Mayor Ruthanne Fuller is requesting the City Council approve $2 million from the city’s Free Cash to help pay for a steep increase in health insurance costs next year.

The move comes after recommendations for rate increases came in much higher than expected: to the tune of $700,000 for the city side and $1.3 million on the school side, Newton Financial Planning and Analysist Manager Perry Rosenfield explained to the Finance Committee Monday night.

In December, the city’s health insurance consultants recommended a 7.8 percent health insurance rate increase for FY2026, Rosenfield said. And that was based on claims data through that November.

But later, December showed an upswing in health insurance claims, and in January the consultants brought that recommended rate increase up to 10.1 percent.

“Keeping in mind that this recommendation also included a 2 percent buffer, we chose to keep the 7.8 percent rate steady, as we wanted to continue to monitor date to determine if December was an anomaly,” Rosenfeld said.

It wasn’t.

January and February saw that rise in claims continue. So the consultants revised their recommendation again, up to an 11.2 percent increase.

“At this point, the public schools had already built their budget off the lower 7.8 percent number, and we didn’t want to drop a $1.3 million increase on them so late in the process, so we ultimately made the decision to keep the 7.8 percent increase in the budget and to request the difference of $2 million in free cash from the City Council.”

That means that, when the time comes to start crafting the FY2027 budget next year, both the city and the school budget will have to start with a higher starting point to make up for that ($700,0000 on the city side, $1.3 million on the schools side) before factoring in the FY2027 rate increases.

Councilor Bill Humphrey asked what the plan was for next year, since the city and schools would be starting health insurance discussions in a combined hole of $2 million. But that’s all unclear still, Newton Chief Financial Officer Maureen Lemieux said, because there will be a new mayor and a new administration handling the FY2027 budget.

“The best way to handle this would be that, looking at the next year’s budget, we more or less add the $1.3 to the base of the School Department and we add $700,000 to the base of the city side,” Lemieux said.

Lemieux suggested the city put the first $2 million from new growth toward those base amounts.

“We have no idea what’s going to happen with the medical trend rates for next year,” she said. “Hopefully, by us going out there with this 11.2 percent, we could be back to a 5 or 6 percent increase on our rates next year. None of that is known at this point. Medical trend rates have really gone crazy.”

The Finance Committee unanimously approved the request, which will now head to the whole City Council for a vote.