Escalating health insurance costs turned into a budget nightmare this academic year for Pioneer Valley Regional School District Superintendent Patricia Kinsella. Between July and October, her district got hit with two double-digit increases, totaling nearly 40 percent.
The double whammy forced the district to lay off a librarian and eliminate three vacant positions. Paychecks for teachers and other employees who earn below statewide averages also shrank as they shouldered their portion of the premium increases.
“These were heartbreaking cuts to make,” Kinsella said. “None of us felt good about it.”
Across Massachusetts, school districts and municipalities are grappling with hefty health insurance increases, typically between 10 and 20 percent, and sometimes even more. The higher costs are pushing up annual health insurance spending by hundreds of thousands of dollars or millions of dollars.
Most communities got hit with the steep increases over the past year or so, following gradual growth in costs through the years. The larger numbers are expected to persist into the next fiscal year and possibly beyond.
The higher costs, coming as municipalities and districts are experiencing growing expenditures for utilities, special education, pensions, and other items, are creating additional pressure on tight budgets, and in many cases, are contributing to reductions in services and higher property tax rates.
Rising health insurance costs were among the factors that propelled Melrose and Stoneham officials to seek voter approval this fall to raise property taxes, with voters greenlighting an additional $13.5 million in Melrose and $9.3 million in Stoneham.
Malden city officials also cited health insurance costs, which increased 17 percent this year, as one of the reasons they are pursuing the city’s first-ever property tax hike at the ballot box in March. Voters will choose between two options, $5.4 million or $8.2 million.
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Health insurance prices are rising for local governments, private businesses, and nonprofits for the same reasons: soaring costs for doctor visits, hospital stays, and prescriptions, as well as an aging population and those with chronic conditions accessing health care more frequently.
Costs could climb even higher, union and public health advocates warn, as President Trump slashes Medicaid and the enhanced federal premium tax credits under the Affordable Care Act expire. That can leave hospitals with more unpaid bills, which may prompt them to recover the losses by raising prices for all patients.
Boston Public Schools is anticipating that health insurance costs could reach $175 million during the next school year, putting it almost in line with student transportation spending, which currently consumes more than 10 percent of the district’s $1.58 billion operating budget.
The recent cost increases have been larger than BPS expected, resulting in an $18 million shortfall this year and an $11 million deficit last year. BPS tapped other revenue sources to balance last year’s budget, according to a recent School Committee presentation.
The dilemma is creating new tension in conversations about adding positions or preserving existing positions. David Bloom, the district’s chief financial officer, told the School Committee last month that BPS likely spends nearly $16,000 per full-time employee on health insurance.
Adam Chapdelaine, executive director of the Massachusetts Municipal Association, said there’s no sugar coating the rate increases. His group runs the Massachusetts Interlocal Insurance Association, which provides health insurance for more than 100 municipalities and other government units. The group’s premium increases for this fiscal year ranged between 12 percent and 18 percent.
His group closed the previous year with a loss because its premium increases didn’t keep pace with rising health insurance costs.
“No matter which way we turn, our members are making clear this is a major budget pressure,” he said.
In some cases around the state, insurance increases have reached a crisis level.
State lawmakers last spring approved $240 million in additional funding to cover higher than anticipated claims for the Group Insurance Commission, which provides health insurance coverage with the state’s backing to dozens of municipalities and other government entities. That amount was twice as much as the group’s last supplemental request in 2016.
And the Hampshire County Group Insurance Trust, which purchases insurance for dozens of municipalities and school districts, including Pioneer Valley, nearly went bankrupt midway through 2025. That’s because rising health care and prescription costs drained most of its reserves.
To prevent the trust from potentially closing, the group imposed a mid-year double-digit rate increase in October, which followed an earlier double-digit increase in July. Previously, the trust had a reputation for keeping rate increases low.
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The move left communities scrambling to find additional money, while employees felt the pinch in their paychecks. In Southampton, the increases pretty much wiped away pay raises that teachers and other educators secured under a new union contract, said Lauren Ames, co-president of the Southampton Teachers Association.
“Everyone was sort of looking at their paycheck and trying to do the math and thinking what’s gone wrong here,” she said. “Sadly, it was all correct math.”
The premiums for the family plan ultimately shot up by about $200 for each pay period, Ames said, prompting some members to take on second jobs.
For many communities and school districts, the double-digit premium increases, combined with other rising costs, are adding to the difficulties of balancing budgets under the constraints of Proposition 2½. The law forbids communities from increasing total property tax revenue each year by more than 2.5 percent unless voters approve more.
“Health care right now is sort of the poster child for the challenges that cities and towns are facing under Prop 2½,” said Steve Bartha, town manager for Lexington.
Lexington’s health insurance premiums increased by about 11 percent this fiscal year, said Bartha. Next year’s increase might reach 15 percent, which would require spending about $5 million more on health insurance.
Many municipalities, school districts, and organizations providing health insurance are taking steps to rein in costs.
The Group Insurance Commission is exploring possible changes to health insurance plans, such as increasing copays and deductibles. The commission is hoping to keep next year’s average premium increases around 11 percent. A final decision is expected this winter.
Several municipalities and school districts are changing their health insurance plans or considering a switch. A popular choice is the Group Insurance Commission because local leaders believe the commission’s plans are more affordable.
Malden will join the commission, which should save about $3 million. Several districts and municipalities in Western Massachusetts currently served by the Hampshire trust, such as Pioneer Valley, also intend to defect to the commission.
Warren Smith, an art teacher at Hampshire Regional High School in Westhampton, said he’s worried he will experience higher out-of-pocket costs and less coverage as his school district prepares to join the commission. He prefers staying with the Hampshire Trust in hopes that they resolve their financial issues.
He credits the trust’s Blue Cross Blue Shield coverage for saving his life after he got diagnosed with colon cancer five years ago, which included a nearly monthlong hospital stay.
“The plan allowed me to go to the best hospital for care that I could,” he said, noting the plan’s reasonable out-of-pocket expenses prevented his family from being financially devastated. “Is the School Committee kind of jumping the gun on this?”