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City manager: Richardson's self-insured health plan facing multimillion-dollar losses; staff proposes benefit and premium changes
Summary
Don Magner told council large claims and medical inflation have driven the city's "core plan" toward a projected negative fund balance unless staff implement a mix of increased city contributions, employee premium hikes, plan design changes and other cost-control measures.
City Manager Don Magner warned council that Richardson's self-insured employee health plan—"core plan"—has incurred unusually large claims and sustained medical-inflation pressures that could exhaust reserves within a year if not addressed.
"In FY27 to break even we would have to generate $4,600,000 year over year dollars of new revenue. I'm here to tell you that's not possible," Magner said, summarizing staff's projection and the drivers of the shortfall. He showed that large claims (roughly $14M in 2025 and $9.5M the prior year) and double-digit claim inflation are key factors.
To stabilize the plan, Magner proposed a package of actions: restore the earlier $100 monthly city contribution and add an additional $155 per‑month per‑employee (figures cited in the presentation), a phased 7.5% increase to employee premiums over multiple years, discontinuation of coverage for weight-loss‑only drugs, and offering a new HMO option negotiated with Blue Cross Blue Shield that staff estimates could save approximately $200,000 with modest initial migration.
Human Resources Director Jose Marino described open‑enrollment outreach and town halls to help employees choose options and noted stop‑loss (reinsurance) is in place with a specific attachment point discussed during Q&A. Council members pressed for clarity on timelines and the distributional impacts on lower‑paid employees; staff emphasized offsetting compensation proposals and wellness incentives to reduce net impacts.
