Muskego committee reviews options to reduce 2026 health insurance renewal amid $219,000 increase

MUSKEGO, Wis. ' At a Sept. 9 Committee of the Whole meeting, benefits consultant Sandy Motts told alderpersons the city's medical plan renewal is projected to increase about 8.5% for 2026, producing roughly a $219,000 budget impact unless changes are made.

Motts, of consulting firm Cunningham and Butler, said the city has three broad paths: remain fully insured with the current carrier, move to the State Employee Trust Fund plan, or pursue self-funding. She recommended against self-funding now because the city's current stop-loss market and high-cost claimants make self-funding riskier.

Why it matters: the projected renewal would increase premiums and the city's net spend substantially at a time the council is finalizing the 2026 operating budget.

Motts said the city's current net cost per employee per year is approximately $27,050 and that the renewal as-quoted would drive an approximately $219,000 increase. She presented several a la carte options intended to lower that amount without immediately increasing employee premium shares.

Key options and estimated savings Motts presented: - Increase insurer-level deductible from the current level (presented as "3,006") to $5,010 and raise HRA funding so employees see no change at the point of care: estimated savings to the city about $45,000. Motts called this "option 1" and described it as having "no impact to employees at all." (Sandy Motts) - Higher deductible alternatives: a mid option (employee-facing deductible increases modestly) estimated to save about $28,000; a larger deductible increase estimated to save about $53,000. Motts said the carrier gives little additional credit beyond the $5,010 level because few members reach the larger deductibles. - Increase copays and prescription cost shares (for example, office visit copay to $30 and specialist to $60, urgent care to $50, Rx preferred from $25 to $40, nonpreferred from $55 to $80, and specialty medications at 25% up to a cap): estimated savings about $90,000. - Family Advantage Health Plan (FAHP)/opt-out: pay employees a taxable payroll bonus (example shown was $100 per covered member per month) and reimburse their out-of-pocket deductibles on a spouse's plan; Motts illustrated an example in which a family now costing the city about $36,000 could have a maximum city exposure capped near combined ACA out-of-pocket limits (she cited $26,000 in the example) while reducing premium costs to the city. Motts estimated that if seven families switched to spouses' plans under FAHP the city could save about $94,000; combined with a spousal surcharge the two strategies were estimated to reduce spending by about $190,000 in her analysis.

Discussion and concerns Chief (Police Chief) and other alderpersons stressed the workforce impact of plan design changes. The chief told the committee, "We are in the people business," and urged caution on changes that could worsen retention problems in public safety. Several alderpersons said they preferred incremental changes rather than wholesale plan redesign.

Legal and operational points Motts flagged - Self-funding: Motts said the city's current claim experience and the stop-loss market make self-funding unattractive now because the city would likely need to carve out costly medications and alter plan design in ways that could harm members without good mitigation. - Spousal surcharge/legal risk: Motts said some private employers use a spouse carve-out (not allowing spouses with other employer coverage onto the municipality's plan). She cautioned that a spousal surcharge or outright spouse carve-out likely conflicts with Wisconsin statute and "has never been challenged" in her experience; she recommended caution. - Timing: Motts recommended the council not make a final decision at the next meeting but to revisit the item when more members could attend; the committee scheduled further discussion for the council meeting on Oct. 14, 2025.

Next steps and council direction Aldermen generally favored starting with the least-disruptive change: Motts' "option 1" (insurer deductible increase with HRA offset) was repeatedly described by members as a "no-brainer" because it would lower the renewal with no immediate employee-facing change. Several members also supported combining a modest deductible increase and copay adjustments as a next step; some expressed interest in adding FAHP as an option for employees but cautioned the city cannot count on FAHP savings until employees actually enroll on spouses' plans.

No formal action was taken on any of the proposed changes during the meeting; the committee asked staff and the consultant to return with recommendations and to include the item in budget discussions leading up to final budget approval.

Ending: The council agreed to continue the discussion in the October meeting so members could see the operating budget and take final positions before the budget approval process.