Senate Bill 7 - Public Employers Health Insurance

  • 27 Sep 2011 2:13 PM
    Message # 709872

    Are you familar with this Bill which impacts Michigan publie employers and is expected to be signed imminently by the Governor?  It is my understanding that PHA's may not opt out and the affect on budgets and employees will be significant.  Will MINAHRO be addressing this?

     

    Regardless of whether the hard dollar or 80/20 cap is used, this legislation applies to medical plan coverage years “beginning on or after January 1, 2012.” 

     

    Insurance Costs Covered by SB 7

    Section 2(e) states that a “medical benefit plan” to which this law will apply is one “that provides for the payment of medical benefits, including but not limited to, hospital and physician services, prescription drugs, and related benefits.”  An earlier version of one of the bills that lead to the final language expressly defined “medical benefit plan” as including vision and dental insurance.  The deletion of this language indicates the legislative intent to not have the provisions of this law apply to dental and vision insurance premiums.  This law does apply, however, to medical and prescription coverage costs.

     

    A public employer’s cost is be capped at 80% of what amount?  The total figure is the sum of “the premium or illustrative rate of the medical benefit plan and all employer payments for reimbursement of co-pays, deductibles, and payments into health savings accounts, flexible spending accounts, or similar accounts used for health care but does not include beneficiary-paid copayments, coinsurance, deductibles, other out-of pocket expenses, other service-related fees that are assessed to the coverage beneficiary, or beneficiary payments into health savings accounts, flexible spending account, or similar accounts used for health care.”

     

    Options Available to Public Employers

    In the absence of any action by the public employer’s governing body, the hard dollar caps (discussed below) set forth in section 3 of the bill will apply.  By a majority vote of the governing body, the public employer may elect to go to an 80%/20% cost sharing system instead of the hard dollar caps. This election may be for a single year, for years designated by the governing body or indefinitely. 

     

    It is important to note that the option to completely opt out of the caps does not apply to all public employers; it only applies to “local units of government, which term is defined as “a city, village, township, or county, a municipal electric utility system . . ., [a public airport authority] created under chapter VIA of the aeronautics code of the state of Michigan, 1945 PA 327, MCL 259.108 to 259.125c, or [the Huron-Clinton Metropolitan Authority].”  Other public employers may not opt out of the cap system. 

     

    In evaluating their options, public employers will need to determine the impact of each option not only on itself, but on its employees, as a change from the current premium sharing to the ones imposed by this law may create substantial financial burdens on employees, particularly those at the lower end of the pay scale.

     

    The Hard Dollar Cap

    The cost caps for a public employer are aggregate, not individual employee, caps.  The same maximum dollar contribution by a public employer does not necessarily apply to each employee with the same coverage (single, two-person, family).  In a provision meant to allow employers to shift the burden of this legislation from lower paid employees to more highly paid employees, section 3 states that a public employer “may allocate its payments for medical benefit plan costs among its employees and elected public officials as it sees fit.” 

    The caps that apply initially are as follows:

    Single Coverage:  a total amount equal to $5,500 times the number of employees with single coverage.

    Two-person Coverage:  a total amount equal to $11,000 times the number of employees with “individual and spouse”[1] coverage.

    Family Coverage:  a total amount equal to $15,000 times the number of employees with family coverage.

     

    The cap amounts are to be adjusted annually on October 1 of each year beginning in 2012 for medical plan coverage years beginning in the next calendar year.



    [1] An additional interpretative issue may arise if a public employer’s two-person coverage is available to unmarried couples.

  • 08 Feb 2012 10:56 AM
    Reply # 819677 on 709872
    Hi Cathy,
    This reply is a little late but you may want to check out the agenda for the upcoming MI-NAHRO Spring Conference in Flint.  It includes a session on this topic.  The plan is to have a panel discussion made up of representatives from Insurance providers and even from the Legislature.

Michigan Chapter of the National Association of Housing and Redevelopment Officials
169 Templar, Pinckney, Michigan  48169               Phone: 734.498.2493               Fax: 734.498.8415          minahro@minahro.org

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