Lowell Budget 2027: Rising Health Insurance Costs Impact City Finances

In Lowell, the proposed fiscal 2027 budget outlines a 4.6% increase in the property tax levy. This hike is partially driven by rising health insurance costs, particularly due to costly weight-loss drugs covered under the Group Insurance Commission (GIC) plan for municipal employees. Assistant City Manager for Fiscal Affairs, Conor Baldwin, informed the City Council Finance Subcommittee that insurance expenses are projected to rise by $2.6 million from the previous year’s budgeted figures.

The GIC remains one of the few large insurers covering glucagon-like peptide (GLP-1) drugs, commonly used for weight management, without necessitating a medical necessity waiver. Although initially intended for diabetes management, these medications, including brands like Ozempic and Wegovy, have gained popularity for weight loss.

The city's move to the GIC model in 2010 aimed to curb health care costs. However, current spending patterns have prompted council members to question the plan's effectiveness in municipal cost-saving. Interestingly, Chelmsford, a neighboring town, has managed to reduce insurance costs by eliminating GLP-1 drug coverage for weight loss in non-diabetic patients, resulting in a 5% reduction in health care premiums, according to Town Manager Paul Cohen.

The state health plan's decision to discontinue GLP-1 drug coverage for weight management reflects ongoing efforts to manage health care expenditures while ensuring member access. However, Lowell's existing GIC contract remains unchanged until 2027, limiting renegotiation options.

Beyond health insurance, Lowell's budget faces pressures from climbing municipal pension costs, debt service, state assessments, and energy expenses. Baldwin has identified a projected $7.7 million funding gap in the fiscal 2027 general fund before the introduction of new programs. The property tax levy continues as the city’s primary revenue source, significantly covering debt service for school and capital projects.

Lowell has maintained a reserve by not fully levying the 2.5% allowable rate under Massachusetts’ Proposition 2½, providing a cushion against potential state and federal aid cuts. Nonetheless, Baldwin warned of ongoing funding uncertainties as the state budget evolves. Meanwhile, public participation in budget listening sessions remains robust, with the fiscal 2027 budget scheduled for City Council consideration and a public hearing, targeting finalization by the end of June to align with the new fiscal year.