Lancaster to renew employee health plan with Blue Cross; city will absorb near-9% net increase under recommended plan design

Lancaster officials received a presentation July 28 recommending renewal of the city's employee health plan with Blue Cross Blue Shield and modest plan-design changes that would limit the city's net premium increase to roughly 8.8% for the Oct. 1 start of the FY25-26 plan year. Andrew Weager, senior account executive at Hub International, presented claims and premium trends to the council and said catastrophic claims and a high loss ratio drove the recommended changes.

Weager told council that the city has run a historically high loss ratio in recent years (101.6% for the 2023-24 plan year and about 106% year-to-date), and that large individual claims (defined in the presentation as claims over $50,000) have been the principal driver. Blue Cross Blue Shield's original renewal quoted a 22% increase; after procurement and a best-and-final process the vendor reduced its offer to a 14.3% increase. Blue Cross also offered a $25,000 one-time wellness allowance and an $83,000 premium credit; with those credits and recommended plan-design adjustments Hub calculated an 8.8% net increase to the city.

Hub described three plan tiers currently offered: a buy-up PPO, an HMO option, and a high-deductible HSA plan (the HSA plan carries a $3,300 individual deductible and $6,000 family deductible and currently enrolls most employees). The recommended plan designs include higher deductibles and out-of-pocket maximums in some options to help reduce the overall rate impact while keeping benefits aligned with market benchmarks, according to the consultant.

The presentation also described ancillary coverage: dental received a 6% increase in this renewal cycle (it was in a rate-guarantee period), life and disability received a rate pass, and staff proposed increasing the basic life maximum from $200,000 to $250,000 and raising voluntary life coverage for children from $10,000 to $20,000. Cost-mitigation measures the city already uses include a spousal surcharge and an $80-per-month tobacco surcharge tied to wellness participation.

City staff and the consultant recommended renewing with Blue Cross Blue Shield and that the city absorb the employer portion of the increase, meaning there would be no change to employee-premium contributions for the next plan year. Council did not direct changes to that recommendation during the meeting; the plan was presented as an action for the city's October 1 plan-year implementation.

“There are some plan-design changes for employees, but we're seeing a net increase below 10% for next plan year,” Weager said during the presentation, summarizing the vendor's best-and-final offer and Hub's recommendation.

Next steps in the process announced at the meeting include formal adoption of plan renewals and benefit design changes in staff reports and budget documents ahead of the Oct. 1 effective date.