City Commission - workshop

And now we move into a workshop of the McAllen City Commission held in accordance with the Texas Open Meetings Act. All workshops are open to the public and serve as an opportunity for city staff to present detailed information, reports, and updates to the commission in preparation for future action or decisions. While no formal votes are taken during these sessions, workshops play an important role in the city's policymaking and decision-making process.

We're live. And good afternoon. Welcome to today's joint workshop with PUB. However, we don't have a quorum yet for PUB. Should we have somebody else, they'll call the meeting.

Exactly, Mayor. If we can call the city meeting to order, if PUB makes a quorum, they can call the meeting to order. In the meantime, Mr. Williams, we're glad to have you here this afternoon and to listen to the presentation.

Thank you.

Mayor, the only thing we have on the agenda, well, I don't know if you want questions to city staff.

Any questions regarding today's meeting? Nope. Onward.

Mayor, the only thing we have on the workshop for you this afternoon is a review of the health plan and recommendations for its structure for the coming year. We've got Jolie Perez here to make that presentation for you.

Honorable Mayor, Commissioner, and Vice Chair, we appreciate you all being here today. Obviously, you know Jolie Pettis, our Employee Benefits Director. I also want to introduce today Mr. Tommy Taylor. He's the Vice President and Managing Director of Pig & Botham Insurance and Financial Services. He played a key role in helping us evaluate the RFP that we went through both with the health insurance and as well as with the pharmacy. So I'm going to let Jolie. and Tommy take this, they only have 134 slides, I think, which they have narrowed down to under 30, but we're gonna go through this, and we're open to any questions that you have as we go through. Sir, leave it for you.

If we could pause for just a second, we'll let the PEB call their workshop to order.

My God, if you tell me how's it going, we'll call the meeting over.

Thank you commissioners mayor members of the board Appreciate the opportunity to talk to you today staff alongside the city manager's office has taken considerable considerable amount of time to evaluate the employee benefits health plan in order to give you an opportunity to approve several enhancements to the plan We'll start with the executive summary. In looking at fiscal 26-27, the upcoming year, if no action is taken, we do anticipate a shortfall of about $2.8 million. After discussion with the city manager and looking at the recommendations that we are presenting for you today, we do believe that we can create a margin of about 2.2 net positive in order to start building some reserves within the fund. If we look at this fiscal year and where we think we'll end up This is a chart that shows you the revenue versus expenses that we believe will be our end year result. We are likely going to break even at the end of the year. I know this chart shows a little bit more of a margin on the revenues. That is covering shortfalls from last year and some unexpected claims that we are still anticipating this year. But we do believe that at best we're gonna break even at the end of this year. As we move into 26-27, This is where we would be without without any recommendations approved today. The revenue does include premiums and rebates while the expenses include the claims and administrative costs. The revenue is not inclusive of any stop loss reimbursements that would be expected. So therefore, we do have the opportunity to possibly improve the reimbursements should we receive any stop loss reimbursements. The expenses are projected to cause a deficit of $2.8 million due to high dollar claimants that we'll talk about in a little bit, and as well as pharmacy rising costs. Additionally, the department does currently have a $1.9 million interdepartmental loan that it needs to satisfy. And so this particular projection of revenue and expenses does not allow us to make a payment towards that loan. If we look at the budget reimagined, if all the recommendations are approved, we do believe that we will not only cover expenses, we will be able to make a partial payment towards the loan of about $475,000. And the plan is to pay $475,000 for four consecutive years. And it does leave us with a projected $2.2 million margin to cover unexpected claims, as well as to begin to build that reserve. We'll further detail the budget recommendation later in this presentation. This chart that you see on this slide is indicative of the medical spend trend analysis over the last 10 years. The blue line is the industry trend for those periods. The actual that we experienced is in pink. And there is a line that begins in 2022 that's purple that would be our experience had we not implemented Frontier Direct Care as our primary care program. Please note that the 2015-16 starting line is not reflective of the industry trend meeting where we were. It's just the starting base for all numbers that we utilized. The expenses rose significantly prior to 2019-20. And that's compared to the industry trend. However, in 2020 and through 2022, we did see reduced expenses, and most of that is due to COVID because people were delaying care. They weren't having any elective procedures. If it wasn't life-threatening, it wasn't occurring. In 2022-23, we did see a spike in expenses, and that was because delayed care resumed post-COVID, and it was slightly exceeding industry projections. For 23 to 25, what we see is expenses have stabilized. They've remained just below industry trend projections and experiences. So between 2015 and 25, the industry expenses increased by 73% in the 10-year period. Meanwhile, the city's increase over that same period was only 69%. Are there any questions on this slide before I move on? OK. As we take a look at the high cost claimants, we've actually decreased our high cost claimants over the last couple of years. However, the cost per claimant has increased significantly. It's increased actually by 30% in the last three years. So what that means, if you take an analogy, if you had 75 inpatient admits at an average cost of 50,000, but year two had 50 patient admits, and it cost 80,000 per admit, then we're increasing expenses by almost half a million dollars, even though we've reduced the amount of claimants. So this is where, as we try to address high cost claimants, it becomes difficult because we're doing our best to reduce those claimants, but the ones that are being hospitalized are much more severe, and that's affecting the average cost per claimant. We currently have five high-dollar claimants that we're tracking, and just to give you some perspective on it, one particular claimant is already near $3 million alone. We have another claimant that's already surpassed $1 million. So with just two patients, we're already surpassing $4 million of claims. The next slide shows you some outcomes and what we're seeing between our engaged members with our primary care program and our non-engaged. To be clear, What you're seeing up there is a representation of people who have engaged with Frontier one or more times, but you're also seeing the combined expenses between their United Healthcare claims and their Frontier claims. So the number is not indicative of only Frontier expenses. It is actually their total expenses, but they have engaged with Frontier. What we're seeing is that the ones that are utilizing Frontier tend to be our sicker population, the ones with chronic disease, things that they're trying, excuse me, that they're trying to manage. In both groups, we have seen overall health improvement, but again, we are definitely seeing that the majority of the sicker population is utilizing our frontier care. As a result, if you look at inpatient admits and compare the two between frontier utilizers versus nonutilizers, what you will see is the inpatient admits are significantly below those who have not engaged with frontier. And even better is the readmits are significantly lower if they are engaged with frontier. Those inpatient admits and the readmits are what cause significant claims experience for us. So we definitely want to do our best to be able to avoid those inpatient and readmits.

