Michigan law caps public employers' payments for health insurance

Michigan Gov. Rick Snyder/ BLOOMBERG

LANSING, Mich.—Michigan Gov. Rick Snyder has signed into law legislation that will cap how much public employers in the state will pay for health care plans and require employees to pay the rest.

Under the measure, S.B. 7, which Gov. Snyder signed last week, health care premium contributions by public employers, such as local governments and school districts, will be capped at $5,500 for single coverage, $11,000 for individual and spousal coverage, and $15,000 for family coverage.

This cap is to go into effect on Jan. 1, 2012, and be adjusted annually by the state treasurer to reflect changes in the medical care component of the Consumer Price Index.

Alternatively, public employers could take an approach under which employees would be required to pay 20% of the health insurance premium, the same percentage that employees hired on or after April 1, 2010, are required to pay. Those hired before then pay 10% of the premium.

The new Michigan law to make employees pay more for health care coverage is part of a broader drive by public entities—economically stressed as the recession has held down tax revenue—to try to reduce their benefit costs.

For example, New Jersey lawmakers this year approved legislation boosting public employees' pension and health care premiums, while the Atlanta City Council approved a measure increasing pension plan contributions for many city employees.

However, the New Jersey law is being challenged by the state's largest public unions, which allege that the measure violates employees' and retirees' contractual rights.