Mercer presented a financial update to the Virginia Beach School Board on the district’s self-funded employee health plan, reporting that recent claims have outpaced budgeted premiums and driven an unfavorable projection for 2026.

David Keogh, principal with Mercer, said the plan’s current loss ratio — total plan cost divided by budgeted premium — is 102.9 percent. "The most recent three months exceeded the budget," Keogh said, and that experience pushed updated projections into a larger shortfall than previously reported.

Keogh walked members through incurred-claims trends through September 2025 and said period-over-period increases of 8.6% for medical and 14.6% for prescription drugs have produced a combined total trend of about 10.4%, above the 9% annual trend assumption the district had been using. He identified pharmacy cost drivers including specialty medications and GLP-1 class therapies and named Humira as the top specialty drug (about $2.1 million in pharmacy claims) and Ozempic and Mounjaro as top non-specialty contributors (a combined ~$3 million).

Keogh also highlighted concentration among high-cost claimants: individuals with more than $100,000 in plan claims rose to 137 people (up about 9.6%), and roughly 0.3% of members (about 40 people) accounted for nearly 16% of total plan spending.

On the division’s projected 2026 budget, Mercer presented a baseline gross cost of about $132.6 million. As of Sept. 2025, the health fund balance was roughly $5.6 million; the updated projection without new funding showed a year-end projected balance near negative $5.9 million and left the division far short of a two-month reserve target (about $22.1 million).

Mercer modeled two mitigation scenarios. Adding a $5.8 million reversion into the plan — an amount the board placed in a reversion resolution that city council will consider Nov. 18 — would shift the projection to roughly break-even (Keogh's model showed the deficit shrinking from about -$5.9M to about -$0.1M). "That infusion into the plan does not affect the contributions required of employees or retirees," staff said. In a second scenario, adding an additional $5 million (for a total employer infusion of $10.8 million) would produce a projected positive year-end balance (roughly $4.9M in Mercer’s exhibit).

Board members asked for clarification of enrollment and utilization metrics. Mercer explained that "claimants" refers to distinct members on a medication and "prescriptions" are fills (roughly 4.8 fills per claimant on the diabetes drugs example), and said the consolidated plan covers approximately 14,000 employees and 23,000–24,000 total covered lives.

Board members requested follow-up data showing, where possible, how many previously enrolled employees shifted from the point-of-service (POS) plan to the consumer-driven health plan (CDHP) versus how many were newly hired members. Staff agreed to provide the raw comparisons.

Timing and next steps: Dr. Robertson said the $5.8 million reversion is part of a city council resolution set for Nov. 18; if council approves the reversion, the board will be asked to accept the funds and staff recommended waiting for February 2026 claims data before seeking any additional contributions. "Maybe we don't need to put $5,000,000 in," Robertson said, "maybe we only need to put $3,000,000 in."