You might just give, does that make sense? What we're seeing with Frontier, one of the things that you're seeing is a significantly less hospital admissions, number one, which you would expect, but even more important than that, the readmits are substantially less, which means you're not paying for that claim again after it's there. So that's an important positive within those Frontier patients as well.

What is the difference between the Frontier Care and the United Care?

So the Frontier Care means that they're engaged in our direct primary care program, which means they are utilizing the provider that has the convenience of being able to have a constant relationship with them, help them immediately with any issues that they're having on the spot, be able to prevent those urgent care and hospitalizations through ER because they didn't have somebody to go to for, let's say, a sinus infection at 7 o'clock at night. They have that access through the Frontier program.

Let me interrupt for a second because I want to take a step back. Commissioner Fowlick was not on the commission three years ago when we adopted this program. Three years ago, Commissioner, the city... adopted an element to the healthcare benefit that included what Jolie refers to as direct primary care through Frontier. Frontier is a company here in the Valley that offers primary care services on a subscription basis. So as part of the benefit package, the city pays a premium to or a membership fee to Frontier Direct for every city employee and their families to have access to that clinic free of charge to those patients. And so through that program, the employees can access primary care at zero cost to them with 100% of any claims expense coming out of Frontier Direct being borne by the city. The subscription that the city pays to for the Bennett for that benefit is approximately 1.8 million dollars a year. That's correct Yes

Yes, sir, and we have on average 66 to 67% of our members are utilizing Frontier at any given time.

And do you touch those individuals that 30 plus percent that aren't utilizing it periodically to try to get them to engage with the program?

Absolutely, we do it through various means, not only the marketing purposes but the outreach that's done to them specifically. We've done, there's email broadcasts, there's incentives within our health plan design to encourage them to utilize the program because they have higher co-pays and everything through the traditional care. Thank you. Yeah. As we look at the ER visits, one thing to note on the ER visits, we were reducing them quite significantly from 2022 all the way to 2024. 2025, we did have a spike, and that was we were able to nail down the reason. Not only was it 158 redirectable visits, meaning they should never have gone to the ER, but it's also that we had 11.1% of hospital repeaters. That means they go three or more times in a year. And we actually had one patient alone that went 37 times that year to the ER. So that's the primary, it is the single reason that we had a spike that year.

As we move to pharmacy... Excuse me.

