Muskego committee hears options to curb rising city health costs; self‑funding presented as cost-saving — with risks

Muskego City’s Committee of the Whole on Aug. 12 heard a detailed presentation from Cottingham & Butler on options for the city’s employee health insurance, including staying fully insured with Group Health Trust (GHT), moving to a self‑funded arrangement with stop‑loss reinsurance, or joining the state Department of Employee Trust Funds (ETF). The consultants presented cost comparisons, risk trade‑offs and a recommended timeline for next steps.

The presentation matters because the city’s current medical program is a large line item in the budget: Cottingham & Butler reported roughly $2.7 million in total funding today, with the city’s net cost for medical coverage running “just under $2.6 million” after employee contributions and the employer‑funded health reimbursement arrangement (HRA). Consultants said the city faces a proposed renewal of about 9.5% from its carrier for the coming year, which would push net cost toward $2.8 million under current plan design.

Cottingham & Butler’s Sandy Motts, benefits consultant, told the committee the city currently has about 94 enrolled members out of roughly 125 eligible employees (25 single, 13 limited‑family/employee‑plus‑one and 56 family enrollments). She described Muskego’s plan as unusually generous: employer pays roughly 88–89% of premiums (employees pay 12%), the HRA “buy‑down” reduces employee out‑of‑pocket exposure, and the plan’s actuarial value is near 96% — a “platinum”‑level design well above typical public‑sector benchmarks.

Why that matters: richer plan design and heavy employer premium share tend to lift utilization and cost. Motts said Muskego’s participation rate (employees taking the plan) is about 76.4% versus a Wisconsin public‑sector benchmark of 82%, and the city’s dependent ratio (roughly 2.9 dependents per employee on the plan) is above the benchmark (2.64). The consultant also cited loss‑ratio history that has driven recent renewal pressure: a roughly 73% loss ratio in 2023, 142% in 2024 and about 138% through June of the current year, which contributed to the carrier’s recent pricing actions.

Options analyzed

- Self‑funded: Cottingham & Butler estimated a self‑funded net cost for 2026 at about $2.3 million, based on a retro‑funding analysis and assumptions about administrative fees, a recommended $50,000 specific retention, and stop‑loss pricing. The consultants said self‑funding can produce 5–8% savings over a five‑year horizon, give the city more claims data and flexibility (for example to partner with a local clinic), and allow direct levers on pharmacy and utilization. Motts warned of volatility and a possible “bad year” that could make a self‑funded year cost more than fully insured; she said clients typically see year‑to‑year swings of up to ~10% but net savings across five years.

- Key stop‑loss assumptions: the consultant described two layers — specific stop‑loss (protects individual high‑cost claims; recommended retention $50,000) and aggregate stop‑loss (commonly set at 125% of expected claims). Cottingham & Butler used a market‑competitive estimate of roughly $600,000 for specific stop‑loss for a group Muskego’s size, but warned underwriters could charge substantially more (they cited examples where that price could rise to $900,000 if underwriting finds elevated risk). The aggregate layer was modeled as relatively inexpensive but would protect the city’s variable claims above the expected threshold.

- Fully insured (status quo, Group Health Trust): advantages include minimal disruption for employees, broad network continuity and administrative simplicity. Cottingham & Butler said GHT gave Muskego a renewal this year that ultimately landed near 9.5% after negotiations and a plan design change; staying would likely leave the city subject to continuing carrier‑driven increases. The consultants described two levers inside GHT to reduce cost: raising the carrier deductible (for example, from $3,000 to $5,000) while increasing HRA seed funding; or trimming plan generosity (reducing actuarial value), which would have employee impacts.

- ETF (state plan): the presenters outlined ETF as an available option for public employers but noted tradeoffs — underwriting fee (they cited $3,000), likely initial surcharges based on Muskego’s recent claims, a narrower network and less local HR/service flexibility. Cottingham & Butler modeled a first‑year ETF scenario that included a full surcharge and showed higher first‑year costs (their scenario showed roughly $3.1 million in year one with a max surcharge, falling if the surcharge is reduced over subsequent years).

Clinic partnership and other strategies

Motts and the committee discussed the city’s prior talks with the local school district about sharing an on‑site clinic. The consultants said a clinic can reduce claims if members use it for primary/urgent care and that adding the city’s employees could expand clinic hours and practitioner availability. Cottingham & Butler emphasized the clinic scenario was not included in their baseline cost models and would be an additional planning option.

The consultants also described “win‑win” risk‑transfer options such as structured opt‑outs (an employer‑funded per‑member payment to encourage employees to take a spouse’s plan and reimbursement for that plan’s out‑of‑pocket costs) and a Good Samaritan/Samaritan Fund advocacy model for employees with very high ongoing costs; they noted the advocacy fund model is more common in self‑funded arrangements because of its set up and administrative costs.

Timeline and next steps

Cottingham & Butler recommended that if Muskego wants to pursue self‑funding, the council signal that direction by October to allow stop‑loss quoting, selection of a third‑party administrator and pharmacy benefit manager, and employee communications so new ID cards and coverage would be ready Jan. 1. The consultants said preliminary modeling and plan‑adjustment scenarios could be ready for the council’s September meeting, with firm stop‑loss quotes available in October.

Committee questions and concerns

Alderpersons pressed for clearer worst‑case numbers for the self‑funded option and asked about reserves and cash‑flow. The consultants recommended a reserve target roughly equal to three months of claims (the consultants translated that to about 25% of variable claims in their model) but noted actual funding and timing would be a council decision. Several committee members also asked for modeled alternatives that would change plan generosity but minimize employee disruption; Cottingham & Butler agreed to provide those scenarios in short order for the council to review in September and to return with firm stop‑loss pricing in October.

Votes at a glance

- Approval of the agenda: motion passed by voice vote.

- Approval of minutes from 07/22/2025: motion passed by voice vote.

- Motion to convene closed session under Wis. Stat. §19.85(1)(g) and §19.85(1)(c) (innovation grant impact on police; nuisance property abatement; businesses failing to return annual survey): roll‑call passed (see actions[] for roll call).

The committee left the meeting for a closed session after the health insurance discussion; no further public action on the insurance item was taken that evening. The consultants will return with plan‑adjustment scenarios for the council’s September meeting and stop‑loss quote results in October, per the schedule described in the presentation.