Prescott Valley staff propose switching town health coverage to self‑funded plan; council asks about reserves and risk

Prescott Valley — Town staff presented a plan to move the town’s employee medical coverage from a fully insured policy to a self‑funded model at a council meeting.

A staff presenter (Speaker 2) told the council the primary change would be financial: the town would pay claims directly while contracting a third‑party administrator (TPA) to handle claim adjudication and payments using the current United network. "We are continuing to explore whether or not an internal service fund or section 1 15 agreement trust is gonna be the best opportunity for the town to make sure that we are legally compliant with self funding," the staff presenter said, and added that staff would "receive any feedback" and return with comparative rates.

Town counsel (Speaker 1) framed the basic shift this way: "Self funding to fully insured, you're literally just simply changing who pays the bill." Counsel and staff clarified that the town itself would not adjudicate medical necessity or approve individual procedures; that work would be done by the contracted TPA.

Council members asked how the change would affect employees’ out‑of‑pocket costs and whether the town must have reserve funds in place first. One council member (Speaker 4) described the concern: "I just... think about what you end up paying, and that's with insurance. So I'm trying to visualize what it would be like with being self funded." Staff said employees would continue to have plan provisions such as copayments and deductibles under the proposed model, and that staff will model those scenarios in upcoming rate comparisons.

Staff (Speaker 5) said the presentation to council will include multiple pro‑formas and options for building a reserve over time and that staff may request "seed money" for an initial reserve. "We plan to do is come to council with a recommendation for seed money to do the reserve, and then the rest we can actually build into the premium," Speaker 5 said, adding that different options on how to build the reserve would be presented.

On administrative details, a town official (Speaker 3) noted the practical reason for the current approach: UnitedHealthcare operates a self‑funded subsidiary, UMR, which staff plan to use in the near term. "They've got a subsidiary component of UnitedHealthcare called UMR, and that is who we're gonna be working with," Speaker 3 said, and emphasized the town could re‑bid to other carriers later.

Staff also described the difference between an internal service fund and a Section 115 trust. Using a numeric example, staff explained that allocating $1000000 to a Section 115 would make that money available only to the medical plan, while an internal service fund would remain a town fund that could, in unusual circumstances, receive a loan from the general fund.

Next steps: staff expects to receive the town's self‑funding, stop‑loss, and fully insured renewal rates in the coming weeks, model multiple scenarios with finance staff, and return to council with a recommendation and potential request for seed funding. If the council directs staff to proceed, the town would seek to implement a TPA ahead of open enrollment in May for a self‑insured plan year beginning July 1. The item closed with no vote taken.

The council did not adopt any ordinance or formal motion during the discussion; staff is expected to bring formal recommendations, option comparisons, and any seed‑fund requests back to a future meeting.