Avon tri‑board warns $1.5M disputed health claim drives large FY27 insurance spike, possible 5.43% mill‑rate increase

Avon Town Council Chairman Dan Polhamus, Town Manager Brandon Robertson and finance officials told a joint Town Council/Board of Finance/Board of Education special meeting on March 10 that employee medical insurance costs are the main driver of the town’s proposed FY 2026/27 budget increase and are forcing the council to budget for a large disputed claim.

Town Manager Brandon Robertson said the proposed budget includes a $5.2 million increase overall, of which $3.44 million is attributable to active employee medical insurance and that the requested budget would require a 5.43% increase in the mill rate if fully adopted. Robertson said the increase reflects routine medical inflation and one unusually large claim of about $1.5 million that a stop‑loss carrier has declined to reimburse to date.

"We don't have enough confidence as we stand here tonight that it will be reimbursed," Robertson said, adding staff are budgeting conservatively for FY27 while pursuing reimbursement.

Lockton consultant Dawn O’Shaughnessy, who said she leads Lockton’s Connecticut health and benefits practice, told board members Avon has been self‑insured for many years and that stop‑loss insurance is intended to limit employer exposure above a $175,000 specific deductible. She said rising specialty pharmaceuticals and expensive medical treatments account for roughly half of catastrophic claim cost growth, with the remainder from high‑cost medical services.

"This is a differing interpretation of experimental and investigational that in 27 years I've never seen," O’Shaughnessy said of the stop‑loss denial, describing the stop‑loss market as the hardest she has observed and saying carriers are scrutinizing known exposures and often applying "lasers" to carve out specific claimants when quotes are provided.

Finance Director Tom DiStasio told the boards Avon has paid the claims to date. DiStasio said the town maintains a Medical Claims Internal Service Fund that holds resources for claims and administrative costs, and staff have previously transferred and assigned funds to stabilize that account. As of June 30, 2025, the presentation showed an actual balance of $446,865 versus a recommended balance near $2,992,988, leaving a stated shortage of $2,546,123; FY25 year‑end actions included an $850,000 assignment and a $900,000 transfer to the claims fund.

Lockton and town staff outlined options under active consideration: continue pursuing reimbursement from the stop‑loss carrier (WellPoint), pursue arbitration or litigation if needed, issue RFPs for stop‑loss and third‑party administration, evaluate the Connecticut state partnership plan administered by Anthem, and consider alternative risk structures such as a captive. O’Shaughnessy said the team is conducting market analysis but warned that once a high dollar claimant is known to the market, insurers typically "laser" that claimant out of coverage terms, shifting the financial risk back to the employer.

Board members and the public pressed for more detail on claim drivers and timing: O’Shaughnessy said roughly half the recent catastrophic claim growth is from specialty drugs; DiStasio said the bulk of activity for the disputed claim began in August 2024 and that reimbursement efforts have taken months. Board of Finance member Houston Putnam Lowry warned that the treatment is likely long‑term and that the town could face repeat exposures.

Brian Cuddeback, who identified himself as a vice president of sales for Cigna and an Avon resident, said Cigna is engaged and pledged the company’s assistance in resolving the complex claim, noting a prior similar case took about 18 months to resolve.

Next procedural steps: the council’s requested budget that incorporates the current medical projection moves to the Board of Finance, which recommends what goes to referendum. Public budget hearings were scheduled in April and a referendum in May. Officials said staff will continue to pursue reimbursement and that unresolved disputes could proceed to arbitration or court, a process board members estimated might take years in the worst case. Short‑term plan management changes that do not require bargaining may be possible to implement for July 1.

The meeting adjourned on a motion by Houston Putnam Lowry, seconded by Margaret Bratton; the three bodies voted 18‑0‑0 to adjourn at 8:43 p.m.