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...yo call on our meeting to order and turn it over to Jay Chapa.' Good afternoon.

This meeting is another step as we move toward um.

Through the summer, to get to uh a recommended budget in August.

And uh, one of the the only items we're going to talk about today is uh one of the major issues that we're uh experiencing some issues with here.

Um, as we go forward around the uh group health fund.

Kristen is gonna come up and provide a presentation and we will uh have she also has her her hub consultants with her that will assist as we go through.

But basically what we're dealing with is the structural issue on how we were funding our health uh program the last couple of years and part of it's tied to a big part of it is tied to prescriptions and prescription drugs overall.

I'll let her go through the presentation to go to.

But one of the things I've asked staff after we got reports, she'll touch on this, is to ensure that we are not out of market when it comes to what our employees pay for their portion of the overall health plans.

So you'll as you'll see as we go through it, we're trying to keep that level for employees so that we don't have an impact with employees because we don't want to get out of market with other cities and and entities in Fort Worth overall.

So Kristen, if you go forward.

Good afternoon, Mayor and Council.

Um as the city manager shared, I'll be walking you through just really historically what has gotten us to this point with the health fund and the extensive amount of work that has occurred over the last several months to uh come up with both a strategic plan that will better align us, but also you know, kind of bring to the forefront some of the opportunities for both this fiscal year and the upcoming fiscal year.

Right, so just background information, our group health fund or group health and life insurance fund as it's officially called, is responsible for all of the claims expenses and administration and just overall costs for our employee uh and a portion of our retiree uh health insurance.

The revenues come from employees, you know, in a traditional model through uh benefit premiums as well as contributions from the uh city and entrance on interest on investments.

So it includes our health benefits, any wellness programs, condition management, uh, employee health utilization and overall plan administration.

So partners like Blue Cross Blue Shield.

Um I refer to this as my pillars slide, and um the pillars are important because when you think about kind of the big rocks or the big cost drivers for a program like this for a self-insured model, which the city is, that means that you know, as employees are utilizing their benefits, they're going out, they're going to the doctor, they're getting medical procedures, um, we are incurring um all of those costs.

The city is is uh managing that risk.

Um, so there are kind of three main buckets that drive the expenses and costs of that fund.

Uh, one is the administration, so again, TPA or third-party administration fees from a blue cross blue shield who's our current partner, uh, and then claims make up the bulk of impact to this fund.

So any type of medical activity for our employees, um, our covered members and their dependents, uh, any pharmacy claims, which we are gonna spend a lot of time talking about this afternoon, uh, and then any of our condition management uh programs and for example anything that would be diabetes related or uh other condition MSK related, which is a big uh cost driver as well.

And then best practice and also city policy is that we have a reserve component.

Um so you know, we do our very very best to project claims activity based on historical usage.

We're also looking at uh diagnoses, uh, how long someone is expected to uh continue for certain types of treatments, um, but it does require kind of a an ongoing refinement.

Where did we think we were going to land, where are we currently landing, regardless, having contingency or reserve funding uh is important because of the um amount of fluctuation that can happen uh in a fund like this.

And so we have shared, I've shared actually a couple of times.

Um we were uh in uh the audit and finance committee.

Um we shared um in December kind of where this fund was projected to be.

We went through a very extensive strategic analysis and strategic plan development with our now broker Hub International.

And these numbers have been shared repeatedly with where this fund is expected to land.

And these numbers, although they look you know definitely scary, and that's why we're having these conversations, but these numbers are reflective of if nothing else changes.

And so, you know, there are some cost reduction efforts, there are other decisions from a fiduciary perspective that can be made to help to offset some of the increases that we've seen, and I'll share what those look like.

But you know, just from what we're seeing and where we're expected to land, you know, anywhere from a 30 million on up to a you know very significant number, but hopefully the things that we're talking about today will prevent moving further in that direction.

Um, as I also shared over the last few months, the reserve current reserve allocation in this fund is basically diminished.

So it has been reduced over several years.

Over the last five years, the reserve balance for this fund has reduced more than 80%.

So, you know, all of these numbers that you're seeing are, you know, if things remain static and there are no plan or program design changes to help prevent this.

All right, similar to my pillars slide of just you know, kind of what makes up the cost for a fund like this, this is an internal service fund, and so you know, departments are contributing to costs, including any fluctuations.

So is our you know, utilization you know, trends upward.

Uh, if our projections are off as you know, claims experience as we start to study claims experience, then you know, there is a possibility that departments have to contribute additional amounts, and that has occurred.

Uh so in FY25, there was additional contributions that were required from departments, and that's expected to continue for FY26 based on where we are where we're projecting right now.

All of this, well, let me not say all of it, the majority of it is related to claims expense, but there are some kind of best practices that we need to also implement to help with this.

All right, so again in 2025, and this was late 2025, around December, the city started a strategic review and a strategic plan development, so that we you know had very specific guidance of where we could make the most impact, but also you know, not just focusing on the cost of managing the fund, but what are we doing from a plan and program design perspective and what does that look like over multiple years?

So the key findings from that strategic plan number one was that the city has been underfunding the health fund contributions, meaning that in looking at what it costs you know per member per participant based on claims activity, we were not contributing enough or did not have a model that was uh contributing enough to the fund.

And so, you know, when that happens, if you have a reserve, that reserve is going to be you know reduced at a much faster rate if it was not funded fully, if the expenses were not funded fully initially.

Also, we have uh a very fast-growing category of pharmacy, and so you know, everybody is familiar with GLP ones.

If you you know turn on any TV channel, you've seen weight loss medications, and while they have uh specific uses and were initially introduced from a you know diabetic perspective for the most part, they are a huge cost driver on our plan.

And so I'm gonna spend a lot of time talking about that.

Um the study also found that we you know we're not fully accounting for our overhead and administrative expenses.

So just like we have Blue Cross Blue Shield is our third party administrator, I have members of my team, our HR benefits team, um, we have several direct contract partnerships for other programs, and those costs related to kind of the internal administration of our programs are not being captured.