Healthcare costs continue to rise, making it a challenge for public school districts to maintain quality employee benefits while remaining fiscally responsible. Learn more about the latest trends in health insurance and practical strategies for navigating this evolving landscape.
The Current Landscape
Medical and pharmacy trends are outpacing inflation, with median medical trend increases at around 8% for both Preferred Provider Organizations (PPOs) and high-deductible health plans (HDHPs). Outpatient prescription drug costs rose 11.4%, and specialty drug costs rose by 13.3%. These figures highlight a troubling imbalance. While wages rose by 4.5% and inflation was 3.2%, family insurance premiums grew by 7% in the same period.
One of the starkest statistics presented is that 41% of every health care dollar goes toward emergency room, inpatient, and outpatient services, while prescription drugs consume 24%. Specialty medications, including GLP-1s used for diabetes and weight loss, are now the fastest-growing portion of pharmacy spend. Soon, they are expected to comprise more than half of all pharmacy costs.
Amid these pressures, districts are increasingly turning to self-funding and level-funded plans to regain control over healthcare expenses. In fact, 63% of workers are now covered under self-funded plans. Of those at large firms, 79% are now covered under self-funded plans. The appeal of these plans lies in budget predictability, enhanced customization, and long-term savings. Employers can see an average 17% reduction in costs in the first year of transitioning from a fully insured plan to a self-funded plan.
Cost Control Strategy: Where should you start?
Districts are also exploring enrollment optimization strategies. Exploratory reviews are critical because they allow employers to benchmark their benefit offerings against others in the state. By analyzing plan design, costs, demographic utilization, and rate structures, districts can make informed decisions about funding strategies, consortium participation, and plan adjustments. Some districts offer incentives to employees who opt out of coverage or join a spouse’s plan, potentially lowering overall plan costs while giving staff more personal choice.
Risk mitigation is also critical. Many employees, especially those approaching Medicare eligibility or managing chronic conditions, require education to fully understand their benefits and choose the most cost-effective coverage. Without guidance, they may default to expensive employer-sponsored plans when better-suited alternatives exist. It is best to use incentives and targeted education to help employees explore and enroll in options aligned with their needs.
Disruption in the Pharmacy Industry
The pharmacy sector is in flux. As the use of life-changing treatments like gene therapies expands, districts must weigh whether to cover these high-cost therapies or carve them out of coverage, potentially reinsuring them outside of traditional stop-loss plans.
Market disruptors like Mark Cuban’s Cost-Plus Drugs and GoodRx are aiming to simplify and lower drug costs, while consolidation among pharmacy benefit managers (PBMs) continues to shift power dynamics. Meanwhile, federal regulations, including a recent executive order signed on May 12, 2025, are targeting pricing reforms, aiming to tie U.S. drug costs to the lowest prices available globally.
While the long-term impact of such legislation remains uncertain, the message is clear: the pharmacy landscape is volatile, and employers must stay agile.
Key Takeaways for districts:
- Use Data to Drive Decisions
Evaluate plan design and cost using tools like benchmarking and exploratory reviews to identify opportunities for savings and improvement.
- Implement Risk Mitigation Strategies
Educate employees about their coverage options, promote health literacy, and use incentives to guide them toward smarter, more cost-effective choices.
- Think Strategically and Innovatively
Consider self-funding, alternative vendor arrangements, and modern benefits that align with employee needs and fiscal responsibility.
Health insurance isn't just a budget line item; it’s a critical part of employee well-being and organizational stability. As costs continue to rise, districts that take a proactive, informed approach will be best positioned to offer strong, sustainable benefits.
OASBO Members can view the Health Insurance Trends webinar from which this article was drawn, on the On-Demand section of the OASBO Learn Site.