201 S. Anaheim Blvd.
Suite #501
Anaheim, CA 92805
Tel: (714) 765-5111
Fax: (714) 765-5215
www.anaheim.net
CITY COUNCIL AGENDA REPORT
City of Anaheim
HUMAN RESOURCES DEPARTMENT
DATE: AUGUST 26, 2025
FROM: HUMAN RESOURCES DEPARTMENT
SUBJECT: 2026 HEALTH AND WELFARE PLAN CARRIERS AND RATES ATTACHMENT (Y/N): YES ITEM # 06
GOVERNMENT CODE § 84308 APPLIES: NO
RECOMMENDATION:
That the City Council, by Motion, approve the 2026 Health and Welfare Plan Rates as listed in Attachment “A” and authorize the Human Resources Director, or designee, to enter into and execute all required and necessary agreements and take all necessary actions to implement and administer the approved health and welfare plans and agreements.
DISCUSSION:
The City provides a comprehensive health and welfare program covering medical, dental, vision, wellness, life insurance, and disability coverage for eligible active employees, as well as medical, dental, vision and life insurance for eligible retired City employees. Each year, the City reviews these benefits to ensure the best plan options, related rates, and to manage overall employee/employer costs while maintaining employee satisfaction. This annual review is conducted by Human Resources in concert with Mercer, the City’s insurance broker, and the Anaheim Health Council, an advisory body comprised of city employees representing each collective bargaining unit.
The City offers two insurance carrier options for medical and vision coverage to eligible active employees: Kaiser and Blue Shield. For calendar year 2025, the city experienced a
9.9% increase with Kaiser. To address rising healthcare costs that are expected continue, the City negotiated a two-year guaranteed renewal rate with Kaiser for 2026 and 2027 at
4.53% and not to exceed 4%, respectively. This two-year renewal strategy is intentionally designed to protect the City from large rate fluctuations due to potentially higher than anticipated claims and overall utilization. This increase also incorporates an improved vision plan design that is now comparable to that offered by Blue Shield, which includes greater benefits and lower out-of-pocket cost for employees.
Blue Shield offers City employees a choice of two HMO and two PPO plans. The City successfully negotiated with Blue Shield for a 6.5% average renewal increase across all plans for the 2026 plan year, which is lower than the expected rate based on claims experience, medical/prescription trends, and significant high-cost claimants, which are the drivers of plan increases. City renewal increases are comparable with those experienced 2026 Health and Welfare Plan Carriers and Rates
August 26, 2025
by other employers throughout California as a result of upward rate trends and inflation in the healthcare industry.
Effective January 1, 2026, Senate Bill 729 requires fully insured plans to offer infertility coverage. The City’s Kaiser and Blue Shield plans are in compliance. This legislative mandate contributed to a slight increase in cost.
The Medicare Advantage plans offered by Blue Shield, Kaiser, Humana, and UnitedHealthcare will have an average increase of 6.0% across all retiree plans. This increase is below the 8.3% increase the City experienced in 2025.
The City’s dental insurance carrier, Delta Dental, offers two dental plans: DHMO and DPPO. The City’s rates for dental have remained unchanged for the past five years; however, due to industry trends, the DHMO rates will increase by 2.0%, and only the DPPO administrative fee will increase by 2.9%. Despite these slight increases, the DPPO rates will remain unchanged for 2026 due to favorable claims experience, even with the inclusion of negotiated plan enhancements for employees.
The remaining health and welfare plans including group life and disability insurance through the Hartford, Flexible Spending Account (FSA), Health Savings Account (HSA), and Consolidated Omnibus Budget Reconciliation Act (COBRA) programs through IGOE, and the City’s Employee Assistance Program (REACH) remain unchanged with no rate increase.
IMPACT ON BUDGET:
Employee Health and Welfare Programs are budgeted in the Employee Benefits Fund and sufficient funds have been allocated in the Fiscal Year 25/26 budget; there is no general fund impact.
Respectfully submitted,
Linda N. Andal
Human Resources Director
Attachments:
1. 2026 Health & Welfare Plan Carriers and Rates