Oh, I'm sorry. I was one slide behind on that one, so I'll give you a second to look at that. This is the ER numbers that I was talking about. Also relevant to this slide is the fact that what we see is the transition from people utilizing their UnitedHealthcare providers to moving over to Frontier. You will see a couple really... important aspects of this chart. One of them is, if you look in 2022, our UnitedHealthcare primary care visits were just over 9,000 visits for the year. And that is before we implemented the primary care program. If you look 23 through 25, you will see how UnitedHealthcare's has declined. Meanwhile, the Frontier visits in blue have increased. And if you look at the combination of what's happening through UHC and Frontier, what we see is a significant increase in people getting that primary care right off the bat. And that's what helps us reduce long-time claims helps prevent chronic conditions, helps manage those with conditions currently. And that increase in primary care visits is also coupled by the frontier texts that they're able to do throughout the day and evening hours and recognize that those texts, they're not back and forth numbers that are counted for each text. It's one string of texts. So if I text my provider and we go back and forth five or six times, that's only counting for one text. It's not counting for six different texts. So you can see quite a significant number of people communicate with their provider through the texts as well as phone calls. As we move on to pharmacy, again, the industry trend line is in blue, the actual spend in pink, and then we do have purple post-2022 that represents the international sourcing that was added through Frontier in 2022-23. In late 2022-23 is when we instituted that international sourcing through them. And before the 23-24 plan year, we exceeded the industry trend line, not greatly, but we still exceeded it on average every year. Afterwards, we managed to meet or surpass it in having a lower increase in trend. The chart also shows that potential, again, if we had not implemented this international sourcing, that it would have been significantly higher.

Let's pause there for just a second, Jolie, so we make sure that the commission understands that the international sourcing is primarily for specialty medications, those people taking maybe medications for rheumatoid arthritis or some of the more expensive diabetes medications, the GLP-1s, things like that that can be sourced through international Rx.

Thank you.

It's not necessarily for the blood pressure medicine or the drugs you can obtain at a reasonable price here in the States.

Pharmacy costs have increased nationwide, again, primarily due to specialty meds and GLP-1s, but for our plan, It's not for any increase in utilization. Our script counts have remained very steady over the years. And so what we're seeing is all increases in expenses are coming from the actual individual ingredient script cost. Prior to 2022, 23, again, the city's pharmacy consistently exceeded industry benchmarks. We have steadily improved since implementing the international sourcing program. And again, the bottom line is that it remains our largest cost pressure, but we have strategies in place that are trying to produce measurable results. Again, to the cost drivers, We have the GLP-1s, the cancer, the specialty biologics, and treatments for chronic diseases. One of the important things to recognize with GLP-1s is these are long-term treatments. We have more users adding on to our plan using these scripts than we have people falling off the plan. So that trend is what's not allowing us to balance that average out. It's constantly adding more and more expense.

Toby, let me ask you to pause again for a second and please explain a little bit about that formulary and the decisions that are made that allow people access to those medications because that formulary is not dictated by your office, but rather the formulary that UnitedHealthcare prescribed for access to those medications. So just explain a little bit about that so there's some understanding there.

So the pharmacy program through Optum, what they have is their traditional formulary. Our plan design with them limits the GLP-1s down to diabetes uses. So it is not covered for weight loss purposes. Now, there are some added FDA approvals for, I think it's sleep apnea, some cardio stuff that's going on. that it is being approved for. But aside from that, they cannot get it just for weight loss purposes. And we also have, in addition to utilizing Optum for the GLP-1s, we do have the sourcing through International Rx, which is now called TruPath, that they are actually doing domestic compounding to try to control those costs. And we have seen that that has kept the impact of increased pharmacy expense MINIMIZED BECAUSE WE'VE DONE THAT SOURCING. IS THAT WHAT YOU WERE LOOKING FOR?

I JUST WANT TO MAKE SURE THAT THEY'RE GETTING THE INFORMATION.

SIMILARLY, IS THERE CO-PAYS OR PERCENTAGE ON THE FORMULARIES THAT ARE ACTIVELY MANAGED THROUGH THE PROGRAM OR IS IT JUST WHATEVER WE GET THROUGH THE SYSTEM?

YES. SO THERE WOULD BE BOTH IN CERTAIN CIRCUMSTANCES, DEDUCTIBLES THAT MAY HAVE TO BE MET. For example, you're choosing a name brand over a generic. There are co-pays that go along with the drugs at increased dollars over what a standard drug would be. So if you might pay $20 or $30 for your blood pressure medicine, you might pay $120 or $140 for the specialty drug if you're the patient. Thank you.

