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Brown & Brown recommends higher out‑of‑pocket cap to lower Rapid City schools’ 2025‑26 medical premium increase
Summary
Benefit consultant Brown & Brown presented a renewal analysis recommending a change to plan design (higher individual and family out‑of‑pocket maximums) that would reduce the district’s projected 2025‑26 medical funding increase to about 5.5% and limit the district’s additional cost to roughly $713,000.
Brown & Brown’s financial executive Scott Johnson told the Rapid City Area Schools board the district’s self‑funded medical plan was running slightly above expectations year‑to‑date and presented three funding options for the 2025‑26 plan year, recommending a plan‑design adjustment that raises the maximum out‑of‑pocket cap and lowers the projected premium increase.
“The plan is basically running at a 104.2% of contractual expected,” Scott Johnson said during his presentation. After adding three months of claims experience that were favorable, Brown & Brown revised an initial projected funding increase from 7.7% down to 6.6% if no plan‑design changes were made. The firm’s recommended alternate—raising the plan’s maximum out‑of‑pocket (the presentation described an option raising individual out‑of‑pocket from $5,000 to $18,000)—reduced the recommended funding increase to about 5.5%.
Key numbers presented: Brown & Brown estimated the district’s additional cost under the recommended design at approximately $713,000 annually and additional employee contributions at about $286,000, for a total portfolio increase of roughly $1,000,000; the consultant reported the overall benefits portfolio rising about 5.3% (about $745,000) including a proposed 3% dental increase. Scott Johnson gave sample employee impacts: a 12‑month single coverage employee’s monthly contribution would rise by about $6.74 under the recommendation; family coverage showed a rise of about $46.43 per month.
District staff described the governance and communication process: the insurance advisory committee had reviewed the options and the HR/benefits team planned employee educational sessions during the upcoming two‑week open enrollment (end of July into August). Human resources staff said they would notify employees after the board confirms the funding direction.
Board discussion and recommendation: Board members and administrators discussed whether the board must make a formal vote on the renewal or whether the district historically handles renewal approvals as an information item and administrative action. Chief Financial Officer mister Sassy said he supported Brown & Brown’s recommendation. “I would support the recommendation for Brown and Brown as I believe the insurance advisory committee did as well,” he said.
Process note: Brown & Brown and district staff stressed the plan is self‑funded, and that funding decisions must balance projected claims, fixed costs (administrative fees and stop‑loss premiums) and the district’s health‑fund reserves. Staff warned that underfunding the plan could require drawing on reserves later in the year.
Ending: District leaders said they will finalize the premium renewal and then share detailed rates and open‑enrollment materials with employees; HR staff indicated communications and educational sessions will precede the employee enrollment window.
