Title
Receive a presentation regarding 2026-2027 Medical Plan RFP updates and considerations.
Body
REQUESTOR:
Human Resources Department
BACKGROUND:
The City of Farmers Branch recognizes that providing a competitive and comprehensive health insurance program is essential to attracting, retaining, and supporting a highly qualified workforce. Employee health benefits are a critical component of the City's total compensation strategy, promoting the well-being, productivity, and financial security of employees and their families. By offering access to quality healthcare coverage, the City demonstrates its commitment to employee wellness while ensuring its ability to recruit and retain the talented professionals necessary to deliver high-quality municipal services to the community.
The City of Farmers Branch provides health insurance benefits to eligible full-time employees through a self-funded health plan. In a self-funded plan, the City pays medical and pharmacy claims as they are incurred rather than purchasing a fully insured health plan from an insurance carrier at a fixed cost. This allows the City greater flexibility and control over cost strategies and plan design. To protect the City against catastrophic claims, stop-loss insurance is purchased to reimburse the City for claims that exceed specified thresholds.
The City’s current health plan consists of a High-Deductible Health Plan (HDHP) with a $2,000 individual deductible, $4,000 family deductible, 80% coinsurance, and a $3,000 individual and $6,000 family annual out-of-pocket maximum. The plan currently serves employees across all departments, with high participation rates of approximately 82% of General Employees, 90% of Police employees, and 92% of Fire employees.
Generally, every three years, the City works with its long-time insurance broker, McGriff Services (now a Marsh/McClellan company), to issue a Request for Proposal (RFP) to evaluate market offerings from a variety of carriers and to remain competitive in the employer space.
DISCUSSION:
The RFP process was designed to evaluate vendors based on overall cost, program options, employee disruption, pharmacy management strategies, and long-term value to the City and its employees. The City received proposals from five medical plan administrators and six pharmacy benefit management vendors. Following evaluation of the proposals, staff is proposing retaining the City’s current medical plan administrator, UMR, and transitioning pharmacy services to ServeYou Rx. Below is a short narrative of the evaluative findings:
Proposed Transition to ServeYou Rx (3 Years)
Pharmacy services presented the greatest opportunity for cost savings and plan design improvements through the RFP process. ServeYou Rx provided the strongest overall proposal, offering the most competitive pricing, detailed cost-saving projections, and a comprehensive suite of member-focused programs. The proposed pharmacy program is expected to generate significant savings for the City through a combination of reduced administrative costs, manufacturer rebates, biosimilar drug requirements, specialty pharmacy management, and an optional international prescription program.
This transition will cause minor disturbance to employees' pharmacy services during the initial phase for those who have existing and recurring medications.
Proposed Renewal with UMR (3 Years)
Medical claims costs are largely driven by external healthcare market factors and offer limited opportunities for direct cost control. Despite these constraints, the City identified approximately $52,734 in savings through UMR's proposal, primarily through increased administrative credits and fixed administrative pricing. UMR will provide $50,000 annually in administrative credits throughout the contract term, compared to the current $30,000 per year, and offers a three-year rate guarantee for administrative and Third-Party Administrator (TPA) fees, providing greater budget predictability. Additionally, retaining UMR will result in virtually no disruption to employees, as plan participants can continue using the same provider networks and administrative platform.
The discussion focuses on cost and carrier administration and is separate from discussions related to plan design, which includes components such as covered services and the City’s monthly contribution differential. The discussion will cover the following topics:
1. A review of the City's current self-funded health plan structure and plan design.
2. The RFP process, vendor responses, and evaluative criteria.
3. Staff's recommendation for medical plan administration and pharmacy benefit management services.
4. Next steps for implementation, employee communication, and future plan design evaluation.
DISTRICT:
Citywide
POSSIBLE COUNCIL ACTIONS:
N/A
FISCAL IMPACT:
An estimated $600,000 increase to the healthcare budget.
ATTACHMENT(S):
1. Presentation