Michigan Reform Initiatives Aimed At Public Sector

Quick updates on Michigan reform initiatives that could impact you

1. Andy Dillon Proposal-- this Proposal was released last summer and called for the consolidation of healthcare plans through a "state-run" program. Pointing to the savings generated through "economies of scale" and through the reduction in administrative cost, the proposal claimed to create $700 to $900 million/ year in healthcare savings. However, 60% to 66% of this savings resulted from creating  "standard" benefit levels for all public sector employees and retirees--- in other words, a reduction in benefits through higher deductibles, co-pays and cost sharing. The Proposal never gained much momentum as labor groups worked to remind legislatures of the "labor" and "collective bargaining" issues that would arise with such a proposal.

2. Senate Bill 1046-- this bill sponsored by Jansen and Sanborn, would invoke a "mandatory" limit on what a public sector employer pays for employer provided healthcare. The bill says that employers would pay "no more" than 80% of the premium cost for the healthcare plans they offer to employees; 85% if the plan includes wellness incentives, by example, it mentions Health Savings Accounts. This proposal, I believe, will have similar difficulty as the Dillon proposal, since the "mandate" does not consider collective bargaining agreements. In theory, a good idea but most communities are already headed towards "health care plan" changes that will produce similar, if not greater savings.

3. Directive 2010-1-- Gov. Granholm- OPTIONAL 

Excerpt:

"The executive directive gives the director of the Department of Management and Budget (DMB) and the director of the Office of the State Employer (OSE) until June 30, 2010, to identify and remove any barriers to participation in the state's health-care benefit plans by local units of government and other public entities. Local units of government include cities, villages, townships and counties.  Other public entities include school districts and public colleges and universities. All the state's health-care benefit plans would be open to participation, including the state's PPO plan, health maintenance organization plans, prescription drug coverage programs, dental-care plans and vision-care plans." 

This allows municipalities to "piggyback" the State's plans. Too early to tell whether this option would be a good option. The State tried this several years ago with, Express Scripts (ESI). At the time, the State used Express Scripts as its PBM. The state allowed other public sector groups to piggyback its contract with ESI. However, because the State had to administer this "offering", there were additional fees associated with the State program, and there was not enough evidence of savings. As a result, I am not aware of any public sector group that took advantage of the plan. Regarding health insurance plans, there could be initial savings for smaller, NON-SELF funded plans currently paying very high "community" pooled rates through Blue Cross. 

This "option" should be reviewed to determine whether the advantages are significant enough to pursue.

HB 5325—This bill seeks to amend PA 312 by adding “ability to pay” language and re-stating where an arbitration panel should place “weighting” on factors under consideration

• Interest and welfare of the “public” and ability of the unit of government to pay
• Arbitration panel shall not consider unused millage or assessment capacity

Panel should consider the following:

1. financial impact of award over 5 years
2. all liabilities, whether or not appearing on balance sheet
3. obligation to operate under a balanced budget
4. financial climate of region, state & country

Panel shall afford weight to the following factors, as follows

1. most significance shall be given to a determination that govt unit has financial ability to pay
2. Internal comparables vs. external comparables

OTHER REFORM PROPOSALS:

Public Employee Healthcare Reforms – (Savings $615 Million)

Benefit Elimination for Newly Retired Lawmaker Health Plans

Eliminate health care benefits for legislators who have not vested before Jan. 1, 2010.

Estimated Savings – Less than $5 million

Legislation - SBs  132 and 133

Local Police & Fire Reforms – (Savings $70 - $118 Million)

Encourage Cooperation of Local Police and Fire Services

This reform amends the Urban Cooperation Act and the Intergovernmental Transfer of Functions Act. The legislation would specify that nothing in either act requires job providers to pay employees the highest wages and benefits previously paid to any employees or their pre-existing bargaining units who are either 1) transferred from one political subdivision to another or 2) employed under an inter-local agreement. 

Estimated Savings – Indeterminate. These changes, however, will remove roadblocks to consolidation of local services, including police, fire, sewer and other services to save money.

Legislation -  SB 1085 and  SB 1086

Expedited Arbitration Process for Police and Fire -- PA 312 Reform

The legislation amends Public Act 312 to strengthen the training and quality of arbitrators, reduce timelines, and change the last best offer process to promote good faith negotiating.  These changes will significantly improve the process leading to more efficient and timely decisions.

Estimated Savings – Indeterminate. The current arbitration system raises costs from 3 to 5 percent, or $70 - $118 million. Local governments units accrue savings.

Legislation -  SB 1072