By: Benjamin J. Gohs, Associate Editor
When Michigan Gov. Rick Snyder signed Senate Bill 7 in late-September, it meant several things, not the least of which that some public employees would now be required to pay at least 20 percent toward their health insurance costs or face losing out on state revenue sharing. While municipalities like the City of Charlevoix have opted out of the new law – a legal move under the new legislation – entities like Charlevoix County are still considering the matter.[private]
“Beginning Jan. 1, 2012, the bill would require that public employers who offer medical benefit plans to their employees or elected officials pay not more than 80.0% of the total annual costs of all the medical benefit plans they offer to employees and elected officials,” states the bill, referred to as the Publicly Funded Health Insurance Contribution Act. “In addition, any collective bargaining agreement or contract settled on or after the effective date of the proposed Act, if that date were after July 1, 2011, would have to comply with the requirements of the Act; however, the employer’s required payments under the Act would not become operative until January 1, 2012.”
Currently it costs county taxpayers approximately $600 per month to fully fund some of the county workers’ health benefits. Certain county employees, such as the sheriff’s office, already pay 20 percent of their health care costs. Nearly 120 out of 160 county employees receive the insurance.
It can cost as much as $500 per month for the nearly 45 retirees the county currently owes post-retirement health benefits too.
This benefit was instated in 1987 and ended in 1992. While there are a few current employees who will qualify for the post-retirement health care benefit, no new employees will receive the benefit, so the cost will continue to decrease as those retirees die. The post-retirement health benefit, including costs of those qualifying employees yet to retire, has been estimated at nearly $8 million. However, the life-span of each employee could change that number up or down.
While the commissioners in charge in the 1980s did not set up a contingency fund to cover the future liability, Charlevoix County Clerk Cherie Browe is working to ensure the county can meet its financial obligations. “It’s something I realized needed to be taken care of and little by little I am trying to set up a reserve,” she said. “I have a half-a-million of fund balance for post-retiree health benefits.” Browe added, “We have to make sure our future obligations can be taken care of.”
WHAT THE COMMISSIONERS THINK
“I could not see me supporting any other than an 80/20 health care plan,” said Charlevoix County Commissioner Richard Gillespie. “I see that as the most common health care plan out there.” He added, “Things are definitely changed in our world as we know it, and if the people that support public sector jobs cannot pay their taxes and are losing their homes … how could they be expected to pay for a blue-chip health care plan for public sector jobs?”
Charlevoix County Commissioners Joel Evans and Shirlene Tripp could not be reached by press time.
Charlevoix County Commissioner Chris Christensen said the revenue-sharing aspect of the new law will have no bearing on his decision in the matter. “I think we have to take a real hard look at the situation and see what these costs are and how they are figured into the cost of doing business,” he said. Christensen said he could not give an answer on how he would vote without first investigating the matter thoroughly. “I think we need to take a look at the compensation packages as a whole,” he said.
The county’s human resources manager has been charged with the duty of a wage study which will compare salary and benefits throughout the region.
The study will help determine if employees are being underpaid, overpaid or justly compensated for their work.
“The fact that the governor did this (SB7) so the state can try to clean up its own house probably affords counties an opportunity to do the same,” Christensen said. “I think we definitely need to get a grip on it, and as long as health care costs continue to skyrocket we are going to have to take a look at what the county’s alternatives are for dealing with it.”
Charlevoix County Commissioner Bob Drebenstedt said while he is no fan of the state’s ideas on revenue sharing, he is not necessarily in favor of forcing the employees to pay. “Why should I give you (State of Michigan) $1 and have you give me back .50 cents and call that revenue sharing?” Drebenstedt said. “The state has already taken advantage of that and we were smart enough we didn’t get involved.” As to the insurance issue, he said, “If we’re hurting down the road I may change my mind, but if we’re OK I say leave it alone.”
Charlevoix County Commissioner Ron Reinhardt said he couldn’t speculate on how he might vote if such a matter came before the commission. “Right now the county doesn’t get any revenue-sharing anyway, but what can happen down the road if we opt out of it?” he said. “I guess that’ll come up when we have to vote on it.”
But, he added, “There shouldn’t be a privileged class of people.”
DETAILS OF THE BILL
“Costs” and “total costs” of a medical benefit plan would not include co-payments, coinsurance, deductibles, other out-of-pocket expenses, or other service-related fees assessed to the covered beneficiary.
This law affects city, county, village and township government in addition to public schools.
Employers affected include: State; a county, township, village, city, or other political subdivision of this State; any intergovernmental, metropolitan, or local department, agency or authority; a school district, public school academy, or intermediate school district; a community college or junior college; or a public institution of higher education.
A public employer that offers a medical benefit plan that includes a health savings account would have to increase the amount it pays toward the annual cost of an employee’s medical benefit plan by an amount equal to the amount contributed by the employee to that health savings account.
That increased amount would be excluded from the maximum amount payable by the employer under the bill.
If the requirements limiting the amount of employer-paid health insurance benefits were inconsistent with a collective bargaining agreement currently in effect, the requirements of the bill would not take effect until the collective bargaining agreement expired, or was amended, extended, or renewed.
A local unit of government could exempt itself from the requirements of the proposed Act for the next succeeding contract period by a two-thirds vote of its governing body. Another two-thirds vote would be required of the governing body to extend an exemption to a new contract period.
State employees hired on or after April 1, 2010, already pay 20 percent of the premium for health care, and the State Employees’ Retirement Act requires this group of employees to also pay the level of health care coverage in retirement as paid for by active employees.
Savings to State government would result mainly from the impact on civil service employees (either through amendments to the State Constitution approved by the voters or action by the Civil Service Commission).
According to the Michigan Senate Fiscal Agency, as of June 25, there were 44,559 employees enrolled in state-sponsored health insurance plans. This bill could save $70 million just in state employees.
“Approximately 53% of the savings would be to the State General Fund, and the balance would be savings to Federal and State restricted funding sources,” the agency stated in its analysis of the new law. “The bill also could generate State savings related to retired State employees. These savings would occur if active civil service employees were charged a health care premium cost sharing rate higher than 10%, because the State Employees’ Retirement Act states that retiree cost sharing is the same as active employee cost sharing.” It further states, “Currently, since active employees pay 10% of their health care premiums, retirees also pay 10% until Medicaid eligible.”
This increase savings could account for an additional $17 million.[/private]