Amarillo thinks it fixed the City health plan. Its own budget says otherwise.

Every number below comes from budget documents and check registers the City of Amarillo published on its own website. I have linked them at the bottom so you can check my work.

Last winter the City of Amarillo changed how it buys prescription drugs for its employees. It dropped the pharmacy vendor it had used for years, brought in Optum, and negotiated much better rebate guarantees.

Around here that is treated as the answer. The health plan problem got handled. Move on.

I do not think the numbers support that, and I think believing it is the reason nothing else about this plan is getting fixed.

Let me be upfront about who I am. I run a benefits consulting firm in Amarillo and build custom self-funded health plans for employers. I have conversed with the city about this plan for about ten years, and across two administrations. I do not have a contract with them. Take my opinion for whatever you think it is worth. But the numbers here are not my numbers. They are the city’s, printed in the city’s own budget, and they say the same thing no matter who reads them out loud.

What the city did – first, the check register

The check registers date it precisely. October, November and December of 2025 show payments to Maxor Pharmacy for prescription drugs and nobody else. The first payment to RxBenefits clears on January 30, 2026. Maxor payments run one more month and taper to nothing, which is what runout looks like as the last of the old prescriptions get paid.

So the switch took effect January 1, 2026. Through the first half of that year the city paid RxBenefits $4,397,695.

Optum is the pharmacy benefit manager (PBM). RxBenefits sits in front of Optum. The new arrangement came with much better rebate guarantees.

That date matters for everything that follows. The city’s budget year runs October through September, so fiscal 2025-26 is three months of Maxor and nine months of Optum. The budget Council is about to vote on, fiscal 2026-27, is the first full year of the new arrangement with Optum.

Getting out of the old deal was overdue and somebody at the city deserves credit for finally doing it. This piece is not an argument that the city should have stayed put. They were right to move.

It is an argument about whether the change did what people think it did. Particularly, the people managing this health plan, and those who vote on it.

DID THE PBM CHANGE WORK?

Did pharmacy costs go down?

Yes. Somewhere between 6% and 15%.

The check registers show what the city paid its pharmacy vendors every month. Comparing February through June of 2025, under Maxor, against the same five months of 2026 under the new arrangement, payments fall from $4,691,945 to $4,010,009. That is 14.5%. Nice.

I will not pretend that is precise. Cash payments jump around. April 2026 is $2,400, because March carried it. Depending on how you count the first payment to RxBenefits, which cleared on January 30, the drop reads anywhere from 6% to 15%. Call it several hundred thousand dollars a year, possibly north of a million.

The city has never published a pharmacy-only figure. Its budget has one line for claims, account 71260, mixing prescription drugs in with hospitals and doctors. If the city has better numbers, and it should, it has not shown them to anybody.

But take the win at face value. Pharmacy costs came down. Credit where it belongs.

Where did that saving come from?

From a contract. Not from the plan changing.

Nothing about how much medicine city employees take changed on January 1. Nothing changed about which drugs they take, where they get their care, or what happens with the handful of people who drive most of the spending in any plan this size. What changed is the contract terms. Better discounts and better rebate guarantees, negotiated by a bigger buyer (RxBenefits).

That is worth having. But a contract term has an expiration date printed on it. Guarantees run a set number of years and frequently step down after the first one. When they reset, the saving resets with them, and the city is standing exactly where it started, having changed nothing about why the plan costs what it costs.

Which is the same question I keep coming back to. What happens in the year those guarantees change?

Nobody outside the city can answer that either, because the contract is sitting with the Attorney General after we requested it from the City. If we get the contract, we’ll review/analyze it and report back.

Was pharmacy big enough to matter?

Yes. Going by what the city actually paid its pharmacy vendors, drugs run somewhere around a third of everything this plan spends on claims.

That is exactly why the switch was worth making. A third of the spending is a serious piece of the problem, and fixing it should show up in what the plan costs.

