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Gallagher analysis: large medical claims drive higher costs but city fund balance rises
Summary
Gallagher presented the city’s employee benefits renewal for the 2025–26 plan year, reporting a roughly 30% year-over-year increase in net medical claims driven by several large claims and specialty drugs; staff recommended modest dependent-rate reductions and lower out-of-pocket maximums while keeping employer contribution levels steady.
Jeff Summers, the Gallagher benefits presenter, told the Nacogdoches City Council at its Aug. 19 budget workshop that the city’s net medical claims rose sharply this year. "The net increase was a little over 30% year over year," Summers said, and he attributed most of the rise to several large claims, including one exceeding $500,000, and higher specialty-drug spending.
Summers said pharmacy claims were up about 11.3% and that administrative and reinsurance costs fell, leaving the net overall cost up "right at 15%" year over year. Despite the claims increases, he reported a stronger fund balance: "We're up to a little over $3,300,000 as of July 1, and it's the healthiest it's been," Summers said.
On plan design, Gallagher recommended holding most employer-paid contributions steady and lowering dependent rates on the base health plan from $422 to $397 per month — a $25 monthly reduction. Summers summarized the recommended change this way: "The base plan, the monthly rates for the dependents are gonna come down $25 if voted on." He also proposed lower out-of-pocket maximums on the base plan — $1,000 for individuals and $2,000 for families — and said similar, modest caps would apply to the buy-up plan.
Summers described the dental plan as self-funded and recommended no rate changes; the city contributes $30 per month for each tier and the dental plan will retain a $2,500 orthodontic maximum introduced last year.
Council members asked whether retirees remain on the city plan. Summers said employees who retire before 65 may stay on the plan, but when they reach 65 they become eligible for Medicare. City staff clarified the municipality does not continue employer contributions for retirees under the current policy.
The presentation did not include a formal council vote on the recommendations. Summers encouraged HR and council to review details, and said Gallagher suggested that spouses who have access to employer coverage should not remain eligible for the city's plan going forward.
