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Consultants outline $8M–$9M in potential savings by moving retirees to Medicare Advantage; council urged to act before Aug. 13
Summary
City-Parish insurance consultants recommended aligning retiree benefits with active employees and expanding Medicare Advantage enrollment to capture substantial federal subsidies and reduced claims; consultants also recommended renegotiating pharmacy benefits for additional savings.
Insurance consultants hired by the City-Parish presented a detailed report on Aug. 6 on the status of employee and retiree health benefits, telling the Metropolitan Council that administrative and plan design changes could produce multimillion-dollar savings.
Kevin Gardner and Michael Bridal of HUB International walked the council through claims data, retiree enrollment and options that would reduce the city’s medical spend. They said about 1,000 retirees currently participate in a Medicare Advantage option, while roughly 1,800 Medicare-eligible retirees remain on the city’s active group medical plan. The consultants presented a 2024 claims baseline and used actuarial trend to estimate 2026 costs.
The consultants identified three near-term opportunities:
- Align retiree coordination of benefits with active employees and incentivize retirees to enroll in a Medicare Advantage plan subsidized by the federal government. HUB estimated that, if 90% of eligible retirees moved to Medicare Advantage, the city could realize about $8.3 million in recurring savings (figures presented as illustrative and subject to actuarial confirmation). Blue Cross’s Medicare Advantage premium was stated at $310 per member for 2025 and projected to rise to $325 in 2026; by contrast, the city’s per-retiree cost on the active group plan was shown as roughly $703 per member on current claims.
- Renegotiate the pharmacy benefit manager (PBM) contract and pursue an RFP in 2026. Consultants conservatively estimated $2 million–$3 million in near-term PBM savings from renegotiation, with larger savings possible from a formal competitive procurement; they noted the city’s 2024 pharmacy rebates were substantial and that PBM rebate terms materially affect net plan costs.
- Improve eligibility management and dependent verification to reduce spend on dependents who could be covered elsewhere; consultants estimated additional savings from eligibility reform but said this would take more lead time.
Consultants emphasized timing and the need for clear communications. They told the council that Blue Cross requires notice and that the coordination-of-benefits decision must be communicated in time for open enrollment; they indicated Aug. 13 was the practical deadline to confirm a COB move for implementation work ahead of an October open-enrollment period. Human Resources officials said they would rely on Blue Cross and the consultants for education sessions for retirees and employees.
Legal and policy constraints were discussed. Human Resources and the Parish Attorney’s Office advised the council that existing City-Parish ordinances limit the administration’s ability to make Medicare Advantage enrollment mandatory for current retirees, meaning implementation would proceed via robust education and an opt-out or opt-in administrative approach rather than a forced change for existing retirees. HR also clarified that employees hired on or after Jan. 2, 2004, may be subject to different rules under existing local ordinances.
Council members expressed support for moving quickly, asked for a formal directive to HR to proceed with the recommended steps and requested an outreach plan for employees and retirees. The consultants and HR recommended a careful education campaign before any automatic enrollments, if the council directs staff to proceed. The council asked staff to confirm timelines, next steps and statutory limits before the next meeting.
