Title
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, 2025.
Body
DATE: June 3, 2025
TO: Kent Cagle, 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 MELIFE 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 1,008 employees select the City’s medical insurance plans. In addition, we have 1,140 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 total projected cost for medical/Rx in FY2026 is $8,677,205, which includes both the employer and employee portions. For comparison, the FY2025 budgeted amount was $7,186,542, while the projected actual for FY2025 is $7,929,345.
The employer share of the FY2026 cost is estimated at $7,325,872.
The City’s current dental carrier, MetLife, offers employees two dental plans. Approximately 1,140 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 FY25 dental is $794,457. The City negotiated a two (2) year rate guarantee with MetLife for FY25 and FY26. The annual expense for FY26 is $794,457.
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|
Total |
CoK Cost |
|
Medical/RX |
|
|
|
FY25 estimated cost: |
$7,929,345 |
$6,406,268 |
|
FY26 estimated cost: |
$8,677,205 |
$7,325,872 |
|
|
|
|
|
Dental |
|
|
|
FY25 cost: |
$794,457 |
$397,229 |
|
FY26 cost: |
$794,457 |
$397,229 |
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 FY26 cost of $8,677,205.
It is also recommended the City renew its negotiated contract with MetLife for its dental plans for an annual expense of $794,457.
CONFORMITY TO CITY POLICY:
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FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
The proposed medical/Rx insurance plans reflect an increase in total estimated costs for FY2026, based on an average of 1,008 full-time employees per month eligible to participate in the medical insurance program. The total estimated employer cost is $7,325,872, with a total plan cost (including employee contributions) of $8,677,205.
The dental insurance plans proposed reflect no increase to cost and are based on an average of 1,140 full-time employee per month who are eligible to participate in dental insurance for a total cost of $794,457 in FY26.
Costs for medical/RX and dental insurance are included in the City's FY26 Proposed Budget, which will be delivered to the City Council in July 2025.
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 FY26 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 FY26 Proposed Budget.
RECOMMENDATION:
Staff recommends the City renew its contract with Blue Cross and Blue Shield of Texas (BCBSTX) for its medical/RX plans for an estimated FY26 cost of $8,677,205. It is also recommended the City renew its negotiated contract with MetLife for its dental plans for an annual expense of $794,457.
DEPARTMENTAL CLEARANCES:
Purchasing
Finance
Legal
City Manager
ATTACHED SUPPORTING DOCUMENTS:
FY 24-25 Services Agreement