Health insurance costs hit $341.3 million across LI towns, cities

Long Island’s towns and cities spent $341.3 million on employee and retiree health care premiums in 2024, nearly 12% more than in 2023, while state-set rate hikes quadrupled in recent years, a Newsday analysis found.

Premium costs for Long Island’s 13 towns and two cities have climbed since 2021, according to data from the state Department of Civil Service, which administers health insurance to town and city employees. The municipalities paid a total of $341.3 million in 2024, an 11.8% increase over the 2023 Islandwide total of $305.4 million. 

The increased spending comes as the state has hiked premiums between 2021 and 2024 by a larger amount each year. Rates for the New York State Health Insurance Plan rose by 2.2% in 2021, 7.4% in 2022, 8.6% in 2023 and 8.9% in 2024. 

The rate hikes are due to a number of factors including an uptick in the total number of claims filed, the actual cost of health care services — including procedures and medications — and inflation, experts in insurance and public officials told Newsday.

The rising expense has put a strain on town and city budgets, with officials saying they’ve had to pierce the state’s 2% tax cap and delay key infrastructure projects. Some municipalities are adopting measures to minimize the expense. In Long Beach, employees are eligible for cash bonuses if they decline the city’s coverage and enroll in a family’s plan.

Brookhaven Supervisor Dan Panico said he predicts the town’s health care costs to spike 10% in the 2026 budget, which might mean trimming costs elsewhere. Officials in East Hampton are also projecting a 10% hike in the town’s health insurance budget next year.

Local government “is going to collapse under its own weight” if major changes aren’t made to the way towns fund health care premiums and pensions, Panico said in an interview.

Growth in inflation, health care and pension costs have created “a simmering crisis for local governments to continue to deliver the core front line services they need to their residents,” Chris Koetzle, executive director of the New York Association of Towns, said in an interview.

Budget challenges

About 6,900 individuals in town and city government on Long Island are insured through NYSHIP’s Empire Plan, which is administered by the state Department of Civil Service.

Counting the employees’ dependents, 27,000 individuals are covered in Nassau and Suffolk counties, said Bryan Viggiani, an agency spokesman.

Rate changes to the NYSHIP plan are due in large part to spikes in the cost of administering health care, Viggiani said. The expense can balloon if there are more employees with beneficiaries enrolled on family plans.

The state kept the rate for premiums flat in 2025, following successive annual increases, in part by rebidding the contract that handles pharmacy-related benefits, he said.

Big increases

Health insurance costs rose by 20% in 2024 over 2023 in three towns on Long Island’s East End: Shelter Island, by 25%; East Hampton, at 22%; and Southampton, which had a 20% jump. 

Becky Hansen, East Hampton’s administrator and budget officer, said the town has tried twice to find a better alternative to the NYSHIP plan through a competitive bidding process. The efforts were unsuccessful, she said in an interview. 

“That was kind of disappointing,” Hansen said. “Yes, it’s expensive for us as the employer, but it’s also expensive for employees, too.”

She said the town has had to “think outside the box” to reducing costs. Next year, the town plans to allow retirees to use accrued sick leave to pay down health insurance premiums through the use of a state Civil Service law. 

Governments would also benefit, she said, if the State Legislature allowed towns and cities to stash money in a reserve fund dedicated to health insurance costs. 

“Because otherwise, health insurance is pay as you go,” Hansen said. “We fund it during that year, we pay for it during that year.”

National factors

David Spiegel, a broker with Florida-based Brown & Brown, an insurance brokerage firm, said on a national level, the cost of health care is rising faster than inflation. 

Health care costs can be exceedingly high when there are “high-claimant” employees or retirees — those whose medical procedures are more expensive than the average beneficiary.  Much of it, he said, also “is specialty medication driven,” Spiegel said.

“Some of these medications can be $1 million, $2 million for one medication for one individual — and you think about the impact that could have on a town or a municipality,” he said.

Weight loss medications, known as GLP-1 drugs, are becoming more common and driving up costs for government employers, Newsday has reported. 

The NYSHIP plan continues to cover GLP-1 drugs “while looking at ways to manage increasing utilization,” Viggiani said. To qualify for GLP-1 coverage, individuals need “prior authorization,” he said, which includes meeting certain body mass index requirements.   

Spiegel said he is working with the New York Association of Towns to explore an alternative group insurance program to counteract the rising costs of the NYSHIP plan, adding, “we’re in the infancy of starting that process.”

The goal, Spiegel said, would be “to offer another competitive solution here where we can control costs.”

Tough decisions

NYSHIP sets its annual rates in December, generally weeks after towns and cities have approved their budgets for the following year.

That means towns and cities are setting budgets without knowing the exact cost of health insurance in the year ahead.

With that in mind, budget officials said they are increasingly opting to set more money aside for the expense.  

Nine of the 13 towns on Long Island pierced the state’s 2% tax cap when they approved their 2025 budgets. Budget officials cited rising costs, including increases to mandatory pension payments, as the impetus behind the overages.

Long Beach Comptroller Inna Reznik said the city’s options are limited when it comes to funding health care.

She said the city is “very conservative in hiring full-time positions.” Long Beach offers annual bonuses — $5,000 for police union employees and $2,000 for other Civil Service union workers — to those who can get health insurance through spouses, parents or elsewhere, she said.

The pressure on governments is rising as more workers retire earlier and live longer, said Panico, Brookhaven’s supervisor. The town has had to defer capital projects, officials said.

“The fixed costs of municipal government will eventually force the consolidation of government because the system as it exists right now is unsustainable,” Panico said in a phone interview.

The town is now projecting rate increases based on the past three years’ average, instead of the previous five-year figure, because state-set increases have recently been “unusually high,” town spokesman Drew Scott said in an email. 

Southold Supervisor Al Krupski said state-mandated increases to these premiums are a “hot topic” among supervisors Islandwide.

“You look at the cost, and it’s a critical part of the benefit package for the employees,” he said. “The payroll is more than just salary. The whole benefit package is quite a bit to consider.”

Plans deferred

In Babylon Town, the spike in health care costs has affected budgeting for the construction of a planned chemical dependency treatment center in North Amityville, Comptroller Victoria Marotta said.

The town “had to push back construction” of the facility, known as Beacon 2, “while we pursue outside grant funding to make up the shortfall,” Marotta said in an email to Newsday. The jump in health care costs forced Babylon “to temporarily reallocate funding to core employee benefits to avoid service reductions elsewhere,” Marotta said. 

The facility will be paid for using federal pandemic aid and revenue from the town’s cannabis shops, as well as capital funding, officials said.

Babylon Supervisor Rich Schaffer said the town will also apply proceeds from Suffolk County’s opioid settlement fund. He said he doesn’t expect the funding to be an issue for the new facility if the town can secure other sources to pay for it. But that could be at the expense of other projects on the town’s “wish list.”

“We’re concerned,” Schaffer said in an interview. “That’s obviously an amount that we have to cover, so if we have to reduce something, it would be a reduction in capital funds.”

Barbara Van Epps, executive director of the New York Conference of Mayors, said health insurance increases are “a statewide epidemic.”

To meet those costs, towns and cities have a limited number of options.

“Local governments do not have a lot of revenue sources available to them,” Van Epps said in an interview. “You have to make some very tough choices about either delaying capital projects, taking more money out of your reserve funds or cutting services.”

Newsday’s Denise M. Bonilla, Sam Kmack, Carl MacGowan, Joshua Needelman, Jean-Paul Salamanca and Tara Smith contributed to this story.