committed to providing more frequent claims reporting to board staff and running disruption reports showing which local providers would be affected if the district moved to a smaller network.

Board questions focused on how often stop‑loss and reinsurance have been shopped, the drivers of the claims spike, and how pharmacy rebates and PBM contracts affect net cost.

Ending: School division staff and USI said they will return with more detailed, monthly claims reports and provider disruption analyses to help trustees weigh network and funding choices before the final budget vote.