In the face of rising costs and increased use, Belmont’s fiscal year 2027 budget will see a 16% increase in retiree Medicare supplemental group health insurance costs.
That’s compared to a 6% increase last year, according to Select Board Chair Matt Taylor.
“The big picture and the reasons for the increase affect employee plans as well,” he said in an email to The Voice. “It is a leading indicator of what is to come. We haven’t reviewed or set rates for other plans yet. The increase affects both the town’s portion and individual’s portion.”
According to consultant Sue Shillue, managing director of Hilb Group, rising utilization and increased demand for care, particularly on an outpatient basis, paired with increased pharmacy costs, are among the factors contributing to the increase.
“Since COVID, in particular, members are often starting treatment for illness at more advanced stages, which leads to more intensive and expensive care,” she said.
According to the Massachusetts Municipal Association (MMA), municipal employers are advised to be prepared budget-wise, as health care costs are projected to rise through at least 2032.
Shillue told Select Board members last week that the trend factor, which is used to project the percentage increase in the cost to treat patients from one year to the next, is 8.5%. That’s double last year’s, she said.
Another factor, according to Shillue, is that the out-of-pocket maximum in the prescription portion of the enhanced Medicare supplements was reduced by the federal government last year from $8,000 annually to $2,000. This year, it’s increasing to $2,100 for the 2026 calendar year.
“When it was set at an $8,000 cap, you most likely did not have a significant number of people hitting that cap,” she said. “It’s just there as protection for anyone who has catastrophic utilization and has a lot of high prescription claims costs.”
This results in the plan paying “significantly higher costs than in previous years.”
“Members are hitting that out-of-pocket max sooner and more people are hitting the max,” Shillue said.
Another reason for the higher costs is the increase in use of GLP1 medication (used for Type II diabetes and, more recently, for weight loss) has added “billions in unanticipated expenses to the system,” according to MMA.
For all those reasons, Shillue recommended a 15% to 16% increase in the supplemental Medicare plans for retirees.
“Any increase like this is a shock for a lot of people,” said Taylor. “I think also what’s not obvious is that we have been using the trust to essentially keep rates down for folks.”
Belmont’s Health Insurance Trust Fund is funded by both the town and individuals, according to Taylor. In recent years, the town has drawn down from the trust to offset health insurance rate increases.
“The rates affect the town, employees (both union and non-union), and retiree costs,” Taylor said. “Unions did not have to bargain for the lower rates and individual savings.”