Gallagher warns city’s health plan faces steep trends; bill to require 80% employer funding could add roughly $750,000

Chad Hodkinson, area senior vice president at Gallagher, told the East Lansing Financial Health Team that the city’s employee and retiree health benefit program is facing “a challenging time for health care” as insurers and public pools grapple with rising costs.

Hodkinson reviewed the city’s current arrangements — active employees are in the Western Michigan Health Insurance Pool and post‑65 retirees are on Humana Medicare Advantage with a city health reimbursement arrangement for certain retiree costs — and summarized recent renewal activity: the pool average renewal for 2026 is roughly 9.1 percent and the city’s all‑in annual benefit spend (actives plus retirees) is “about $8 million annually,” he said.

Why it matters: Hodkinson said two large structural drivers are pushing trend higher: hospital system consolidation (which he said can reduce competition) and rapidly rising specialty‑drug spending, notably the recent surge in GLP‑1 weight‑loss medications. He also noted pharmacy benefit manager market shifts and pending federal actions that may change how drug costs are managed.

Policy risk and a concrete estimate: Hodkinson reviewed the status of House Bill 6058, legislation that would flip the existing Public Act 152 cap (a ceiling) into a floor requiring public employers to pay at least 80 percent of total premium. He told the committee that, using sample calculations, complying with the amended law could raise employer costs by roughly $260,000 per 100 employees; with the city’s roughly 300 employees that translates to about three‑quarters of a million dollars in additional budgetary cost under the bill’s indexing assumptions.

Employee contributions and bargaining: City staff and the consultant confirmed the city’s current practice largely funds employees’ premiums; a staff member said currently employees pay nothing for most coverage (exceptions for spouse coverage were noted). Hodkinson cautioned that moving to a different contribution model or changing plan design would likely require collective‑bargaining discussions with unions and careful pricing to avoid unintended migration to richer plans.

Options discussed: Gallagher presented a menu of tools to control costs — plan design adjustments (HDHP/HSAs, deductibles, co‑pays), network tiering, direct contracting with systems to secure deeper discounts, direct primary care pilots, nurse‑led care navigation for complex cases, utilization analytics, and dependent‑eligibility audits. The consultant emphasized tradeoffs between cost savings and member disruption.

What happens next: Gallagher said it will continue to provide analytics and support the city’s health‑care task force and staff as they evaluate design changes or pilot programs. The consultant recommended continuing de‑identified claims analysis to target high‑cost conditions and warned the committee to watch the legal outcome on HB6058, which remains in judicial/legislative limbo.