Savings in health contribution act?

Michigan Governor Snyder in September 2011 signed into law the “Publicly Funded Health Insurance Contribution Act.”

The act requires that all public employees pay a certain percentage of the overall cost of purchasing health insurance. The act covers all local units of government, including cities and school districts.

As local municipalities adhere to the Publicly Funded Health Insurance Contribution Act, local government employees will be paying more for their health insurance.

Unfortunately, individuals contributing more toward their health insurance is a sign of the times. It’s been a common practice in businesses for years.

What should happen now is local governments need to study how they can lower tax burdens on area residents.

If local municipalities are going to save money, that savings should be passed to the residents. That’s the goal off the act.

The law is designed to limit a public employer’s expenditures for employee medical benefit plans.

According to Iron Mountain City Manager Jordan Stanchina, the state of Michigan passed Public Act 152 of 2011 giving municipalities four options concerning health insurance premiums.

First of all, a municipality could opt out and use any premium ratio that the governing body approved by a two-thirds majority.

Second, they could use the default method which is the ‘hard cap.’ The state annually sets the maximum yearly premium that a municipality can pay and the employee must pay any premiums that can exceed the maximum amount.

A third choice is that the municipality, by a majority vote of the governing body, can establish an 80/20 city/employee ratio.

The final option is to fail to comply with the law, and risk losing revenue sharing in the process.

Iron Mountain last year followed the default ‘hard cap’ option, which figured out to a cost of approximately 15.5 percent for employees.

The city has five groups of employees that make contributions toward their health insurance premiums – the police lieutenants,municipalities patrol, firefighters, department of public works and administration.

All groups except the Department of Public Works are under the hard cap paying between 15-15.5 percent.

The Department of Public Works, Stanchina said, signed a collective bargaining contract prior to Public Act 152 of 2011, and are exempt from the hard cap until their contract expires in 2015. Although they are exempt, they agreed to pay 15 percent during the last round of contract negotiations.

The city’s health insurance premium renewal date is July 1, and the employees under a new hard cap formula were facing a 25 percent premium contribution based on the increase in rates. The city is currently negotiating with the other unions and has offered a switch to an 80/20 percent ratio as part of the overall package.

It’s expected that they will agree to the switch.

The action was needed this week, Stanchina said, since the administrative employees were facing a July 1 renewal. If the city stayed with the ‘hard cap,’ the result in a 10 percent increase in worker premium contributions which would equate to an additional $3,000 for a family plan.

Stanchina added that under the 80/20 ratio, the employee would still pick up an additional $1,400 of premium contributions.

“I don’t know how this is going to go. It fits within the budget we adopted, but I’m more interested in the challenge this will present next year,” Stanchina said.

Given the ever-increasing costs of health care in the U.S., all workers – government and private sector – will be wondering the same thing.