NORTHAMPTON — A rising number of claims and climbing drug costs is prompting the Hampshire County Group Insurance Trust to consider implementing a 20% increase in rates for its 73 members, many of which are located in Hampshire and Franklin counties, to go into effect on Oct. 1.
The Insurance Advisory Committee meets virtually Wednesday at 10 a.m. to vote on the increase recommended by HCGIT’s Executive Committee July 23.
“Trust claims have increased significantly on the pharmacy and medical side, and the premiums coming in are not matching this,” said Trust Executive Director Joe Shea, adding that it’s the “perfect storm.”
The trust has been using cash reserves to plug the gap, Shea said, though this is not a sustainable approach.
According to the trust’s Insurance Advisory Committee meeting agenda for May 28, the trust has lost $14 million since January 2024. Minutes from the July 16 Insurance Advisory Committee show that members were warned that $4.6 million in reserves could be wiped out by September as claims continue get worse.
In fact, in May and June there were significant claims, Shea said. “A complete surprise, unfortunately,” he said.
The unknown factor continues to be claims and the costs of pharmaceuticals up 80% over the past 18 months, and the trust has been hit hard by the popularity of weight loss drugs and GLP-1’s.
Blow for strapped towns
For members, though, the rate adjustment will have significant consequences for budgets that have already been adopted.
In South Hadley, the mid-year increase in rates would cost the town $1.2 million, according to Town Administrator Lisa Wong. The town, she said, is already anticipating grant losses and cuts to state aid, but the unexpected hike in health insurance could push South Hadley further toward a fiscal cliff.
“We need more global discussion and solutions as we are not the only ones facing rising health care costs,” Wong wrote in an email. “The impact to the town budget is devastating. We also understand that eliminating drug coverage and changing plans is also problematic if it creates a disincentive for prevention and doesn’t hold those accountable that are hugely profiting off of a system that is not in the best interest of patients.”
Wong reached out to Sen. Jake Oliveira, D-Ludlow, and Rep. Homar Gomez, D-Easthampton, over the “alarming rate” of climbing health insurance costs.
The town had already budgeted an 18% increase in PPO and 20% increase in HMO plans for fiscal year 2026. Now, if the local health insurance trust raises the rates another 20% less than a month into the new fiscal year, and then implement estimated increases next fiscal year of between 8% and 15% as predicted, Wong said that increases will have doubled in four years.
Hadley, too, is wrestling with what could be an almost $300,000 impact from the double-digit, mid-year increase, as it already prepares for a Proposition 2½ tax-cap override to fund town and school operations.
Human Resources Director Lauren Wilcox told the Select Board and Finance Committee at a recent meeting the increase in rates started off at 10% before doubling. Wilcox said there are already double-digit increases as of July 1 for PPO and HMO plans, while Medex, the plan for retirees, would go up by 20% as of Jan. 1, 2026.
“They say this is due to high dollar claims coming through, that are over $100,000,” Wilcox said. “So this is obviously going to be a huge hit, it’s three-quarters of the year, so it’s projected at about $268,000 at the 20%.”
At the July 16 Insurance Advisory Committee meeting, members were told that there were 65 people with claims over $100,000, when usually there are about half that amount.
The trust, Wilcox said, is also looking at alternatives such as a low deductible and high deductible plan and possibly new plans entirely, though that would lead to the need for collective bargaining agreements.
Westhampton’s cost for employee health insurance has grown over 30% the past three fiscal years, from $395,000 in fiscal 2023 to $630,465 in the current fiscal year. With the new, mid-year increases proposed, the town must find a way to stretch the budget to cover other important town operations such as emergency services, schools and the Department of Public Works. Health insurance represents about 8% of the town’s operating budget with the proposed increase expected to grow to 12%.
Possible solutions
Solutions outside the premium increases are being suggested.
In correspondence to the legislators, Wong proposes three actions from state government that could level the playing field. She asks the state Legislature to investigate HCGIT’s financial and underwriting practices, including premium adjustment calculations, claims data, pooling and plan designs.
Lawmakers could also support legislation that allows municipalities to modify health insurance plans designed outside collective bargaining, which Wong said could “address the ‘double standard’ which has caused municipal costs to rise nearly 150% in 10 years compared to 25% for other services.”
Finally, she requests that the state regulate insurance growth for public employees as Gov. Maura Healey aims to limit private insurance company’s deductibles and copays.
Westhampton officials outlined their worries in a letter to state officials, too.
“These increases are straining our capacity to pay for essential services, and could potentially jeopardize our ability to meet even baseline needs,” read a letter from the Select Board to state legislators.
Like Wong’s communication, the letter calls for the legislators to investigate HCGIT’s financial practices, support legislative action that boosts local municipality ability to modify insurance plans and advocate for state-level regulation of public-employee insurance growth.
Staff writers Emilee Klein and Sam Ferland contributed to this report. Scott Merzbach can be reached at smerzbach@gazettenet.com.