But, did it show up?

No. In fact, plan costs are slated to increase 12.5% this year. Ouch!

Net cost was $24.26 million in 2023-24 and $24.13 million in 2024-25. Flat, even a little down. Those are Maxor years. The transition year came in at $24.76 million. The first full year of the new arrangement is budgeted at $27.9 million.

So put the two together. The city negotiated real savings on drugs, and the plan still costs 12.5% more per person than it did last year.

That is the whole story in one line. The pharmacy fix worked, and it was not close to enough to solving the overall issue with the City’s health plan.

One more thing, because it complicates the victory lap.

The big jump is FY2024-25. Rebates went up 84.6% that year, and that is a Maxor year. The first full year under Optum, the budget Council is about to vote on, adds 5.5%. The smallest rise in three years.

I am not saying the new guarantees are worthless. I am saying that on the city’s own projections, the dramatic rebate improvement happened before the switch to Optum. The City would have us believe that the move to Optum, via RxBenefits is what “solved” the issue – it’s not.

So what actually got “fixed”?

One thing. The pharmacy contract.

That was worth doing and it was overdue. But a pharmacy contract is one piece of a plan that costs $32.8 million a year, and every other piece of this was left exactly where it was.

The reserve policy is out of date. The city’s contribution has not been connected to what the plan costs in years. Money keeps getting moved out of the fund. The claims budget went unchanged for two years while actual claims ran past it. Nobody has published a plan for specialty drugs, for where care gets delivered, or for the handful of claimants who drive most of the spending in any plan this size.

None of that was touched by changing pharmacy vendors. None of it could be.

That is the real cost of believing the problem is solved. Not that the pharmacy move was wrong. That it became a reason to stop looking.

What “solved” is hiding….

Here is why any of this matters. When an organization believes it has handled a problem, it stops looking at it. And there is a lot here that nobody is looking at.

Start with the plan’s reserve policy. The budget has a footnote about how much money the health plan is supposed to keep on hand in reserve funding. It says the target is “three months average claims paid or $6 million.”

Those two numbers used to be the same. They are not anymore. The footnote never got the memo.

The plan is projected to end next year with $5,759,852 on hand/in surplus reserve. Against the $6 million number, that is $240,148 short. Close enough that nobody has to bring it up. Against the standard the city actually wrote down (3 months of actual claims), it is about $2.8 million short.

This will be the second year in a row the plan is budgeted to finish below its own target. Last year it came in $7,154 under.

Then there is the budget that did not move. For two years running, the city budgeted exactly $27,030,000 for medical claims. Not about that. Exactly that, twice. The city’s own budget book prints the variance between those two years as 0.00%. Actual claims came in at $27.9 million the first year and the city now estimates $29.4 million for the second. Over budget both times, and nobody changed the number in between. Either that is impressive discipline or nobody opened the file.

And $5.5 million was transferred out of the health fund into the General Fund across three budget years. Two and a half million, another two and a half million, and $500,000 in the current proposal. The fund was running deficits. It was under its reserve target. The money left anyway. I am sure there was a reason, and I would like to hear it.

Who is actually paying for this?

Now the part that concerns me most.

Over the last three years, medical claims went up $6,562,111. The plan is funded from four places: the city, employees, retirees, and money the plan collects back from its pharmacy contract. Every one of those went up too….but they did not go up evenly.

The city’s contribution grew less than 1% a year. Retiree contributions grew 23.5% a year. Drug rebates grew 34.7% a year and now cover about 15% of everything the plan spends on claims.

Those four sources together cover 77% of the increase in claims. Not all of it. The remaining $1.5 million came out of the fund’s reserve savings, which is a good part of why the savings/reserves are going down.

And none of this is because the plan covers more people. Enrollment went up only 0.5% in two years. Cost per person went up 17%. Same people, costing more. This is a structural issue, not a PBM contract only issue.

Take the rebates out entirely and look at what is underneath.

