Executive Summary
The Ways & Means Committee held a hearing on Docket #0201 to initiate the FY27 operating budget process, with a primary focus on a projected $80 million increase in city healthcare costs. Chief Financial Officer Ashley Groffenberger and labor advisors detailed a 'perfect trifecta' of cost drivers: nationwide healthcare inflation, several high-cost medical claims, and a significant surge in the utilization of GLP-1 medications for weight loss. The administration proposed a 22.6% rate increase for FY27 and discussed potential cost-mitigation strategies, including the implementation of utilization management and the possible discontinuation of coverage for weight-loss medications. Councilors raised concerns regarding the impact of these costs on departmental services, health equity for city employees, and the necessity of maintaining fiscal discipline amidst slowing revenue growth.
Meeting Information
- Date: February 26, 2026
- Governing Body: Boston City Council, Ways & Means Committee
- Meeting Type: Committee Hearing
- Docket Number: #0201 (Order for a hearing to discuss Boston's FY27 operating budget)
- Chair: Councilor Benjamin Weber
- Vice Chair: Councilor John Fitzgerald
- Attendees:
- Councilor Benjamin Weber
- Councilor John Fitzgerald
- Councilor Enrique Pepén
- Councilor Edward Flynn
- Councilor Erin Murphy
- Councilor Miniard Culpepper
- Councilor Liz Breadon
- Councilor Sharon Durkan
- Councilor Ruthzee Louijeune
- Councilor Brian Worrell
- Administration Panel:
- Ashley Groffenberger, Chief Financial Officer
- Alex Lawrence, Chief People Officer
- Lou Mandarini, Senior Advisor for Labor Policy
FY27 Operating Budget Overview and Healthcare Cost Drivers
The hearing served as the formal kickoff for the FY27 budget season. The administration highlighted a critical fiscal challenge: a projected $80 million increase in healthcare costs for the upcoming fiscal year.
Key Healthcare Financial Data:
- Projected Rate Increase: 22.6% for non-Medicare plans.
- Employee Impact: For the most popular plan (Blue Cross Blue Shield standard HMO family), premiums would increase by approximately $148 per month (nearly $1,800 annually).
- Historical Context: The average year-over-year increase for the last eight years was $10.6 million; the FY27 jump to $80 million represents the steepest increase since at least 2001.
Primary Drivers of the Deficit:
- Nationwide Inflation: General increases in healthcare and pharmaceutical costs.
- High-Cost Claims: A series of exceptionally high medical claims, including two claims totaling $7 million.
- GLP-1 Utilization: A dramatic increase in the use of GLP-1 medications (e.g., Ozempic, Wegovy) for weight loss. Approximately 3,000 city employees currently use these medications for weight management.
Proposed Healthcare Interventions and Plan Design
The City of Boston is self-insured, meaning it assumes all financial risk for medical claims. The administration presented two primary interventions to mitigate the $80 million budget impact, both of which require negotiation with the Public Employee Committee (PEC):
- Utilization Management (UM): Implementing clinical appropriateness reviews for non-specialty drugs.
- Estimated Savings: $9.2 million.
- Note: Boston is currently the only Blue Cross Blue Shield account without UM for non-specialty drugs.
- Discontinuing GLP-1 Coverage for Weight Loss: Removing coverage for weight-loss-specific GLP-1 medications while maintaining coverage for diabetes.
- Estimated Savings: $17.7 million (inclusive of UM savings).
Labor Policy Context:
- The city is currently in the middle of a seven-year agreement with the PEC.
- Lou Mandarini noted that 'spending more money on a health insurance plan doesn't make it a better plan,' emphasizing the need for common-sense cost controls.
Councilor Discussion on Health Equity and Service Impacts
Councilors debated the balance between fiscal responsibility and employee benefits:
- Health Equity: Councilor Durkan strongly advocated for maintaining GLP-1 coverage, noting that obesity and diabetes disproportionately affect Black and Latinx Bostonians. She stated, 'GLP-1 medications are not vanity medications... they are helping people manage obesity and reverse diabetes progression.'
- Departmental Cuts: Councilor Murphy and Councilor Flynn expressed concern over how the $80 million healthcare gap would affect other services. The administration confirmed that departments were asked to propose budgets 2% lower than the prior fiscal year to help close the gap.
- BPS Shortfall: It was noted that Boston Public Schools (BPS) is facing a $53 million shortfall in FY26, largely driven by healthcare and salary costs, which may lead to significant staff reductions.
Revenue Projections and Long-Term Liabilities
CFO Ashley Groffenberger provided a preliminary outlook on city revenue and liabilities:
- Revenue Growth: Projected at 1.5% to 2.5% for FY27.
- Property Tax: Remains the primary revenue driver (70% of total revenue), but growth is offset by flat or declining miscellaneous revenue sources (e.g., permits).
- Pensions: The city remains on track to fully fund its pension liability by 2028.
- OPEB Liability: The city has an unfunded Other Post-Employment Benefit (OPEB) liability exceeding $2 billion.
- Free Cash: The city is awaiting certification of current free cash levels, but the CFO advised against using one-time reserves to subsidize recurring healthcare costs.