Healthcare costs and rate failures drain regional insurer, forcing municipal cuts

Rising healthcare costs are forcing western Massachusetts municipalities to choose between raising taxes or cutting jobs and services, with the Hampshire County Group Insurance Trust at the center of a widening financial crisis affecting 73 cities, towns, and school districts across five counties.

The trust, which covers more than 12,000 municipal employees, has seen its cash reserves plummet from $22.8 million at the end of 2024 to around $5 million in March, according to trust records. The organization has raised premiums three times in recent months: 20% last July, another 20% in October, and 12.5% again in February. The financial squeeze has prompted multiple communities to hold tax override votes and at least 12 municipalities to withdraw from the trust to find new insurers.

In Easthampton, voters narrowly approved a tax override by 239 votes on Tuesday to avoid service cuts. But other communities across the region have voted down similar measures, prompting what the Massachusetts Municipal Association has described as the largest round of municipal layoffs since the Great Recession. South Hadley, Hadley, New Salem, and other towns in the Connecticut River Valley have also faced pressure to hold override votes.

The trust's executive committee points to the rising cost of GLP-1 drugs, a class of medications originally developed for Type 2 diabetes that doctors increasingly prescribe for weight loss, as a major driver of expenses. "GLP-1s for weight loss have been a significant contributor to the financial challenges faced by the Trust over the past two fiscal years," the committee stated in writing. However, the committee also acknowledged that overall healthcare cost increases, higher medical service utilization, and elevated claims activity across multiple coverage areas have contributed to the crisis.

State Rep. Lindsay Sabadosa, D-Northampton, described inadequate financial planning by the trust's trustees as the root cause, compounded by rising healthcare costs, inflation, and an aging population. "We are seeing the repercussions of year after year, after year, of not increasing rates where they needed to be," Sabadosa said. "You had people with loyalty to their towns deciding not to increase premiums, making decisions based on what was best for their communities, but not what was best for the long-term sustainability of the trust."

Sabadosa said the broader healthcare system requires systemic change. "Our healthcare system is broken and careening towards a moment where we are going to have to make some changes if we want to actually provide healthcare to everyone," she said.

The trust is a remnant of the Hampshire Regional Council of Governments, which dissolved in 2019 due to financial and governance problems. Last year, the Legislature passed an amendment introduced by State Rep. Aaron Saunders, D-Belchertown, allowing members to withdraw from the trust and repay outstanding bills over five years, which has accelerated the exodus.