Belmont to stay fully insured after consultants flag high cost and risk of self-funding

Belmont City Council on May 18 was presented with market results showing a 39.3% renewal from UnitedHealthcare for the city’s employee plan and a self-funded alternative that consultants warned carries substantial near-term risk.

Consultant Donna Nixon of Hub International told the council UnitedHealthcare’s renewal came in at about a 39.3% increase. A Paro self-funded quote, she said, showed an expected cost roughly 18% higher than the UnitedHealthcare renewal and a worst-case maximum liability about 39% higher. Paro’s stop-loss quote included a $250,000 laser on one plan member; if that person’s claims materialize, the city’s maximum exposure could be about $3.2 million.

“We looked very seriously at this,” Nixon said. “Unfortunately, the numbers do not support making that move right now, even though we still feel self-funding is the right long-term destination.”

Hannah (staff) and consultant staff explained the gap arises because the self-funded vendor underwrites purely on the city’s recent claims experience — including a prior high-cost period — while UnitedHealthcare used a blended underwriting approach that softens the immediate increase.

To avoid passing the full increase to employees, consultants recommended remaining fully insured with UnitedHealthcare for FY2026–27 and offering a second, optional plan with higher deductibles that would reduce payroll deductions for employees who enroll their dependents. Under the proposal the city would absorb the rate increase for employees who keep the existing plan, and employees who choose the optional design would face somewhat higher out-of-pocket cost in exchange for lower payroll deductions for dependents.

Council members pressed staff on alternatives, including a salary-band contribution model that would shift dependent-cost burdens by income band. Staff and Hub representatives said such a banded model can be administratively complex — requiring multiple payroll deduction codes, frequent reconciliation, and policy to track salary changes — and that Belmont’s current HR/payroll capacity (two staff handling HR/payroll matters) would be strained. Hub noted private employers commonly use banded models, but public employers rarely do unless they have larger dedicated payroll teams.

“We typically will recommend that you fund at maximum liability,” Nixon said, citing the $250,000 laser and the associated $3.2 million exposure as a budgeting consideration. Council and staff discussed building a reserve over 12–24 months to enable a future transition to self-funding from a position of strength rather than under duress.

Mayor Jordan and several council members asked staff to study whether adding payroll/HR capacity or software could enable a banded-contribution model in future years and to survey employees during the coming year to test likely enrollment behavior under an optional plan. Council indicated support to proceed with UnitedHealthcare and the dual-option approach for the upcoming plan year and to revisit self-funding with additional data and staffing analysis.

The council did not adopt a separate, recorded vote on the insurance recommendation at the workshop but directed staff to proceed with the UnitedHealthcare renewal and the optional plan design as presented and to return with further operational analysis and enrollment information.