AMHERST — Amherst is facing a much larger than anticipated increase in health insurance costs for fiscal year 2026, with a projected jump of almost 20%, at the top range allowed for the town’s insurer, the Massachusetts Interlocal Insurance Association.

Town Manager Paul Bockelman told the Finance Committee on Tuesday that town officials have learned the costs for health insurance for town, school and library employees are going up by 19.92%, well above the 13% increase town staff estimated last fall.

“That’s a significant number,” Bockelman said. “This is not good news for the town, nor the school department or the library.”

What it shows, he said, is that employees are using health insurance at a higher rate than what the insurer had projected, based on what the town is paying the company. Because the insurer is losing money on their contract with the town, he explained, MIIA is increasing rates, the only tool it has to improve its loss ratio under the current contract.

Bockelman said he is turning to the town’s Employee Insurance Advisory Committee for a discussion on how to proceed. That committee, required by state law, is made up of representatives from all collective bargaining units for the town and schools, along with nonunion staff and employees.

“This is a shared problem between employees and the organizations, i.e., school, library and town,” Bockelman said.

Amherst pays for 80% of HMO plans and 75% of PPO plans, Bockelman said.

For Amherst, the tools to get the increase closer to a 13% increase are varied. One might be to go out to bid for a different company, but that likely wouldn’t make a difference because, as Bockelman puts it, “the claims are the claims” and would be priced accordingly by another insurer. The more likely options to pursue are to have a “less rich” plan, which will be the focus of conversation with employees, meaning possibly increased deductibles and co-pays and other adjustments to the plan benefits to lower costs.

“We will have that conversation with our labor groups … and that will probably continue over several weeks as we try to sort out what that impact is and what the various changes that will be put on the table,” Bockelman said.

Bockelman said the first tactic is to work with the insurer and the town’s unions.

“The goal is to reduce the percentage lower than 19%, because it can’t get worse, and do the best we can in addressing this gigantic impact on our budgets,” Bockelman said.

The environment is not favorable for insurance, he said, with wage increases for medical professionals and the widespread use of expensive weight loss drugs among the factors.

Bockelman said he will also look at the rates from the Group Insurance Commission, which serves the University of Massachusetts, to get a comparison.

Whatever is settled on, the new insurance rates would go into effect in July.

Finance Director Melissa Zawadzki said the hit to budgets will be difficult to manage. “It is certainly more than we hoped,” Zawadzki said

Finance Committee members agreed with that analysis. “The percentage is awful,” said member and At Large Councilor Mandi Jo Hanneke, adding that she needs to know what the raw numbers are in actual dollars.

At a Budget Coordinating Group meeting Wednesday, bringing together representatives from the schools, libraries and the town, that concern was raised in a similar way.

Schools Superintendent E. Xiomara Herman said the increase in insurance costs could mean up to $2 million deficits for both the regional and elementary schools.  “It is going to cripple us if we don’t do something differently,” Herman said.

Library Director Sharon Sharry said the library, which has lost three full-time positions in recent years, will continue to fall farther behind in keeping up with patrons’ demands.

And Bockelman said the increase in insurance will eat up all the money that would otherwise go to pay for cost-of-living adjustments for employees.

Meanwhile, the so-called “cherry sheet” projections, revenue sources from the state, won’t fix the problems, Zawadzki said. What Amherst is seeing is a fairly small, 0.8% increase, up $117,951, from $13.9 million to $14.02 million.

But the town is already aware of other cost increases that absorb this entirely, such as the assessment for the Pioneer Valley Transit Authority going up by $111,481, from $1.35 million to $1.46 million, and a $276,692 increase in school choice and charter school sending tuition, up from $2.07 million to $2.35 million.

Resident Finance Committee member Bernie Kubiak said the hope is that revenue estimates will improve. “This is a start,” Kubiak said. “Not great news, but this is a start.”

Zawadzki also presented the first-quarter budget update, showing spending from July 1 through Sept. 30 is on track, including for municipal salaries. While some departments have spent above the quarterly rate, she said this is not unusual, as most of the expenses for running two swimming pools and Cherry Hill Golf Course, for instance, are incurred during the spring and summer.

“Things are where we expect them to be,” Zawadzki said.

Scott Merzbach can be reached at smerzbach@gazettenet.com.