Thursday, August 25, 2011

Cost Control Tool for Public Employee Health Benefits Enacted


I have voted for Senate Bill 7 which creates the Publicly Funded Health Insurance Contribution Act as reported out of the Conference Committee. The law prohibits public employers from paying more than the following amounts toward the annual health benefits of their employees:

  • $5,500 for individuals,
  • $11,000 for married couples and
  • $15,000 for family plans.
  • These amounts include all premiums, copays, reimbursements, and deductibles that the employer may pay.
  • The state treasurer can adjust the amount based on the medical component of the Consumer Price Index (CPI), which will correct the caps for inflation.

Local governments and school districts can voluntarily switch to an '80/20' plan with a majority vote of their governing board. Under the 80/20 plan, employers must not pay more than 80% of total annual health benefit costs. There is no hard dollar limit under an 80/20 plan. We are giving local leaders the tools they need to control costs and the option to utilize them.

With a 2/3 vote of the governing board (and the consent of the mayor or county executive if that person is both the chief executive and chief administrator), local governments (other than school districts) can opt out of the limits entirely and avoid paying any noncompliance fee. The rationale for this "opt out" provision is that local governments do not receive all of their funding from the state. The local taxpayers can monitor their local governments concerning whether such as opt out is appropriate for their community.

If a public employer ignores either the cap or the 80% limit, the state treasurer is authorized to reduce 10% of economic vitality incentive program payments from local governments. For school districts, the Department of Education shall reduce School Aid Fund payments by 10%.

These limits do not apply to current employees until new collective bargaining agreements are reached or current agreements are renewed or extended.
State lawmakers are included in this and do not have the option to opt out.

We are committed to reining in out-of-control spending and ending special perks and gifts from the taxpayers for public employees:

  • This bill cuts costs for state and local government, saving taxpayers money. We are committed to showing restraint and making tough decisions to put this state back on solid financial footing. We are asking public employees to pitch in to save taxpayer dollars, just like private employees are pitching in to keep local businesses afloat. We all must sacrifice to get by in these difficult economic times.
  • Health insurance plans far better than private sector plans are driving up our tax bills and taking money out of the pockets of Michigan's working families.
  • In many cases, rising premiums have outpaced the rise in appropriations for public employers. We need to do something to keep state and local governments from falling further behind with this runaway spending.
  • We are asking employees to be more involved in their own healthcare decisions. The high cost of insurance forces all of us to weigh our options and seek out the best value; getting the employees involved is critical to that discussion.
  • Private sector job providers are making tough but necessary decisions to make ends meet in this economy, cost-sharing with their employees to keep their health programs up and running.
  • Government at all levels needs to start getting leaner and do a better job of giving the public top value for its tax dollars. We cannot afford to spend unlimited money on lavish health plans. However, we are not eliminating options by prohibiting high-end plans or insurers, only capping how much taxpayers will spend on the high-end plans. The public should not be on the hook for any unlimited spending, and this bill keeps costs to state and local governments within reason.
  • We are leading by example by cutting our own retiree health insurance, and we are asking state and legislative employees (and legislators) to help pay for their own if they want a high-end plan. Everyone in this state is struggling to get by in this economy, and we refuse to take even more from them for top-end benefits.

The House of Representatives and its employees have made the following reductions to save taxpayer dollars over the last few years:

    • Legislators' pay was cut 10% at the beginning of this term.
    • Representatives and their employees have been asked to contribute more to their own healthcare on several occasions, and cheaper insurance plans have been contracted.
    • Member office budgets were cut 5-10% to begin the year, following 4-5% reductions two years ago, and an additional 13.9% this summer. Also, non-partisan staff budgets were cut 5% this year, following separate layoffs two and four years ago. Central staff budgets were cut 7.5%, following two separate cuts of hundreds of thousands of dollars two years ago.
    • Benefits were eliminated for part-time employees and full-time employees began mandatory contributions to their own retirement health care fund.
    • The number of full-time and part-time employees a legislator can hire were cut.
    • The House of Representatives have voted to eliminate their own retirement health benefits. The bill currently lies in the State Senate, but is expected to be enacted by year end.
    • Representatives now pay for their own parking.
    • Out-of-state travel expenses were cut off.
    • The House Office Building was purchased from the developer and refinanced, saving $30 million long-term. The House also renegotiated existing cleaning, maintenance and lease contracts.
    • The House Office Building earned Energy Star ratings in 2006, 2007, 2008 and 2009 for conserving resources and containing energy costs.
    • The House Page Program was eliminated.
    • Common misconceptions:
          Legislators do not receive free use of a state automobile.
          Legislators do not receive a pension from the state of Michigan.

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