One thing that also makes GLP-1 control a little bit difficult is we have people that were diabetic before that were managed fairly well on whatever medication they had been on, and then you have this surge of marketing and celebrity endorsements of the GLP-1s that we know today, Ozempic and Munjaro and so forth. And they already classify diabetics, so they have the ability in the system to move from their already controlled to a different GLP-1 with the comorbidities that they have, there's a justification that their doctors can make. And so that's also been a little bit difficult to control. One of the things that when we're talking about pharmacy increased expense, though, is to note we had injectables. Injectables are very expensive medications. And our reduction in injectables was very significant. But the cost per an injectable raised 732% in a single year. So, as you can see, the pharmacy aspect is something that is constantly having to be managed. We're constantly having to figure out what revenue streams that we can control and minimize and ways to make an impact in utilization to lower cost drugs and so forth. Another idea of some of the expenses that we've seen increased with pharmacy. In one single year, we saw cancer medications add another $600,000 to plan expenses. We had a single dosage increase in Humira that added another $90,000 to our expenses, and a single patient for Tabneos, which cost us $190,000 just for that single patient alone. It remains that pharmacies are obviously our hardest challenge to date, and the issue is

Complexity and treatment again not an increase in medications that we're utilizing the script count does remain stable Yeah, it would be important for you to understand that there's basically three levers that you can pull on pharmacy one is manufacturers assistance programs that that the city uses to try to get the script at no cost if possible and The other is rebates that the city uses, and they get rebates back from high-cost medications, name-brand medications. And then the third is the international importation. That's the third stream. The city is pulling all three of those as effectively as they can, but what we're truly seeing is just a real increase in the drugs that are coming forward right now, GLP-1s being others, other drugs that are coming out that are gene-specific drugs, medications, some that are as much as a million to two million dollars per script. So it's a tough battle to pull, but the city is attempting to pull every lever that they can on those drugs.

How is the city stop loss program functioning?

So we're actually going to be doing our renewal here shortly. We've been working on stop loss quotes. We have some adjustments we'd like to make to the policy regarding the contract terms. We have seen that we are a what we're considered a loss leader or a loss for the stop loss companies right now because of particularly those five high dollar claimants. and again, specifically those two that are costing us about four million. So our renewal rates are increasing dramatically because of that, and again, we're gonna be trying to maneuver some contract terms to be able to lower the impact of those cost increases.

What was your anticipated stop loss recoupment for this year? What was your anticipated stop loss recoupment for this year? And I think we just received a payment A WEEK OR TWO AGO, WHAT DID WE ACTUALLY RECEIVE?

RIGHT. SO WE WERE IN EARLY BUDGETS THIS SUMMER, WE WERE EXPECTING ABOUT $1.4 MILLION OFF OF A CLAIMANT, AND WE JUST RECEIVED ONE OF THE FIRST CHECKS, WHICH WAS ACTUALLY $2.3 MILLION THAT WE RECEIVED BACK ON THAT PARTICULAR CLAIMANT. SO WE WERE VERY, I MEAN, ON ONE HAND, WE'RE NOT HAPPY THAT WE HAD THE EXPENSE TO BEGIN WITH, BUT WE'RE DEFINITELY HAPPY THAT WE CAN RECOUP MORE FUNDS TO THE BUDGET THAN WHAT WE HAD ANTICIPATED.

That is included in your analysis?

Correct.

Correct. It's great to hear the active management.

Thank you.

It's been very active. I've had lots of questions, and Jolie has had lots of sleepless nights.

One important thing, again, for the Commission to know is that far as the active management the city of McAllen is probably one of the most actively managed plans that we see it's it's it's good when you see an employer trying to do what they can do because that's not always the case so we were we were extremely not surprised because McAllen has been on everybody's radar for a period of time but we were extremely Well, we just have a lot of respect for the way we looked at the plan it was put together We did put something forward this year that the city that if the recommendation is approved and The city has not in the past, and this is true for a lot of municipalities, a lot of municipalities across the state, they fund to an anticipated number, not an actuarially determined number, not something that somebody has really looked at and said, this is what we expect your claims to be. Any self-funded plan is truly operating like an insurance company. It is a self-funded program. So you need to be actuarially sound. The numbers that I think you're going to look at this year have been looked at actuarially, so you should not see that case. What you fund... Can't I can't speak to that. I just know what we saw so there may be some reasons that I'm unaware of but going forward That should give you the best opportunity to establish reserves and to keep the plan in a very good situation And to elaborate on that

Historically, it's always been the city's method to fund the claims. Now, once we minimized and actually depleted the reserves back in 2010 because of Affordable Care Act changes, we no longer had a reserve to fall back on on the emergency claims that weren't anticipated or the impact of plans that wasn't anticipated. And so the methodology has always been sound on the initial projection of the claims. But with the other funding, and we'll present this later in the presentation, the other funding mechanism is to fund based on the actuarial sound number to the max liability. And so you expect claims to be here. this is like the absolute worst case scenario, and you build that cushion in. Since the reserves were depleted, it's been difficult to even fund to expected claims. And we've had to do the adjustments year over year to make that happen. And so in our recommendation that will be in in a minute, we'll talk about how we can try to get to that reserves that I told you in the beginning of the presentation.

