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Rexburg council approves 2026 health benefits changes; employees to bear average 12% increase
Summary
The City Council approved changes to employee medical, dental and vision funding for 2026 after staff reported a negotiated 12.6% premium increase from the insurer and a deteriorating claims experience. The city will keep an 85/15 employer-employee split and use budgeted increases to cover much of the rise.
Rexburg City Council on Monday approved changes to the city's employee benefit funding for 2026, including a recommended average 12% increase in employee contributions and a 7% employer-side increase already included in the budget.
Finance staff presented medical, dental and vision renewal information and said the municipality's insurance experience had worsened in the first half of the year. "We were at 77% ... but this year, we're at a 119% experience," Matt Nelson, a city staff member, told the council. He said the city's broker had originally quoted an increase close to 30% and negotiated it down to about 12.6%.
The changes the council approved keep the city's target cost split at roughly 85% employer and 15% employee for overall benefits. Nelson said the recommended employer contribution increase (7%) was already included in the adopted budget; the additional employee-side adjustment would average about 12% and was intended to generate the cash needed to pay the higher premiums. "If we were to go with these recommendations, we would keep that at the 15%, 85% split," Nelson said.
Why it matters: the city's medical plan is the largest single line in employee costs (Nelson said annual medical insurance runs about $2.8 million). Council members pressed staff on drivers of the increase: Nelson cited large claims, higher pharmacy utilization and expensive brand-name prescriptions that account for a small share of prescriptions but a large share of pharmacy spending. He also noted the city will lose 27 employees from the city plan when those positions transfer to a new fire district; staff said that change increases volatility in future renewals.
Staff recommendations and implementation: Nelson and staff told the council they were not proposing changes to plan design (deductibles or copays). They also proposed budgeting conservatively for 2027 renewals, noting their agent recommended assuming up to a 30% increase in the worst-case model. Nelson said the city's broker estimated small increases for dental (modelled at 6%) and vision (modelled at 5%) and asked the council to authorize staff to accept renewals for dental or vision increases up to 10% without returning to the council.
Employee input: Nelson said the employee committee reviewed the proposal that morning and "they felt comfortable with these recommendations." Council members asked for clarity on how the fire district transfer affects both the city's budget and the insurance pool; staff explained the city will continue to show an expense for its share of fire costs in the general fund rather than an internal transfer to Fund 17.
Council action: Council member Johnson moved to approve the 2026 health and other employee benefits as presented; Council member Reeser seconded. The council voted in favor; the motion carried.
What remains: Nelson said open enrollment would take place in November and staff would return to council if dental or vision renewals exceeded the authorized thresholds or if new information required budget adjustments.