A Middleman for a Middleman

The city does not write its pharmacy checks to Optum. It writes them to RxBenefits.

Optum is a pharmacy benefit manager (PBM). It sits between the health plan and the pharmacies, and between the plan and the drug manufacturers. RxBenefits is what the industry calls a pharmacy benefits optimizer (PBO). It sits in front of Optum, partnered with Optum. A middleman for a middleman. Confused yet? Ya, this part is on purpose.

There is an argument for that structure, supposedly. A city with 1,892 employees has almost no leverage against a company the size of Optum. An outfit that bundles hundreds of employers together has more. That is the pitch, and plenty of employers Amarillo’s size buy it.

I am not going to tell you whether it is true here, because I have not read the agreement between the city and RxBenefits and neither has anyone else outside the building.

What I can say is that everybody in that chain gets paid. Optum makes money. RxBenefits makes money. Neither of them is doing this for the good of Amarillo taxpayers, and none of those fees sit in plain view in the budget. One also cannot argue that RxBenefits negotiated the better contract arrangement for the City, as the big leap in rebates came in the last year of the Maxor contract. So if the City negotiated better rebates for itself, better pricing for itself, why does the City need a PBO exactly? Why is our City paying a middleman for a middleman? Someone should answer this question.

I went through every check the city wrote in the first half of 2026 looking for them. The payments to RxBenefits, $4,397,695 across eleven checks, are sized like claims funding, not fees. Nothing in the budget breaks out what the PBO keeps or what the PBM keeps. In this business, those fees are usually taken out before anybody sees them, netted against the rebates or built into what the plan pays for prescriptions. That is normal industry practice. It is also the reason nobody outside the deal can tell whether the arrangement with RxBenefits, or Optum, is a good one.

Not whether the PBM/PBO structure is defensible. It may well be. I’m talking about what it costs, and who is paid by whom. Those are equally important questions, and CAA mandates I might add.

This is not a strategy

Let me say the quiet part out loud.

A city facing a health plan that costs more every year has three options. Lower what the plan actually spends. Put more money in it. Or squeeze more rebate dollars out of a drug manufacturer. The city has squeezed more than $2M in rebates out of Maxor and Optum in the past three years – but this isn’t a long term strategy at all.

Look at the numbers one more time. Of every new dollar this plan found over three years, fifty-seven cents came from rebates and twelve came from the city. Nobody has ever stood up and announced a strategy. But that is what the money says the strategy is. In addition, we were telling the City for the better part of a decade how they were not getting rebate value in their contract. It took almost ten years for them to finally remedy that.

Here is the trouble with it. A rebate is not cost control. It is a partial refund on a bill you already paid in full. The drug still cost what it cost. The plan still wrote the check. Some of it comes back later, from the same manufacturer that set the price to begin with.

And it is worse than just being useless, because chasing rebates works against the things that would actually bring the cost down.

Say the city runs a good clinical program and people get healthier. Fewer specialty prescriptions. Claims go down, which is the whole point of the exercise. And the rebate line goes down right along with it, because rebates come from the prescriptions you just stopped filling.

Or say the city buys smarter. A biosimilar instead of the brand. A cash pay channel that beats the plan’s own contracted price. Net cost per prescription falls. And the rebate on that drug goes to zero, because nobody pays a rebate on a generic.

In both cases the plan is better off and the budget looks worse.

A plan that leans on rebates for most of its new money is a plan that quietly needs its members to keep filling expensive prescriptions. Every year. Forever.

That is not a strategy. That is what you do instead of having one.

A strategy would name what is driving the 8%. It would say what the plan is doing about specialty drugs, about where care is delivered, about the handful of claimants who drive most of the spending in any plan this size. It would set a contribution rate connected to what the plan actually costs. It would treat rebates as what they are, a discount worth taking, not a revenue line worth building a budget on.

I have not seen any of that in a public document. If it exists, I would genuinely like to be shown it.

