As part of the ongoing effort to combat rising healthcare premiums and develop a long-term sustainable benefits strategy, the City issued a Request for Proposals (RFP) for medical insurance for plan year 2026. Three proposals were received from Cigna (current carrier), Blue Cross Blue Shield, and United Healthcare. Prior to releasing the RFP, staff conducted a benchmark benefit analysis (specifically looking at plan design offerings) of Cibolo, Seguin, New Braunfels and San Marcos. Schertz continues to far surpass our peer cities relative to the level of benefit offered by our medical plans. In consultation with our benefits broker, staff has been exploring ways to maintain competitive benefit offerings while managing rising healthcare costs, especially in a tight budget environment. One such strategy is re-evaluating our plan designs and introducing incremental changes that will maximize premium savings. In this vein, proposals reflected some plan design changes, namely to maximum out-of-pocket (OOP) amounts and out-of-network benefit coverage. 

Proposed Plan Design Changes:

1. Increase Max OOP by $1,000 on all medical plans
2. Reduce Out of Network benefits after deductible from 60% to 50% coinsurance
3. Introduce 10% coinsurance on High Deductible Health Plan (HDHP). Plan pays 90% after deductible instead of 100% (until OOP max is reached)

With their initial proposal, United Healthcare was the least competitive of all the carriers, and they were not included in Best and Final Offers (BAFO). Below is a summary of Cigna and BCBS BAFOs.

Cigna BAFO: +6.5% increase across all plans. No rate cap offered for 2027.
BCBS BAFO: +1.96% increase on HDHP only. Rate pass on PPO plans. 15% rate cap offered for 2027.

Staff has concluded that BCBS is offering the best value medical plans to the City, and recommends contracting with BCBS for plan year 2026.

Enter into an agreement with Blue Cross Blue Shield of Texas for medical insurance coverage for plan year 2026.

Through this RFP process, the City was able to effectively negotiate competitive medical benefits with minimal fiscal impact. This demonstrates staff's commitment to exercising fiscal stewardship and ensuring that we are providing the best value to our current employees, retirees, and ultimately, the taxpayers. Additionally, offering competitive and affordable benefits is an integral part of the City's total compensation strategy to more effectively recruit and retain top talent. 

Approve Resolution 25-R-118

With the switch to BCBS, there will be a 1.96% increase in premiums on the HDHP, which is approximately $16,500 (fund breakdown below). There will be no fiscal impact to the PPO plans.

General Fund = $12,705
Water = $1,155
EMS = $2,310
Drainage = $165

Approve Resolution 25-R-118