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District briefed on health plan: staff cite PBM change, clinics and pharmacy use as key cost levers
Summary
Brokers and staff presented health plan finances, saying pharmacy and large claims are major drivers; the district plans changes already approved (a PBM change) and outlined other steps — clinic/pharmacy use, retiree and employee contribution adjustments, and voluntary dental options — that staff estimate will reduce budget pressure.
District staff and outside benefits consultants briefed the finance committee on the school system's health plan performance, calling pharmacy costs, large claims and unit‑price inflation the principal cost drivers and outlining several near‑term steps the district has taken or plans to take.
Penny (district benefits lead) introduced consultants from the Baldwin Group. The consultants said the health plan has generally outperformed the national trend over several years but that recent medical inflation and large claim activity have pushed costs up: the presentation cited an example of a single claimant with about $3.2 million in annual costs in fiscal year 2024, and the consultants noted the plan's stop‑loss protection applies to claims above $425,000 in a year.
On plans and budgets, the consultants said the fiscal‑year 2025 health plan budget was about $84 million with actual paid claims of about $86.3 million and that the fiscal‑year 2026 budgetary planning figure is approximately $91.6 million. They said a recently approved change to the district's pharmacy benefit manager (PBM) was included in the FY26 projections and that the district expects some savings when that change is fully implemented.
Consultants and staff emphasized the role of the district's on‑site clinics and pharmacy. The consultants presented a district analysis showing that prescriptions filled at the district's on‑site pharmacy were materially cheaper (they cited a sample figure of about 39% less per typical 30‑day fill) and that closing the on‑site clinic would increase district costs by an estimated $640,000 a year while increasing employee out‑of‑pocket costs by an estimated $431,000. Staff said the clinics and pharmacy were part of a strategy to increase participation and control unit cost growth.
Other measures discussed in the presentation included: (a) incremental increases in retiree contributions toward premiums (staff proposed moving retirees closer to contract levels), (b) a proposed employee premium increase distributed across coverage tiers (presented as roughly $25 per employee per month in the packet materials for planning), (c) making dental plans more voluntary and shifting costs to employees over time, (d) leveraging Cigna plan network features (steerage to lower‑cost imaging sites) and (e) adding behavioral‑health clinicians into the Cigna network so clinic behavioral visits generate reimbursement.
Staff said the health plan is self‑insured with reinsurance (stop‑loss) layers and that reinsurance premium was roughly described as about $40 per employee per month; the consultants said an appropriate reserve for incurred but not reported claims is tracked and updated annually. The district said it will continue to monitor claims, clinic participation and PBM performance and that additional budget recommendations will be presented in September as part of the FY27 budget process.
Why it matters: Health‑benefit costs are one of the district's largest and most variable operating expenses; changes to pharmacy purchasing, clinic access and contribution policy can materially affect operating budgets and the district's ability to fund raises or other priorities.