Just a bit of additional information. When she talks about funding to the maximum, When you look at stop loss and they give you what your expected claims would be, that is expected. That maximum number is typically at 120 to 125% of the expected number. And that's called your maximum claims liability. Funding to the maximum claims liability is how an entity, any employer, begins to establish reserves. If you only fund to expected, then you're going to constantly find yourself trying to play catch up. That's just the way that it works. So that maximum claims liability is what will be put forward.

Mayor, commissioners, trustees, that was something Joe Lee and I talked about last year. We didn't have time between me coming in in September and needing to get the budget ready. But when we SPOKE EARLIER THIS YEAR ABOUT HOW WE WERE GOING TO APPROACH BUDGETING THIS YEAR AND FUNDING THIS YEAR. WE TALKED ABOUT MAKING THIS PHILOSOPHICAL CHANGE IN HOW WE APPROACH FUNDING THE PLAN. I DON'T WANT YOU TO THINK, THOUGH, THAT WE'RE ONLY SAYING LET'S PUT MONEY IN THE BUDGET. MORE THAN THAT CONVERSATION, THAT WAS A VERY QUICK CONVERSATION, VERY EASY TO DO. challenge to to joe lee and the benefits department has been great we'll fund to maximum liability but at the same time we need to be working every day to bring the cost of managing this plan down as far as we can so that that number although it may reach will reduce the deficit that that we've run at for a number of years build a reserve and provide a reasonable benefit at a reasonable cost to the city and the employee. I'm sorry, go ahead.

But am I a little confused here? So if we're going up to maximum insurability, so we're in a sense creating an artificial reserve.

It's not artificial. It's real.

But it's something that we're creating with our own money to create a reserve for something else.

For a catastrophic claim that's not going to be covered by, that maybe surpasses.

We're covering it like that as a reserve instead of doing what we're doing right now.

Yes, sir. To what extent is that? Monetarily?

We're going to get to those recommendations. It's a couple of pages down.

But we're still going to be spending one way or the other.

Yes, sir. I mean, whether we fund for it or, you know, what I told Jolie last year was, look, I don't want to sweep this deficit under the rug. So I'm not gonna just sign off on a Interfund transfer and say, okay, I'm gonna cover the debt and we're moving on. What I said is I'll make you an Interfund loan because I wanna show the liability moving forward because I wanna track that number and know what I need to make up. I don't want it to disappear after one budget cycle.

We looked into everything, the different coverages that other cities afford. Yes, sir.

I just need to ask this. What percent or what idea do you have that it might be due to workers' comp or injuries at work?

Workers' comp is a separate fund funded separately from the insurance benefit.

Are there any injuries that happen while they're working that you cover as a claim?

No. No. And you may recall if you've ever had a claim where you got a follow-up letter from the health insurance saying, can you verify this wasn't an accident? Those are to try to find and identify certain claims that came in that flag that could potentially be workers' comp. And so that's called subrogation. They will actually reverse those claims and make the insurer for workman's comp pay those. Yeah. To wrap up the final slide on pharmacy, again, just talking about the benefit that we've had through the international sourcing. We've been able to cut the cost of Ozempic and Munjaro by about 22 to 42% per patient. The shift to moving to international sourcing and the compounding program has saved us $4.9 million over the last three years, and it's allowed us to improve against industry benchmarks. Despite these overall pharmacy expenses, despite overall pharmacy expenses rising, traditional PBM costs through our Optum fills has remained stable, which means that our international source has absorbed a lot of that increased pharmacy expense. We've been able to see on our diabetic population under the direct primary care program, we've seen an improvement of 40% of the diabetic population's A1C over the last year to two years.

Are they not a PBM, International Rx, or just a sourcing company? They're a sourcing, yeah. Okay. I thought they were PBMs.

