Katy ISD board reviews plan to add Kelsey Seybold health option, boost district's insurance contribution by $4 million

KATY — Katy ISD trustees spent much of Monday night’s work study meeting vetting a proposed overhaul of the district’s employee health benefits for 2027, including the addition of a fourth health plan through Kelsey Seybold Clinic and new copay structures designed to shield employees from unpredictable out-of-pocket costs.

No formal vote was taken on the health plan proposal or any other agenda item during the Aug. 17 work study session, which board members used to question staff and vendors ahead of anticipated action at a future regular meeting. The board also heard a presentation on the district’s 2026 state accountability ratings, in which Katy ISD earned an overall score of 88, a “B,” and was told the district was the highest-rated among the 10 largest school districts in Texas.

Chief Financial Officer Brian Shust and benefits consultant Chris Harris of the Baldwin Group presented the proposed 2027 health plan changes, which would keep the district’s existing Memorial Hermann ACO and high-deductible plans while retiring the standalone “Choice” plan’s structure in favor of two new copay-based options: a revamped Memorial Hermann plan and a new Kelsey Seybold plan. Under the proposal, employees on either copay plan would pay $10 for a primary care visit and $50 for a specialist visit rather than paying the full cost toward their deductible, as under current plans.

Shust told the board the district is recommending increasing its employer contribution per employee from $385 to $427 a month, an increase he said would cost the district about $4 million. Combined with roughly $1.9 million in additional employee contributions, Shust said the district would still project a $12 million operational deficit in the self-funded health plan for the coming year, which he said would need to be covered through fund balance, consistent with how the district has managed health plan shortfalls in recent years.

Trustee Dawn Champagne asked why the primary care copay was dropping from a 20% coinsurance charge to a flat $10 fee; Harris said modeling showed adding copays would raise the Memorial Hermann plan’s overall cost by about 2%. Trustee James Cross asked about the district’s self-funded insurance model, and Harris said the district evaluated becoming fully insured but determined self-funding remained more cost-effective given the size of the district’s roughly 8,100 insured employees.

Representatives from Kelsey Seybold, including Chief Medical Officer Dr. Donnie Aga, Chief Operating Officer Kenneth Janis and sales director Jill South, told the board the clinic system operates about 1,100 employed providers across 45 locations, including sites in Katy, and said patients under its plan can see any Kelsey Seybold provider without a referral. They said the plan carries an “Aetna wrap network” of roughly 6,000 additional providers, including access to Memorial Hermann, Methodist, Texas Children’s, HCA and other hospital systems for specialty and emergency needs, with referrals required for services outside the core Kelsey network.

Board members pressed representatives on continuity of care, network limits, out-of-state coverage and potential conflicts of interest given Kelsey Seybold’s ownership by Optum, a subsidiary of UnitedHealth Group. Agha said Kelsey Seybold contracts with multiple insurers beyond UnitedHealthcare, including Cigna, Aetna and Blue Cross Blue Shield, and said the clinic’s only other Texas-based UnitedHealth Group affiliate, WellMed, serves a separate Medicare Advantage population.

Trustee Rebecca Fox and trustee Cicely Taylor raised concerns about affordability and whether increasing the district’s contribution serves all employees equitably, given that only about 8,100 of the district’s roughly 15,000 employees participate in district health coverage. Fox said she would prefer surplus funds go toward salary increases rather than health plan subsidies that not all employees use; Taylor countered that some employees may forgo coverage due to cost rather than choice. Shust acknowledged the tension, saying decisions on employee and employer contributions “have to fall into the equation” alongside compensation discussions.

Trustee Nathan Shipley, new to the board, said the shift to flat copays represented a “significant change” that would give employees cost certainty compared with the current deductible-based plans, which he said could expose families to thousands of dollars in unexpected costs, such as during emergency room visits.

Earlier in the meeting, Executive Director of School Improvement Natalie Martinez presented the district’s 2026 state accountability results, reporting scores of 87 in Student Achievement, 87 in School Progress and 89 in Closing the Gaps, contributing to the district’s overall 88 rating. Martinez said Katy ISD’s STAR performance levels ran 14 to 18 points above the state average across core content areas, and that the district’s graduation rate for the Class of 2025 was 96.5%, compared with 91.2% statewide. She said the district’s College, Career and Military Readiness (CCMR) rate stood at 82%, slightly below the state average, but described it as a “lagging indicator” reflecting outcomes from the 2025 graduating class. Board members, including Shipley, Rebecca Fox and others, praised the results while noting continued challenges, including some campuses that received “D” ratings.

The board also received a presentation on cost-containment strategies from Baldwin Group’s Harris, who said the district’s health plan is currently trending at 6.5% medical cost inflation, below a national average he put at about 9% for 2026-27.

Because the meeting was a work study session, formal board action on the health plan, the 2026-2027 budget items, and other discussion items listed on the agenda — including the June 2026 financial reports, the proposed 2025-2026 final amended budget, a fund balance commitment resolution, and the 2026-2027 official budget — is expected to occur at the board’s Aug. 24 regular meeting.

Also at this meeting:

• The board convened a closed session under Texas Government Code sections 551.071 and 551.129 before returning to open session; no closed-session actions were announced.
• Trustees discussed but did not vote on proposed Board Operating Procedures.
• Information items were presented on the acquisition of new library books, certification of anticipated 2026-2027 tax collection rates, 2027 appraisal district budgets, and donated items to the district, though none were discussed in detail on the record.
• No members of the public signed up to speak during the public comment portion of the meeting.
• The board’s next regular meeting is scheduled for Aug. 24, 2026.