PUBLIC EMPLOYEE HEALTH CARE BENEFITS S.B. 7:
REVISED COMMITTEE SUMMARY
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Senate Bill 7 (as introduced 1-19-11)
Sponsor: Senator Mark C. Jansen
Committee: Reforms, Restructuring and Reinventing
Date Completed: 3-21-11
CONTENT
The bill would create the "Publicly Funded Health Insurance Contribution Act" to require that all public employees pay a certain percentage of the overall cost of purchasing health insurance. Beginning January 1, 2013, the bill would require that public employers with and without self-funded health benefit plans pay not more than 80.0% of the premium costs of health insurance plans. The health insurance premium paid by the employer could be increased to 90.0% of the total cost for a health insurance plan for employees or elected officials covered by a medical benefit plan that included a health savings account in combination with a high deductible health plan that complied with Federal statute and regulations. The maximum allowable payment for employers would be calculated annually based on the most comprehensive Detroit consumer price index. Additionally, a public employer that was formed by the merger of two or more public employers after the bill's effective date, and that did not offer a self-funded medical benefit plan, would have to calculate the maximum payment for health insurance as of the date the new entity came into existence.
The bill includes the following definitions:
-- "Costs" and "total costs" of a medical benefit plan would not include copayments, coinsurance, deductibles, other out-of-pocket expenses, or other service-related fees assessed to the covered beneficiary.
-- "Local unit of government" would be defined as a city, county, village, or township.
-- "Medical benefit plan" would mean a plan established and maintained by a carrier or one or more public employers that provides for the payment of medical, optical, or dental benefits including hospital and physician services, prescription drugs, and related benefits, to public employees.
-- "Public employer" would be defined as this 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 could contribute to an employee's health savings account and the contribution would not be included in the employer's maximum allowable payment for the cost of medical benefit plans. Additionally, a public employer could deduct the covered employee's portion of the cost of a medical benefit plan from employee's annual compensation.
The bill further states that 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.
FISCAL IMPACT
Based on data for FY 2010-11, the passage of Senate Bill 7 would result in approximately $173.9 million in gross savings ($92.2 million GF/GP) in the cost of health insurance provided to State employees in the first year. This assumes the employer-share of health insurance cost would be capped at 80.0% of premiums as opposed to the 90.0% of premiums currently paid by the employer. Comprehensive data do not exist to accurately calculate the potential savings to local government, school districts, and public higher education employers from this bill. If one assumes the same level of savings for other public sector employees in Michigan as with State employees, the approximate savings could surpass $500 million.
As of October 1, 2010, the average annual premium of the State plan for health care for a married classified employee with dependents hired before April 1, 2010, was an estimated $19,700. The average annual premium for the same plan for employees hired on or after April 1, 2010, dropped to an estimated $17,500. If the employee was hired before April 1, 2010, the State pays 90% or $17,700 of that premium. If the employee was or is hired on or after April 1, 2010, the State pays 80% or $14,000 of the lower premium.
Currently, there are an estimated 49,400 employees enrolled in a State health plan. Based on the most recent data, an average of 2,400 new employees are hired annually, meaning an estimated 47,000 currently enrolled employees were hired before April 1, 2010. If those 47,000 employees were required to pay 20% of their premium, it is assumed that they would convert to the less expensive health plan offered to employees hired on or after April 1, 2010. The estimated annual savings for the State based on the State's paying 80% of the lower premium is $3,700 per employee. If the $3,700 saving is multiplied by the estimated 47,000 employees to whom this proposal would apply, there would be estimated gross savings of $173.9 million. The GF/GP saving is estimated at 53% of the gross savings, or $92.2 million in year one.
Fiscal Analyst: Joe Carrasco
Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. 7/1112