All right, so we'll move on to the recommendations that we have moving forward. The first one, as mentioned previously, is the budget approach. There is a difference between how we've been doing it and how we'd like to get to eventually. The funding declaims, it's been difficult to react to anything that was unexpected or any changes in the market, and it's also going to prevent us from being able to satisfy a partial or full payment of that loan. The second one, as we mentioned, is to fund to maximum liability, 125% of what we expect claims experience to be. It does provide much more greater stability, allows us to reserve those growths over time, and however, that approach does come at a significant increase to both the city and to the employee. So we'll talk about those numbers next. This chart represents the premium structure. The top boxes are the current premiums. The bottom in blue is the recommended premiums. Together across both the active and retiree fund, these increases would result in about $4 million of additional revenue to the plan. The impact to the city is $77.50 per paycheck, more in contribution. And for the employee, it would be a $12 per paycheck contribution increase. Again, these would be aimed at covering the expenses for next fiscal year as well as...

Monthly or by month?

Per paycheck.

Per paycheck. Yep. Per paycheck. Which is by month? By week. By week. Correct. I'm sorry. By week. Yes, sir. $24 to the employer. Correct.

It is one thing to mention that traditionally we have always held the same premium for both active and retiree plans. The retiree pays the subsidy from the city as well as the employee portion, and then of course as an active employee you just have to pay the employee portion. In this recommendation that we're making for premiums, we are not recommending that we change retiree premiums from this last year, and the reason why is over the last couple of years our retiree population that are enrolled has dropped significantly. The thing is is those people that have dropped are not necessarily the sick ones on the plan. So when we take a substantial hit to enrollment under the retiree plan, we no longer have the group funding mechanism to be able to pay for the claims that are occurring under the retiree plan. So right now, our retiree plan is pretty much breaking even. The revenue that we have coming in is covering the claims pretty much dollar for dollar. If we increase the retiree premiums by this amount, which for the retirees would be about $179 a month more in the premium for them, we will see another significant loss of retirees. in which case we will absolutely run into a deficit on the retiree plan. And so under this recommendation, we are not recommending the same premium adjustments to the retiree plan. Yeah, the majority of our retirees are pre-65. We have a very few that are post-65. I will say that our post-65 does help the fund because we do Medicare estimation, which means we pay out very few dollars towards the post-65 retiree claims.

They're not required to switch over to Medicaid.

They're not required, but we don't pay claims. We pay claims as if they are, period. It doesn't matter if they're enrolled or not. So we do what we call an assumption of A and B enrollment, and we will only pay out on the remaining. We look at the allowable under retiree, excuse me, under Medicare. and are allowable, and if Medicare's already satisfied that same allowable, we don't pay anything out.

And is a long-term plan, I mean, I understand when people turn, when they turn 65, they may go over to Medicaid, but if they have Medicare, if they have the option of a Medicare plan for a city plan that's better, I think they would stay at the city plan that's better. So does that not tell me at least they're perceiving perhaps they're getting more benefits at the Medicare plan? Is that why they're moving over? And look, I know nothing about insurance or Medicare or what's being offered, but something tells me that they're being incentivized. Some things with the plans that they're analyzing, they're smart. Believe me, when you get to my age, even though I'm not even close to retirement, I'm still old, you start looking at which of the plans benefit you the most. And so, I mean, as a long-term plan, does it make more sense to look at it Since there's going to be a coverage there.

So we meet with all the retirees that are turning 65. We explain to them how our plan design is. And when it comes to their out-of-pocket expense, they're actually paying much more to be a part of our plan. Because Medicare A and B or Medicare Advantage, whatever they move to, is actually going to be a lot cheaper than what our premiums are. And we explained to them the value of what we actually pay towards claims is not going to be significant for them because of that Medicare assumption. The reason why we see people that might elect to stay on our plan primarily comes down to one thing, end-stage renal disease. Medicare has some pretty limited coverage options of how they treat that particular disease. And so a private plan like ours does have a little bit more benefit. So if they're scared that they're going to end up with end-stage renal disease, they may opt to stay on our plan.

But we have... Are there other specific diseases like that?

No, it's pretty much end-stage renal disease. Okay, that's interesting. Yes. What kind of disease? Yeah, so, and I think our total post-65 retiree count now is, we're down to 13 people that are still enrolled post-65. And I should make it clear that our post-65 population does not have the frontier benefit. So the direct primary care program is only for pre-65 retirees.

I'm curious, and you probably don't have an answer to this, but if you were to roll off those 13 down the road, and again, I'm not talking about something right now, but a future thing, would that impact your budget? Would you be able to still... meet the cost of those that have retired, it's still not going in. Absolutely not. So you need some of that to help you find it. Correct. Yes, sir.

