Rhinelander weighs self-funded insurance as health care costs climb

Rising health care costs and a possible future shift to self-funded insurance were the focus of an Aug. 10 presentation to the Rhinelander Common Council from Rebekah Johnstone of M3 Insurance, the city’s employee benefits consultant. Johnstone’s presentation walked members through a broader health insurance market update, the city’s recent claims experience, an analysis of self-funding as an alternative to the city’s current fully-insured plan, and a timeline for the 2027 renewal process.
Market pressures driving costs up
Johnstone told council members that consolidation among health care providers — she pointed to Aspirus’s purchase of seven hospitals and an ongoing pattern of clinic acquisitions — has left the region with less competition among providers unless people are willing to drive elsewhere for care.
She said rising provider costs compound the problem and cited national data showing 60% of Americans live with at least one chronic health condition and 42% of those have more than one — a trend she said is driving claims costs higher across the board.
City’s claims experience improving, but still high

Johnstone said the city’s loss ratio — the share of premium dollars paid out in claims — stood at 103.1% for the period through June 2026. While still above the break-even point of 100%, she called that an improvement: “That’s still high, but that’s great, because the city has been running closer to 140 [%] the previous years.” The two-year aggregate loss ratio sits at 121%, she said.
According to slides shown during the presentation, the city currently has 13 claimants with individual claims exceeding $20,000, with the most expensive claim being over $486,000. Six drugs — Skyrizi, Humira, Ozempic, Rexulti, Amjevita and Jardiance — account for over half of the city’s prescription drug costs, according to Johnstone’s slides.
Self-funding versus staying fully insured
A central portion of the presentation compared the city’s options for 2027: continuing with its current fully-insured plan, or shifting to a self-funded model in which the city would pay employee claims directly rather than a fixed premium to a carrier.
Johnstone said that under current numbers, self-funding would require a minimum 27% cost increase, or up to 32% in a worst-case scenario if claims run high — figures that translate to a projected $1,991,471 total plan-year cost at minimum, or as much as $2,068,512 under maximum exposure. That total combines a roughly $840,000 fixed cost (administrative fees, network access and stop-loss coverage) with M3’s projected $1.1 million-plus in claims.
By contrast, she said the city’s current carrier, Aspirus, has released a preliminary projection of a 15.8% increase for a standard fully-insured renewal, though she cautioned that number is not final and could move in either direction.
Johnstone was direct about the trade-offs between the two paths. With self-funding, she said, “in your good years, you keep the money — it’s staying in the cash reserves of the city. But when the years get bad, you want to make sure you’re continually growing that fund to pay for these claims.” She said the city would face weekly exposure to claims costs under self-funding, with stop-loss coverage reimbursing costs above $50,000 per individual claim, compared to the fixed, predictable monthly premium of the current fully-insured structure.
Council questions: risk, timeline and vulnerable employees
Council members pressed Johnstone on both the human and financial stakes of the decision.
Alderman Tom Barnett raised concerns about cost-driven pressure on employees to delay care, saying bluntly: “I’ve known several people who did that and died in their sleep because of it.” Barnett also asked whether any shift in the city’s insurance approach could make it harder for employees with special-needs children to access coverage. Johnstone said no. “None of this planning is to eliminate benefits, to take benefits away,” she said. “It is making sure every option is being reviewed, analyzed to make sure the city is in the best position. It would never be to take away benefits. If anything, it would be making sure enhancements could be offered.”
Council member Luke Kramer asked a series of follow-up questions about the timeline and the fixed-cost figures in the presentation, confirming that the $839,560 self-funding fixed-cost figure would cover a third-party administrator, network access, claims processing and stop-loss risk protection regardless of claims volume.
Mayor Kris Hanus pushed for a clearer apples-to-apples comparison between the 15.8% fully-insured projection and the self-funded model’s cost range, and raised the budgetary risk difference between the two approaches. “There’s a risk to the city based on, you know, if God forbid something happens to a higher ratio of employees, there’s additional costs,” he said, adding that council and the public need to understand “there’s a risk ratio there too, of a fixed number from a budgetary point of view versus a number that could go good or bad depending on how the year goes.”
Johnstone agreed. “When self-funding, obviously the budget is going to be there [as a variable],” she said, comparing it to the fixed nature of a fully-insured premium: “Today, you pay the premium, the next month you pay — it’s fixed.”
Timeline for 2027 renewal
Johnstone said the city’s fully-insured renewal figures should be finalized around Sept. 1, after which M3 will negotiate with the carrier’s underwriting department before bringing final numbers back to the city. She said self-funding figures would be updated in parallel by the stop-loss “captive manager.” Johnstone estimated she could present finalized renewal options to the city by the third week of September at the earliest, or by early October at the latest.
From there, the city would aim to review results in October, hold open enrollment in November, and have new coverage — and ID cards — in place for employees by Jan. 1, 2027, according to the presentation.
No formal council action was taken on the presentation; council members did not vote on any option as the discussion was informational.