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Committee approves move to self‑insured employee health plan after insurer proposes 39.9% renewal increase
Summary
The committee unanimously approved a recommendation to transition the city’s employee health plan to a self‑insured platform beginning in 2026 after staff cited a 39.9% fully insured renewal from UnitedHealthcare; staff said UMR (TPA), Servu (PBM) and a specialty drug program are the planned vendors and that stop‑loss pricing remains pending.
City human resources staff (agenda-identified as Melissa Beck) told the committee that UnitedHealthcare presented a fully insured renewal increase of 39.9% for the city’s health plan, prompting staff and consultant Aperture to recommend a transition to a self‑insured model beginning Jan. 1, 2026.
Melissa Beck explained the move would shift administration to a third‑party administrator (UMR) and introduce a pharmacy benefit manager (Servu) and a specialty drugs program ("Sharps") to control high-cost specialty medication claims. She said self‑funding gives the city "levers" to manage utilization and transparency into claims trends that fully insured arrangements do not provide. "We were running out of levers on a fully insured basis," Beck said.
Staff presented a proposed plan design with higher deductible features and changed HSA/HRA mechanics; Beck said previously available HRA backstop funding would be removed under the fully self‑funded design and HSA contributions would be lowered but still provided to employees to limit out-of-pocket exposure.
A major outstanding element is stop‑loss (reinsurance) pricing. Staff and a consultant explained that final stop‑loss premiums require a fuller claims runout (roughly seven months of claims history) and that a finalized stop‑loss quote was expected in October. Presenters said they had padded budget projections to absorb stop‑loss uncertainty and anticipated funding the claims fund monthly beginning Jan. 1.
After discussion about plan design, employee out‑of‑pocket exposure and contingency padding for stop‑loss, the committee voted unanimously to recommend the transition to the common council. Staff said the proposed plan and numbers will be included in the 2026 budget and that they would return with finalized stop‑loss terms when available.
Next steps include obtaining final stop‑loss quotes in October, confirming vendor contracts, and incorporating the approved plan design and projected costs into the 2026 budget.
