Legislation moving through the State House would give municipalities financial relief if they decide to leave the beleaguered Hampshire County Group Insurance Trust (HCGIT) for a different health insurance provider for their employees.
The House of Representatives on Oct. 15 voted overwhelmingly to add language to bill H.4601 that would allow members of the HCGIT that switch to a different insurance provider to pay the cost of the increases in equal payments over a five-year period — from fiscal year 2027 to 2032.
The language was sponsored by state Rep. Aaron Saunders, D-Belchertown, to provide a “safety net” for communities hit by the increase. The bill now moves to the Senate for consideration.
“The language that we adopted in the House provides a safety net for the communities and residents who had this plan to effectively allow, as a part of another tool in the toolbox, to amortize these unanticipated costs that have already occurred,” Saunders said.
Communities that are part of the HCGIT have been scrambling to figure out how to pay for unexpected midyear increases to health insurance costs. The trust raised its rates by a total of about 40% for its 73 members this year — an increase last spring ahead of the start of this fiscal year and another 20% hike that took effect Oct. 1. Most recently, the HCGIT announced a 19% increase for Medicare patients, effective Jan. 1.
It’s the second 20% increase that members didn’t see coming, leaving many with significant financial gaps in this year’s budget. To cover the costs, some are dipping into reserves, making midyear cuts to their budgets or considering floating a Proposition 2½ tax-cap overrides.
Other communities, such as Orange, Conway and the Frontier Regional School Committee, are exploring whether to leave the trust ahead of next fiscal year.
The bill sponsored by Saunders states that a community has to inform the Department of Revenue (DOR) if it switches before June 30, 2027. Then, the DOR will evaluate the community’s deficit and oversee the pay-off process.
This is only one step to help HCGIT members. Since the increases came to light, Saunders said western Massachusetts state legislators have been “all hands on deck” trying to evaluate how the trust reached this point.
In September, Rep. Lindsay Sabadosa, D-Northampton, informed communities that the trust holds less than 2% of its annual operating budget in reserves — an unsustainably low margin. Additionally, the trust missed its revised financial forecast by nearly $2 million, just two months after implementing a midyear 20% premium increase.
Two providers of interest include the state’s Group Insurance Commission (GIC) and the Massachusetts Interlocal Insurance Association (MIIA).
Saunders said one of the reasons HCGIT’s finances got out of hand is because it does not have state oversight. In contrast, the GIC has state provisions that create a check on its finances.
The HCGIT’s Insurance Director Joseph Shea said the increases come from multiple factors, but since the COVID-19 pandemic, insurance claims have been through the roof.
“We knew claim rates would spike back up during COVID and we anticipated that,” Shea said. “What nobody saw or anticipated was the trajectory to keep going upward. We expected a one- or two-year spike and then it would level off, but there’s no letup.”
This year has been no exception. Along with rising claims, Shea said changes at the federal level have been making it more difficult to manage health insurance costs for everyone.
“From what I understand, from my contacts, it’s going to be a very, very rough rate increase season come February and January,” Shea said. “Municipal health insurance is getting hit hard this year.”
Several weeks ago, Shea announced he will retire effective Nov. 15 after turning 65 and serving the trust for more than 13 years. The trust’s executive committee will be meeting in the coming weeks to decide future options for leadership, and Shea said he will offer assistance in any way he can.
Shea said the trust has been working to cut costs.
With the Oct. 1 increase, weight-loss drugs such as GLP-1 will no longer be covered for general weight loss, only for those with Type 2 diabetes. Shea previously said that in January 2024, the trust paid out $1.6 million in pharmaceutical claims, many because of weight-loss drugs that have “basically wrecked the finances of the trust.” By comparison, the trust only paid for $350,000 in weight-loss drugs in all of 2023.
He anticipates this change will cause claims to go down $600,000 a month moving forward. With this and changes in premiums, Shea said the trust will have to give it a couple months to see how finances are affected before setting new claims come January and February.
If a member was to leave the trust, Shea said it is unclear how it will affect rates for all communities. Depending on a member’s claims compared to others, “a unit leaving could be a good thing or a bad thing.”
For those considering leaving the trust, there are several challenges. First, the timeline to switch is getting tight. Municipalities considering a transition to the GIC must provide notice by Dec. 1, to begin coverage by July 1 next year. Secondly, members switching need to hold union negotiations and agree on a switch together.