Health Care Sticker Shock and Bargaining

Kacie Kefgen

By Kacie Kefgen, MASB Assistant Director of Labor Relations and Legal Services

DashBoard, May 4, 2016

As most of you have probably seen over the last few weeks, health insurance quotes are up this year. In some districts we are hearing of increases as high as 15%.

The good news is that school districts have tools to protect themselves from these increases. Let’s review one major tool in the tool box—PA 152 of 2011, the Publically Funded Health Insurance Contribution Act.

Hard Cap

In 2011, the Legislature capped the amount of money school districts and other public employers could spend each year on employee health care costs. The default option to comply with the law is commonly called the “hard cap,” which is a maximum dollar amount an employer may spend in a given year for employees, depending on their family status (MCL 15.563). This hard cap amount is adjusted each year by the Michigan Department of Treasury. Remember that the hard cap is a ceiling, not a floor. A district could bargain with its employees and agree to spend an amount under the hard cap, leaving additional money for other costs.

The Percentage Option

School boards may also choose to comply with statute by paying a percentage of employee health care costs, not to exceed 80% (MCL 15.564). This option leaves districts more exposed to rapidly increasing health insurance costs, but it may still be a good alternative, depending on the individual situation in your district. Also, the district could agree to cover a smaller percentage than 80%. Perhaps a 60/40% cost split between the employees and the employer could work for everyone.

What’s in Your Collective Bargaining Agreement?

Health insurance benefits are a mandatory subject of bargaining. However, the district’s decision about whether to comply with the statute through the hard cap or the percentage option is a permissive subject of bargaining. That means that the board could decide on its own, for instance, that it will comply with the statute through the hard cap option. It would then bargain the details of insurance with the bargaining unit. However, the board could also decide to bargain over whether to do the hard cap or the percentage, and once it has decided to bargain over the question and has included one option or the other in a collective bargaining agreement, it must honor that contractual promise through the expiration of the contract (Van Buren Co Ed Ass'n & Decatur Ed Support Pers Ass'n, MEA/NEA v Decatur Pub Sch, 309 Mich App 630).

The Details

While it may seem like there’s not much left to bargain over when it comes to health care, there are plenty of issues you should hammer out with the union teams. Will hard cap amounts increase automatically? Will they be rebargained every year? When will new cap amounts take effect? At the calendar year? The school year? Will the district offer a Health Savings Account? And the list goes on.

If you have questions about negotiations or other labor issues, please do not hesitate to call me at 517.327.5914 or email [email protected].

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