Correct. Explain to me again why you believe that if you increase the premium for the retirees, that the number of enrolled retirees would drop.

The amount of the premium increase would incentivize them to go find less expensive coverage someplace else, and they would drop off the plan.

So that the benefits from this current plan, well, the perception of the benefits from this plan that they're on right now is not worth it to them with the premium that goes somewhere else.

Yes, sir.

It's more finance-driven than health care.

Unfortunately, in the United States, we make financial decisions about our health care every day.

The difference would be what?

$179 more a month that they'd end up paying. No, wait.

Are these numbers per paycheck or monthly?

For retirees, it's a monthly number.

Oh, the monthly number. Right.

In addition to the recommendation for the premiums, I'd like to take a moment regarding the medical RFP that we issued in late spring of 2026.

Well, I think I think we need to consider the numbers there I think what Jolie Told us is that we only have over 65 or Medicare eligible 13 and post retirees the majority of our retirees are younger

than the age required to participate in the federal program.

Which may be increasing.

Likely increasing. I won't go all the way, but I'll take it a step further than you, Trustee.

Everything I'm seeing is it's very, very likely. Right.

So the medical RFP, again, our partner with Tommy Taylor with Higginbotham, we reviewed all the proposals. There were eight that were received. There were five that were considered respondent with three that were considered non-respondent. They didn't meet the criteria of what we were looking for just right off the bat. Two of them were simply just broker submissions. They weren't even planned submissions. And of the top two proposals of the five, we did ask them for a best and final offer to see if we could continue to drive that contract into a much better financial position for the city. Of the two top-ranked providers, we did see that UnitedHealthcare had a very competitive bid. There was quite a substantial list of benefits in maintaining that plan and that partnership, and so it is our recommendation to continue with United Healthcare for a set period of three years plus two additional options to renew. Tommy, did you have anything that you wanted to add to that one?

Excuse me, I think the predominant reason was United Healthcare's willingness through UMR, who is their third party administrator, the actual coverage is through the third party administrator is the TPA that we're using, but through UMR to work with the city on continuing to build in integration with a direct primary care program. I won't even say frontier. In this case, it's frontier today, but a direct primary care program. And to the point that was made down here about active management, that further integration only allows that active management to increase and it will give the city access to data that you've not previously had. And that will be a good thing because data will answer all of your questions that we've had here tonight. So you're using Veracity as your program. As a third party I know that we saw Veracity has looked at what the savings have been year-to-date with Frontier, right? Correct. And that's a big number.

Correct. So our third-party analytics firm is called Veracity, and in looking, they get both UnitedHealthcare claims, they get the Frontier claims, and they're able to compile them together, look at benchmarks, look at Medicare percentage, and be able to determine what kind of savings we are realizing off the direct primary care program. And so for the first two years, they had already analyzed that we had saved just about $8 million of reduced cost in the claims experience that our members had had. So they're continuing to look at our last year. We should have some reporting here shortly. And then, of course, they'll end up doing another analysis at the end of this plan year.

So where that active management will allow you to go is ultimately to develop. You ask if they're encouraging people where to go. Well, the answer is yes, they are. But you will have the ability to kind of guide even more as you build out your plan because you'll know whether – the offerings and the procedures through Frontier or through United, which has a great network, where the best opportunity to save might be so that you can navigate those employees where they may need to go. So that was one of the things that none of the other parties that responded were able to put together.

So on the pharmacy RFP, we did issue this in early spring of 2026. We did have another consultant, our pharmacy consultant, HonestRx, that helped us with this particular proposal. Again, eight proposals were received. We did... do a best and final with four of those. And we did find that Labinity was the most advantageous in plan and pricing. One of the things that is strategically important about the Labinity proposal is it is the only one that had a guaranteed savings number. So there is an actual contractual rate of $1.2 million per year for three years that we would be saving each year. that if we don't hit that mark, they're gonna end up paying us out of their own pocket for that. So it definitely was a significant savings guarantee. So it is our recommendation. In addition to all the other plan design components and clinical management strategies, Labinity also offers us much more control. With Labinity, we can actually customize the formulary. So if we decide that we don't want another drug on the formulary list because there's a either a generic or a biosimilar available. We actually can customize the list at no extra expense, and they can manage that formulary for us per our direction, definitely giving us, again, a lot more control. We do have the ability to continue to do market checks annually for both medical and pharmacy, which is an important factor. So even if we do a long term contract of a three plus two year term, we do have the ability to go out for market checks every year and either continue to manipulate our current contract into better terms and or decide to cancel and go to a.

