Attleboro could be facing $5 million deficit due to rising health insurance costs

ATTLEBORO — Increasing health insurance costs could leave the city facing a $5 million deficit in its fiscal year 2027 budget, and city officials have raised concern over potential layoffs as a result.

The rising costs are not unique to Attleboro, as they have increased dramatically at the the state and federal levels as well as for many local municipalities.

Mansfield is facing a $5 million shortfall in its FY26 budget due at least in part to rising health insurance costs, and North Attleboro is looking at dipping into its free cash fund to cover a $2 million shortfall.

Sue Shillue, managing director of Hilb Group, the city's principal health insurance consultant, said the numbers are unprecedented.

"Right now, we work with about 60 cities and towns. Close to half of them are self-insured, such as the city of Attleboro," Shillue told the city council at its Nov. 2 meeting. "In 38 years I don't remember ever seeing such high increases and the scary part is that we don't necessarily expect the trend of these cost increases to stop."

"Historically, health insurance premiums have been similar to inflation and other areas of the budget," around a 2% to 4 % increase each year, city Budget and Administration Director Mason Lord said.

"But the last few years since COVID have really ballooned," he said.

In FY26, active employee plans will go up by 15%, Lord said.

The city also contributes to health insurance for retired employees and some active employees over the age of 65 through its MEDEX plan, which supplements Medicare, he said.

Those costs, he said, are going up even more, with a 21% increase over FY25 effective Jan. 1.

"So knowing that, and based on the trends, we have to start assuming that the active plans are going to be in that same range," he said of the FY27 budget.

Additionally, every 1% increase in health insurance is a little over a quarter-million dollars, Lord said.

"The health insurance budget in FY26 was just over $25 million. With a 21% increase, it would grow to around $30 million.

The MEDEX plans are based on a calendar year while the active employee plans follow the fiscal year, which starts July 1 and runs through June 30.

"When we budget, we always budget an estimated increase mid-year," Lord said of the MEDEX plans. "We assumed about a 7 1/2% increase in the mid-year, which, it came in about three times that," he said, adding the estimated 7 1/2% jump was already much higher than historic norms.

For FY27, he said the city is projecting a budget of $205 million, but revenue of only $200 million.

"That's where that ($5 million) deficit that we're talking about is coming from," he said. "It's almost entirely health insurance."

He clarified that the state budget, which provides around 40% of the city's revenue, would determine what the exact deficit might look like, and $5 million is only an estimate based on current projections.

"It could be worse, is the reality. Hopefully it's better," he said.

Potential for layoffs

Lord said that while laying off employees would be the last resort, it isn't completely off the table.

"It's the last place we want to go. But if it's this significant, our job is to make really difficult decisions," he said.

Lord said in the FY26 budget, several new positions that the city was looking to add went unfilled for lack of funding. He said its unlikely any new positions would be funded in the FY27 budget either, given the projected deficit and the fact that leaving new positions unfilled would be the administration's first choice over layoffs.

This comes at a time when the city just added new positions including a chief of staff, an assistant planning and development director, and an assistant budget and administration director, to its classification plan.

Benefit changes

Other steps, Lord said, will likely be making changes to the health insurance plans, though what those changes would look like at this point are not clear. He said the administration will work with unions and employees to create some benefit changes that are cost effective and still provide adequate coverage.

Lord said taxpayers can expect nothing to change for them, due to proposition 2 1/2 which limits the tax levy growth.

"That's why you get that 3% to 4% tax increase per year," he said.

He said lots of other towns, including Norton this past year, asked for overrides of Proposition 2 1/2 to cover rising costs.

"We're not trying to go to the taxpayer to ask for that," Lord said. "We have a responsibility to try to live within our means."

Currently, the city insures around 2,200 active or former employees.

Around 1,050 are on the MEDEX plan for retired staff or some who are over 65, he said.

Around 1,150 are active employee plans, about 700 family ones and 450 individual plans. The city pays 75% of the plans.

As an example, for FY26, the city's family plan costs $34,000 per family and the city is responsible for $25,000.

Increased costs for prescription drugs is one reason why insurance costs have increased, Shillue said.

One example she gave are GLP1 drugs, which are increasingly being used for weight loss.

"The number of people that are use utilizing those drugs for weight loss and the cost of those drugs has tripled or quadrupled and that trend will continue," she said.

Another reason, according to Shillue, is hospitals and providers are negotiating higher rates for services because they are also incurring higher costs for technology and staffing among other things.

"They're getting very low reimbursement rates from Medicare and Medicaid. So, they have to try and make it up on the commercial insurance plans," she said.

Also, during COVID, many patients put off necessary surgeries or treatments for illnesses but are now getting them, Shillue said.

Council Vice President Laura Dolan pointed out another factor.

"Corporate greed," she said.

"There will be a breaking point ... It's going to be with money. It's going to be with people that just can't afford it, it's going to be with longevity of employees, quality of employees that we can hire because we may not have as good a benefits," she said.