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Foster Swift Employment, Labor & Benefits Quarterly
Fall 2011
On September 24, 2011, Governor Snyder signed into law the Publicly Funded Health Insurance Contribution Act. Beginning January 1, 2012, the Act places certain limits on the amount that public employers can pay toward employee medical benefit plans.
Pursuant to the "hard cap" provision in the Act, a public employer that contributes to a medical benefit plan for its employees or elected public officials may pay no more toward the annual cost of coverage (including reimbursement of co-pays, deductibles, or payments into health savings accounts, health flexible spending accounts, or similar accounts used for health care costs) than a total amount equal to $5,500 times the number of employees with single person coverage, $11,000 times the number of employees with individual and spouse coverage, and $15,000 times the number of employees with family coverage. These maximum payment figures will be adjusted each year based on the change in the medical care component of the United States Consumer Price Index. The public employer may allocate its payment for medical benefit plan costs among its employees and elected officials as it sees fit.
Alternatively, public employers can instead elect pursuant to the 80/20 provision of the Act to pay not more than 80% of the total annual costs of all of the medical benefit plans it offers or contributes to for its employees and elected public officials. Under this alternative, each elected public official participating in the employer’s medical benefit plans would be required to pay 20% or more of the total annual costs of the plan. The public employer is permitted to allocate the employees’ share of the total annual costs of the medical benefit plans among its employees as the employer sees fit.
A local unit of government may exempt itself from the Act annually by a two-thirds vote of its governing body. Certain cities and counties must also obtain mayoral or county executive approval of any such exemption.
Failure to comply with the Act’s provisions can lead to a reduction in state aid to the public employer.
Please contact your Foster Swift employee benefits professional if you have any questions.