SB-0007, As Passed House, June 30, 2011

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 7

A bill to limit a public employer's expenditures for employee

medical benefit plans; to provide the power and duties of certain

state agencies and officials; to provide for exceptions; and to

provide for sanctions.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"publicly funded health insurance contribution act".

Sec. 2. As used in this act:

(a) "Costs" does not include copayments, coinsurance,

deductibles, other out-of-pocket expenses, or other service-related

fees assessed to the coverage beneficiary under a medical benefit

plan.

(b) "Designated state official" means:

(i) For an election affecting employees and officers in the

judicial branch of state government, the state court administrator.

(ii) For an election affecting senate employees and officers,

the secretary of the senate.

(iii) For an election affecting house of representative

employees and officers, the clerk of the house.

(iv) For an election affecting legislative council employees,

the legislative council.

(v) For an election affecting employees in the state

classified service, the civil service commission.

(vi) For an election affecting executive branch employees who

are not in the state classified service, the state employer.

flexible spending account in conjunction with a cafeteria plan as

permitted under the federal internal revenue code of 1986.

(d) "Health savings account" means an account as permitted

under section 223 of the internal revenue code of 1986, 26 USC 223.

(e) "Local unit of government" means a city, village,

township, or county, a municipal electric utility system as defined

in section 4 of 1976 PA 448, MCL 460.804, an authority created

under chapter VIA of the aeronautics code of the state of Michigan,

1945 PA 327, MCL 259.108 to 259.125c, or an authority created under

1939 PA 147, MCL 119.51 to 119.62.

(f) "Medical benefit plan" means a plan established and

maintained by a carrier, a voluntary employees' beneficiary

association described in section 501(c)(9) of the internal revenue

code of 1986, 26 USC 501, or by 1 or more public employers, that

provides for the payment of medical, optical, or dental benefits,

including, but not limited to, hospital and physician services,

prescription drugs, and related benefits, for public employees.

Medical benefit plan does not include benefits provided to

individuals retired from employment with a public employer.

(g) "Public employer" means this state; a local unit of

government or other political subdivision of this state; any

intergovernmental, metropolitan, or local department, agency, or

authority, or other local political subdivision; a school district,

a public school academy, or an intermediate school district, as

those terms are defined in sections 4 to 6 of the revised school

code, 1976 PA 451, MCL 380.4 to 380.6; a community college or

junior college described in section 7 of article VIII of the state

constitution of 1963; or an institution of higher education

described in section 4 of article VIII of the state constitution of

1963.

Sec. 3. Except as otherwise provided in this act, a public

employer that offers a medical benefit plan to its employees shall

pay no more of the annual premium or illustrative rate and any

payments for reimbursement of co-pays, deductibles, or payments

into health savings accounts or similar accounts used for health

care, optical, or dental costs, than a total of $5,500.00 for

single person coverage, $11,000.00 for individual and spouse

coverage, $12,500.00 for individual and child or children coverage,

or $15,000.00 for family coverage for a medical benefit plan

coverage year beginning on or after January 1, 2012. By October 1

of each year after 2011, the state treasurer shall adjust the

maximum payment permitted under this section for each coverage

category for medical benefit plan coverage years beginning the

succeeding calendar year, based on the change in the medical care

component of the United States consumer price index for the most

recent 12-month period for which data are available from the United

States department of labor, bureau of labor statistics.

Sec. 4. (1) By a majority vote of its governing body, a public

employer, excluding this state, may elect to comply with this

section for a medical benefit plan coverage year instead of the

requirements in section 3. The designated state official may elect

to comply with this section instead of section 3 as to medical

benefit plans for state employees and state officers.

(2) For medical benefit plan coverage years beginning on or

after January 1, 2012, a public employer shall pay not more than

80% of the total annual cost or illustrative rate of all of the

medical benefit plans it offers to its employees and elected

officials. Each elected official who participates in a medical

benefit plan offered by a public employer shall be required to pay

20% or more of the annual cost or illustrative rate of that plan.

The public employer may allocate the employees' share of medical

benefit plan costs or illustrative rate among the employees of the

public employer; however, a public employer shall not allocate

medical benefit plan costs among employees in a manner that causes

employer sanctions under the patient protection and affordable care

act, Public Law 111-148, or the health care and education

reconciliation act of 2010, Public Law 111-152. In addition, a

public employer that offers a medical benefit plan that includes a

flexible spending account or a health savings account may increase

the amount it pays toward the annual cost or illustrative rate of

an employee's or public official's medical benefit plan by an

amount equivalent to the amount the employee or public official

contributes to the health savings account or flexible spending

account, and that increase may be excluded from the maximum public

employer expenditure otherwise permitted under this subdivision. A

public employer's contribution is not included in the public

employer's annual maximum allowable payment for the cost or

illustrative rate of a medical benefit plan if it is either of the

following:

(a) A contribution to an employee's or elected official's

flexible spending account or health savings account.

(b) A contribution to a health reimbursement arrangement that

complies with all relevant statutory provisions, regulatory

provisions, and internal revenue service rulings governing health

reimbursement arrangements, including, but not limited to, section

105(b) of the internal revenue code, 26 USC 105, internal revenue

notice 2002-45, and internal revenue rulings 2005-24 and 2006-36.

Sec. 5. (1) If a collective bargaining agreement or other

contract that is inconsistent with sections 3 and 4 is in effect

for a group of employees of a public employer on the effective date

of this act, the requirements of section 3 or 4 do not apply to

that group of employees until the contract expires. A public

employer's expenditures for medical benefit plans under a

collective bargaining agreement or other contract described in this

subsection shall be excluded from calculation of the public

employer's maximum payment under section 4. The requirements of

sections 3 and 4 apply to any extension or renewal of the contract.

(2) A collective bargaining agreement or other contract that

is executed on or after the effective date of this act shall not

include terms that are inconsistent with the requirements of

sections 3 and 4.

Sec. 6. A public employer may deduct the covered employee's or

elected public official's portion of the cost of a medical benefit

plan from compensation due to the covered employee or elected

official. The employer may condition eligibility for the medical

benefit plan on the employee's or elected official's authorizing

the public employer to make the deduction.

Sec. 7. (1) The requirements of this act apply to medical

benefit plans of all public employees and public officials to the

greatest extent consistent with constitutionally allocated powers,

whether or not a public employee is a member of a collective

bargaining unit.

(2) If a court finds the requirements of section 3 to be

invalid, the expenditure limit in section 4 shall apply to a public

employer that does not exempt itself under section 8, except that

the requirement for a majority vote of the governing body of the

public employer in section 4 shall not apply. If a court finds

section 4 to be invalid, the expenditure limit in section 3 shall

apply to each public employer that does not exempt itself under

section 8.

Sec. 8. (1) By a 2/3 vote of its governing body, a local unit

of government may exempt itself from the requirements of this act

for the next succeeding medical benefit plan coverage year.

(2) A 2/3 vote of the governing body of the local unit of

government is required to extend an exemption under this section to

a new medical benefit plan coverage year.

(3) An exemption under this section is not effective for a

city with a mayor who is both the chief executive and chief

administrator, unless the mayor also approves the exemption.

Sec. 9. If a public employer fails to comply with this act,

the public employer shall permit the state treasurer to reduce by

10% each economic vitality incentive program payment received under

2011 PA 63 and the department of education shall reduce by 10% each

payment of any funds for which the public employer qualifies under

the state school aid act of 1979, 1979 PA 94, MCL 388.1601 to

388.1772, during the period of noncompliance.