School districts and cities are on the hook for $6.7 million after health insurance claims soar.

The news caught everyone by surprise. When insurance claims came into the Municipalities, Colleges, Schools Insurance Group (MCSIG) in October, they were a record $11.6 million. More high-cost claims came in November. Already operating at a deficit, the MCSIG board gathered for a special meeting on Wednesday, Dec. 11 and voted that the small insurance joint powers authority would assess its members a total of $6.7 million by Jan. 17, knowing most of the participating school districts and cities would be hard-pressed to find the money.

“This increase is driven by unusually high medical claims, and of course Monterey County is expensive as well, so that adds to that,” MCSIG Executive Director Neddie Sarmiento told the board. The claims are for diseases that include cancer, diabetes, sepsis and kidney disease. “Quite a few members are very ill,” she said.

The assessments range from $928 to $1.24 million, depending on the size of the district. It’s an expense that no district budgeted for and it will likely mean either more money out of employees’ pockets or reduced services to students and residents, or a combination of both, MCSIG Board President Steve McDougall said during the meeting.

One member, Hartnell Community College District, will pay its $680,000 assessment out of reserves, according to a spokesperson. Staff shared with the Board of Trustees on Tuesday, Dec. 17 that the district is going to look into providers other than MCSIG.

The MCSIG joint powers authority includes nearly 30 participating school districts and municipalities inside and outside Monterey County to operate and maintain health insurance for their employees. When claims come in, MCSIG pays on those claims to health care providers, using money from premiums.

Of the $11.6 million in October’s claims, only three claimants had claims of over $500,000; anything above $500,000 is reimbursed by third-party stop-loss insurance. MCSIG is only receiving a $463,230 refund; the rest of the $11.6 million must be paid by the JPA.

MCSIG was already operating at a deficit, Sarmiento said. The new claims nearly doubled that deficit from $6.8 million to $12 million.

The large claims are spread among all the members – no single district is seeing a concentration of claims, said Tom Edwards, a consultant with Keenan & Associates. That being said, the claims coming from districts and municipalities within Monterey County are the driver of the high costs, he said, adding that some costs of medical conditions treated at local hospitals have doubled since a couple of years ago.

Also adding to costs is the jump in claims for drugs used for diabetes and weight loss, like Ozempic and Wegovy. Four such drugs accounted for 25 percent of prescription drug costs, said Bordan Darm, also with Keenan & Associates. He suggested MCSIG may have to limit access to the drugs, as other insurers have done.