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Consider a memorandum/resolution renewing Group Employee Medical and Pharmaceutical Benefits with Blue Cross and Blue Shield of Texas and employee dental insurance with MetLife, effective October 1, 2026.
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DATE: June 16, 2026
TO: Kent Cagle, Interim City Manager
FROM: Kate McDaniel, Executive Director of Human Resources
SUBJECT: Agreement with Blue Cross and Blue Shield of Texas for Group Medical and Rx Benefits and MetLife for Dental Insurance
BACKGROUND AND FINDINGS:
The City of Killeen offers medical/Rx and dental insurance as part of its employee benefits package. Currently, approximately 1,049 employees select the City’s medical insurance plans. In addition, we have 1,322 employees who elect the City ‘s dental insurance plans.
All benefits provided to the City of Killeen employees are reviewed annually to ensure that both the City and employees are receiving the best product for the best price. The City currently pays 100% of the medical premiums for the employee only on the lowest plan option. Employees may purchase additional medical coverage for eligible family members or dependents at their added expense. The City’s current medical carrier is Blue Cross and Blue Shield of Texas (BCBSTX), and the City offers two medical plans: An Exclusive Provider Organization (EPO) Plan, traditionally known as a Copay plan, and a High Deductible Health Plan (HDHP), with a health savings component. Due to anticipated increases based on claims performance, as well as input from the employee population regard benefit issues, the City, requested renewal quotes from BCBSTX in order to determine its vulnerability in the market, and to determine if renewing with BCBSTX would be more advantageous than going out for bid for the second year in a row in a rapidly changing environment.
In partnership with the City’s employee benefits consultant, Lockton Dunning, a benchmark study was completed to determine how changes in the plan design and contributions would impact costs for both the City and its employees. The annual projected expense for FY26 medical/Rx is projected at $7,296,275. Due to an increase in high-cost claims, the estimated FY27 cost for medical/Rx $8,493,662; a 16.4% increase over FY26. This increase will be primarily absorbed by the City. The City will still offer a no cost option for employees, with all other plans and tiers increasing by only $5 per month for participating employees.
The City’s current dental carrier, MetLife, offers employees two dental plans. Approximately 1,322 employees elect the City’s dental insurance plan, and the City currently pays 100% of the dental premium for employee-only coverage on the lowest plan option. Employees may purchase additional dental care coverage for eligible family members or dependents at their added expense.
The annual expense for FY26 dental is $794,457. The City negotiated a two (2) year rate guarantee with MetLife for FY27 and FY28. The annual expense for FY27 is $842,111; a 6% increase over FY26. This increase will be split between the City and participating employees.
Medical/RX
FY26 estimated cost: $7,296,275
FY27 estimated cost: $8,493,662
Dental
FY26 cost: $794,457
FY27 cost: $842,111
THE ALTERNATIVES CONSIDERED:
N/A
Which alternative is recommended? Why?
It is recommended the City renew its contract with Blue Cross and Blue Shield of Texas (BCBSTX) for its medical/RX plans for an estimated FY27 cost of $8,493,662.
It is also recommended the City renew its negotiated contract with MetLife for its dental plans for two (2) years at a fixed rate of $842,111 annually for FY27 and FY28.
CONFORMITY TO CITY POLICY:
Yes.
FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
The medical/RX insurance plans proposed reflect a total estimated cost increase of 16.4% based on an average of 1,049 full-time employees per month who are eligible to participate in medical insurance for a total estimated cost of $8,493,662 in FY27.
The dental insurance plans proposed reflect no increase to cost and are based on an average of 1,322 full-time employees per month who are eligible to participate in dental insurance for a total cost of $842,111 in FY27.
Costs for medical/RX and dental insurance are included in the City's FY27 Proposed Budget, which will be delivered to the City Council in July 2026.
Is this a one-time or recurring revenue/expenditure?
This is an annually recurring expenditure.
Is this revenue/expenditure budgeted?
Yes, funds will be included within each department/division’s personnel service accounts in the FY27 Proposed Budget, upon approval by City Council.
If not, where will the money come from?
N/A
Is there a sufficient amount in the budgeted line-item for this revenue/expenditure?
Yes, upon approval of the FY27 Proposed Budget.
RECOMMENDATION:
Staff recommend the City renew its contract with Blue Cross and Blue Shield of Texas (BCBSTX) for its medical/RX plans for an estimated FY27 cost of $8,493,662. It is also recommended that the City renew a negotiated contract with MetLife for its dental plans for an annual expense of $842,111.00
DEPARTMENTAL CLEARANCES:
Purchasing
Finance
Legal
City Manager
ATTACHED SUPPORTING DOCUMENTS:
Presentation