So we do have that option.

Correct.

Correct. Correct. We always add the out.

In summary, the three changes that I put before you are the premium changes to the active employee population, the award of medical ASO services to United Healthcare, and the award for pharmacy benefit manager to Leviniti. The savings numbers that are shown, or the impact numbers that are shown, are inclusive of both our active and retiree fund. And you can see that we're increasing revenue just over four million. with expected savings to the fund from the medical RFP award and pharmacy RFP award by $2.2 million. We are also continuing to work on some future strategies. Some of them are taking us a substantial amount of time to analyze. They're very complex, but we believe that they have some strong potential for our plan. As always, we're constantly trying to manage different avenues of ways to control the cost, decrease the cost, and make sure that we're building towards that more stable financial future. So we will now open it up for any questions.

Excuse me. Premium changes to active employees, what are we talking about?

The total net impact?

Well, to the employee, $12 per paycheck.

That's doable.

Yes, sir. We tried to keep it as minimal to the employee as possible We fare very well compared to entities in the area Don't want to give specifics, but we did analyze ourselves against comparable entities here in the valley our benefit offering is probably from the employees perspective the best and And in terms of cost and claims management very very strong Certainly not trending worse than any of them and better than most of them So that's a different number because we have employees and then we have employees plus family

So putting for is dollars is for? Per an employee, per project.

So we have a.

Okay, so how many per, how many employees?

On the active population, we're running 19, no, 19, 20. Yeah, we were at 18 something, whatever.

But we're at 19, right? Yeah.

Okay.

with everything the only thing i'm not sure uh three years and that's what you recommend however we have the ability mayor built into the contract um if a better opportunity presents itself to terminate this contract and select something else yeah definitely but also the two-year extension at the discretion of the city manager i'd like to bring it back and i'm sure if everybody feels okay but just to put it at the discretion of the city?

A few more years? I would not be comfortable extending this contract without the city commission's blessing, so for sure, whether that was a requirement or not, it would come back to this body.

The $1,900 getting it right, $24 per month, right?

What'd you say, Tony?

How much? The $1,924 per month is $45,000 a month. that is being generated from the addition.

So let me recapitulate. It's $12 per paycheck more for employees, but the city's contribution is $155?

Well, they should be $550,000.

Let me just real quick go to our... Because I want to make sure that the breakdown is not inclusive of our retiree population. And I do have those numbers here. So for 2020, our active population is actually in the 1800s. It's the retirees that throw us up to 1874 now, as of the end of last fiscal year. And those are the numbers that we used for this year. We had dropped from 1978 just a while back to 1874. total across all the active retiree and COBRA. 18 what? 1874.

Well, the good thing is once we turn into a blue zone, we'll drop it.

I didn't quite understand the recommendations for three years, but are you asking for two? No, no, three is fine, except... You want to come back for the city commission and these boards to approve, okay.

Yeah, and I think trustee the Commissioner and the mayor also made it clear that they wanted to make sure that if a better opportunity presents itself and as Jolie mentioned We are still looking to make modifications to this plan both of entity and United give us the option to Renegotiate with them or terminate the contract early.

Is there an industry standard? I mean in these contracts two versus three years and Have you seen anything like that?

The city has tended to receive better terms if it was a longer contract. Okay. So that's why historically we've always done it. And the market check was just available for us to ensure we were constantly ensuring the best plan.

The one thing that I've always seen constant is these health care costs just keep going up and up and up. I mean, you know, we didn't have such until we had supply line issues of, you know, construction costs going up and we've seen, but health care is always, it's always been hockey to go. So, you know, I think we can count on three years The increase of the premium of the 155 is coming from the general fund to fund the city's participation

It comes from the general fund and the enterprise funds where the employees rest. So it's divided across depending on where the employees sit.

That's an enterprise fund.

Okay. Correct.

All right.

Any other questions? There is a significant portion of these costs do hit the general fund.

Right. Anyone else? Thank you so much. Thank you for the information.

May the remainder of the items be discussed?

Good job.

And we're back from executive session. They're bringing over the business. This workshop is adjourned.

This concludes the workshop of the McAllen City Commission. Workshops are held on the second and fourth Monday of each month at 4 p.m. in the City Commission Chamber, located on the third floor of McAllen City Hall. The public is always welcome to attend or view online. Thank you for staying informed and engaged with the City of McAllen.