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Council awards employee benefits contracts, adopts dual-option medical plan to curb costs
Summary
After an RFP, the council accepted recommendations to keep Aetna as TPA, move pharmacy to a consortium through CVS, and implement a two-option medical structure with an HRA; council approved the awards 7-0.
The City Council approved a suite of employee and retiree benefit supplier awards and a proposed dual‑option medical plan structure for 2026, accepting consultant HUB International’s recommendations to secure multi‑year rate guarantees and reduce projected plan costs.
HR Director Veronica Sanchez and HUB’s Julian Fontana presented a formal RFP review. The city received multiple responses and ultimately recommended Aetna as third‑party administrator for the partially self‑funded medical plan, Employers Health (with CVS) for pharmacy benefit manager services, and Aetna for bundled dental and vision where competitive. The standard carrier was recommended for group life and disability offerings.
Key changes and rationale: HUB recommended moving from three medical plan tiers to a dual‑option model: a base high‑deductible health plan (HDHP) paired with a health reimbursement arrangement (HRA) and a buy‑up PPO. The HDHP would include a city HRA contribution ($750 individual / $1,500 family) and continued access to the Shannon clinic. HUB estimated conservative migration of 20% into the HDHP and projected an overall savings of roughly $655,667 (about 9.1%) versus the current structure.
Guarantees and controls: Aetna offered a multi‑year rate guarantee for administrative fees, and HUB negotiated higher wellness allowances and pharmacy rebate structures expected to reduce net costs. HUB also recommended an actuarial reserve equal to 25% of expected claims to strengthen the self‑insurance fund over time.
Retiree and clinic notes: The post‑65 Medicare Advantage offering was recommended to move to Humana after negotiations produced materially lower renewal increases than UnitedHealthcare’s 31% renewal; staff will finalize Shannon clinic visit-fee negotiations.
Council action: The council voted 7-0 to authorize awards and adopt the recommendations. Mayor Thompson and several council members praised the multi‑year guarantees as stabilizing the city’s exposure and enabling the city to rebuild reserves after prior unanticipated claim experience.
Next steps: Staff will execute contracts, finalize Shannon clinic fees, and run employee education sessions ahead of November open enrollment. The post‑65 retiree plan and the 65+ funding issues will return for final action on Oct. 21.
