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 carrier 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 tool box, to amortize these unanticipated costs that have already occurred,” Saunders said.
Communities that are part of the HCGIT have been scrambling for months 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 — a 20% midyear increase last spring 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 and has left 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, like Southampton, Westhampton and Frontier Regional School Committee, are exploring whether to stay or leave the trust.
The bill sponsored by Saunders states that a community has to inform the Department of Revenue (DOR) if they switch 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 subscribers. Since the increases came to light, Saunders said western Massachusetts state legislators have been “all hands on deck” trying 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 the HCGIT finances got out of hand is because they do not have state oversight. In contrast, the GIC has state provisions that create a check on their finances.
Insurance Director of the HCGIT, Joe 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 let up.”
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 told the Gazette, 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.
Southampton on move?
Southampton — the only trust member to vote against the Oct. 1 increase — is one of the first communities taking steps to move out of the trust. While nothing is certain, the town has been weighing a move to the GIC.
The town was able to address the total cost from the increased rates, amounting to approximately $550,000 — $325,000 from town employee costs and $229,000 to pay its portion for Hampshire Regional High School employees. A special Town Meeting will need to take place to approve the funds needed to pay the increases.
Southampton Town Administrator Scott Szczebak said the town’s future with the trust is uncertain.
“We’re going to be moving forward with the negotiations so probably by the end of mid-November, hopefully we’ll have an agreement in place moving into the GIC,” he said at a Oct. 14 Select Board meeting.
The board on Oct. 8 adopted Massachusetts General Law Chapter 32B, allowing them to commence union negotiations. Negotiations will include the Select Board, Southampton’s Public Employee Committee which includes a representative from each union — such as police and fire — and a representative for retired employees. A majority vote is required from the union representatives after seeing any savings, benefits and impact on subscribers if they switch. The representative’s votes are weighed according to how many union members they represent.
Szczebak could not reveal differences between the HCGIT and GIC plans, to maintain confidentiality during negotiations. But he did say, “There would be significant savings to the town and employees.”
If after 30 days, the parties cannot come to a written agreement, the vote will be given to a state review panel to decide if the switch is best for the town.
Westhampton is another community part of the trust that has been considering a move away from the HCGIT. On the agenda for the Select Board’s Oct. 20 meeting it said union negotiations would be discussed for a switch to the GIC.
Westhampton did not immediately respond to comment.
In contrast, the Frontier Regional School Committee held a meeting last week, where a business administrator said turning to the GIC would come at a higher cost than the HCGIT.