BELCHERTOWN — Officials are moving ahead with a plan to cover an unforeseen $911,000 spike in health insurance rates this fall that involves borrowing money from the town’s stabilization fund and making cuts to operating budgets this fiscal year.
The 73 units of the Hampshire County Group Insurance Trust — the largest of which are Belchertown, Granby and South Hadley — voted in July to raise rates by about 20% due to a looming bankruptcy of the trust. Rises in pharmaceutical costs, high amounts of GLP-1 drug claims and over double the amount of $100,000 claims put a significant financial strain on the trust’s three months of reserves. If the rate raise had not been approved, the 12,000 individuals insurance under the trust were in danger of losing their health coverage.
At a meeting between the Select Board, School Committee and Finance Committee on Aug. 11, the boards brainstormed strategies to close the fiscal gap before rates increase on Oct. 1.
“I don’t feel we’re talking about all or nothing,” Town Accountant Jill Rossi said. “I think we’re talking about taking $900,000 out of stabilization or out of free cash. I don’t think that’s feasible. I think we all understand that there are some cuts that will need to happen.”
All parties unanimously agreed that the town would not raise taxes to cover the gap. However, using money in the stabilization fund would require a two-thirds majority vote at a Town Meeting. The boards will meet again on Sept. 8 to tweak and vote on the proposed plan.
The boards tentatively agreed to cover 60% of the expense with an internal loan from stabilization, or $546,000. Each year, about $182,000 would come off the top of free cash and go back into the stabilization fund.
“We have in the past borrowed from stabilization and held ourselves to the repayment plan utilizing next year’s free cash,” Finance Committee Chair Laurie Shea said.
The remaining 40% of the funds would come from operating “wages and expenses,” according to Town Manager Steve Williams. The three boards also considered forgoing this fiscal year’s Other Post-Employment Benefits contribution, which amounts to 5% of the 40%, if legally allowed.
“At the end of this year, we would almost be back to where we started” Williams said. “I think that’s a reasonable plan, I don’t think it puts us in terrible risk.”
Select Board Chair Lesa Pearson raised concern about removing any money from stabilization or existing free cash. She fears that the move could stray the town from building its reserves and hurt its bond rating.
“If anything should happen in this town, if we have catastrophic weather, fill the catastrophe du jour, then we will not have the funding necessary to address that,” Pearson said.
Williams said he has never seen an emergency that completely drained the stabilization fund. Shea adds that each time the town internally loans the money from stabilization, they honor their promise to put the money back in the account.
Government leaders said they stayed with HCGIT due to the “rich” coverage for much lower rates than other insurance companies. Even after an 18% increase in HMOs and 20% increase in PPOs in January 2025, the rates remained market-competitive.
“When I took a look at the rates back at the renewal, I really did go ‘wow, these are such great rates for such a rich plan design,’ which makes sense because they weren’t able to cover their costs,” Select Board member Nicole Miner said.
Will they stay?
Whether Belchertown stays with HCGIT depends on a new plan design and potential changes in the trust’s business practices. Williams adds that the trust is already discussing a new high deductible plan. Additionally, he said the decision of the Insurance Advisory Committee to maintain minimal reserves has also come under scrutiny.
“I think going forward we’re going to see a much improved plan,” Williams said. “I don’t think we’re going to continue to see exceedingly low rates with a very rich plan in the future. We will be market-competitive.”
After reviewing the Insurance Advisory Committee’s meeting minutes, Finance Committee member Brian Gibbons said the trust ignored recommendations to hire a bookkeeper and implement a new accounting program to track expenses. Miner also noted that the trust lacks aggregate stop-loss insurance to prevent a complete drain on reserves.
“It’s almost like treating our health insurance costs like reimbursable unemployment. The liability could be endless based on the usage,” Shea said.
If these methods do not significantly change and costs continue to rise, Belchertown would likely leave the trust, Williams said.