What I am Asking

Nothing here was hidden. It is in successive budget books, in the same accounts, for anyone who opened them. The question is not whether the numbers were available. It is who was reading them.

Before Council votes, somebody should answer these:

• The city changed pharmacy vendors on 1 January 2026. What has that saved, in dollars, and where does it show up in this budget? Net cost per covered person is budgeted up 12.5%.
• What is the plan’s cost per prescription, discount off list, and generic dispensing rate, before and after the change? If the city does not have those numbers, why not?
• Which reserve standard applies, the $6 million or the three months of claims? If it is three months, the plan is short by millions and the budget should say so. If the policy changed, when, and who decided?
• Why did the medical claims budget sit unchanged for two years while actual claims went over it both times?
• Why has the city’s contribution grown under 1% a year while the plan’s cost grew near 8? What was that rate based on, if not what the plan costs?
• Why was $5.5 million moved out of a fund that was below its reserve target?
• How long do the current rebate guarantees run, and do they step down after the first year? Are specialty drugs in the guarantee at the same rate, or carved out? Does the city have audit rights, and has it used them?
• What does RxBenefits get paid, what does Optum get paid, and where does either amount appear in the budget? If those fees are netted out of rebates or claims rather than billed, how would Council ever see them?
• What has the optimizer delivered that the city could not have gotten by contracting with a PBM directly, or through a public sector purchasing cooperative? Has anybody priced that comparison?
• Does anyone advising the city on this plan receive compensation, commission or override from Optum, RxBenefits, the stop-loss carrier, or any other vendor to the plan? That should be a matter of public record and it should be asked out loud.
• If the plan got healthier and drug spending fell, rebate revenue would fall too. Has anyone modeled that? Is there a plan for it, or does a clinical success show up on the books as a revenue problem?
• And what is the plan to slow the cost, as opposed to the plan to pay for it?

The Numbers, in one place

Every Medical-side line, so nothing is hidden. Claims are account 71260; for FY2024-25 that combines 71260, 71250 and 71100, which is how the city recorded claims that year. Reading 71260 alone for FY2024-25 shows a drop that did not happen. Funding is accounts 34850 (city), 34810 (employee), 34820 (retiree), 34830 (COBRA), and 34890 (drug rebates). The FY2024-25 employee figure looks low against every year around it and is probably a posting artifact from the same reclass:

Note what that table does not say. In the proposed budget, total medical funding of $34,254,135 is actually a little more than medical claims of $32,839,966. The plan’s overall deficit of $2,896,081 comes from administration, dental, life insurance and the transfer out, not from premiums failing to cover claims. I am not arguing the plan cannot pay its medical bills next year. I am arguing that the city stopped funding its share of the growth years ago, pushed it onto retirees and a pharmacy contract, and then told itself the problem was handled.

CHECK IT YOURSELF

Everything above comes from four sets of documents on the city’s website:

• FY2026-27 Proposed Annual Budget
• FY2025-26 Approved Annual Budget
• Monthly check registers, January through June of 2025 and 2026

What to look for. The health plan is Fund 6400, Employee Insurance Fund. Medical is cost center 64100, dental is 64200. The fund statement titled “Health Insurance Fund, Estimated Receipts, Expenditures & Available Cash” has the reserve footnote and the ending balance. Medical claims are account 71260. The city’s contribution is account 34850, City Paid Health Premium. Drug rebates are 34890. Transfers to the General Fund are 92005. In the check registers, search the payee column for Maxor Pharmacy and RxBenefits.

The two budget books agree with each other. The FY2025-26 claims budget of $27,030,000 and the fund total of $35,193,234 appear the same in both, with nothing restated.

I put this together from public documents. If I have something wrong, tell me and I will correct it here. If you work for the City and want to walk me through what I am missing, I will listen, and I will publish the correction. That offer is not rhetorical. I would rather be wrong about this than right.