Virginia Beach schools projected to draw health fund down; board weighs employee premium increases

Mercer told the Virginia Beach School Board on Feb. 10 that the division's health fund is projected to draw down in the short term and may require changes to employer or employee contributions to rebuild reserves.

"We're expecting the health fund to draw down with the experience in December, an additional 1,900,000.0, leaving a health fund balance at 11,500,000.0," the Mercer presenter said while reviewing data through Nov. 30, 2025. Mercer's projection shows a projected drawdown of $7,800,000 in 2026 leaving an estimated balance of $9,600,000 and a projected 2027 gross cost near $140,200,000 under one scenario.

The firm modeled multiple scenarios for 2027. One preserves the current employer/employee cost-share ratio (about 85.5% employer, 14.5% employee). Other scenarios shift costs to employees by 5-percentage-point increments; Mercer said each 5% increase in employee contribution is worth about $900,000 on a pre-tax basis, and a 10% employee increase would average roughly $205 per employee per year (about $17 per month).

Board members repeatedly asked what single metric they should focus on. "If you're looking for a single place to look, then it would be the projected health fund balance at year end," Mercer said, noting a two-month reserve target based on industry practice. Under the plan-year scenarios presented, the two-month (or 2.5-month, in some references) reserve target would be roughly $21.5 million–$23.4 million, while the modeled 2027 balance was $9.6 million.

Direct options discussed included: (a) loading higher employer contribution rates into the budget (Mercer's figures produce an estimated $9.2 million increase in employer contributions for the 2027 plan year relative to 2026), (b) a one-time additional employer contribution (staff proposed an extra $5 million to go directly to the health fund), or (c) phased employee premium increases. Mercer and staff emphasized that the November-based projections will be updated when December 2025 data are included at an upcoming March presentation.

Board members asked whether the $5.8 million reversion identified by staff had been incorporated into Mercer's exhibit; Mercer said the $9.2 million employer-contribution estimate uses Mercer's data through November and does not include the additional $5 million employer contribution staff separately proposed.

What happens next: staff plans to update the projections with December data and return to the board with refined numbers and options for rebuilding the health fund, including how much of any increase would be loaded into the employer budget and how much could be shifted to employees. No formal motions or votes occurred during the workshop.

The board recessed to address technical audio issues and reconvened to continue questions; the formal meeting was scheduled for 6 p.m.