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City staff, consultant warn of underfunded health plan; council approves budget amendment to cover 2026 shortfall
Summary
HUB International and city finance staff told council the city's self‑funded health plan was only funding about 71.8% of expected costs for 2025 and is trending toward the stop‑loss maximum; staff proposed one‑time funding and to include additional funding in the FY27 budget, estimating a FY27 premium increase and a plan funding increase to address claims and medical/pharmacy inflation.
HUB International senior account executive Julian Fontana told the council that the city's premium equivalent rates and contributions were funding roughly 71.8% of the plan's expected costs for 2025 and that claims this year have pushed the plan toward its stop‑loss maximum. Fontana said medical and pharmacy inflation were substantial drivers and that the city will need one‑time funding for the FY2026 shortfall and increased funding for FY2027.
Finance Director Jonathan Flores presented a related budget amendment (Item F) that would contribute about $4.2 million from operating funds to cover health insurance claims and premiums for the current fiscal year, including a $3.2 million general fund portion and roughly $500,000 from utility operating funds. "Contractually, the city was funding about 71.8% of the plan costs," Fontana said during his presentation. Council approved the first reading and the budget amendment passed (Item F, 7‑0). Staff said they will continue to evaluate plan design, employee contributions and reserve targets during the FY27 budget process.
