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LANSING UPDATE

From: Ellen Hoekstra
Legislative Update
June 25, 2010

New Version of Mandatory Health Care Bill Still Includes Retirees

A new version of HB 5345 (Rep. Andy Dillon, D-Redford) has been in circulation for several weeks and there has been one meeting of the committee that he created for the sole consideration of this legislation. The bill is based on one fatal flaw: the assumption that it is better to have one single set of health plan options designed by a state-appointed board for all school district and community college and university employees and retirees. At the hearing which took place on the latest version of the bill, the only testimony came from Speaker Dillon and the staff member assigned to this issue. They presented the bill as providing an "opportunity for savings ranging from $700 to $900 million." However, the House Fiscal Agency has yet to do a fiscal analysis of either the bill as introduced or the new version - unlike any other piece of legislation with fiscal implications.

In the new version of the bill, the 13-member board would be given 210 days to get claims data from all public employers in Michigan, design coverage plans, and assess savings. If the actuarial analysis of the state-developed plans demonstrates savings of at least 2% ($100 million) in premiums over current public employer expenditures, then the office of the state employer shall communicate this to all public employers within 15 days. One set of questions about the proposal is whether a new board could be appointed within a 30 day period and whether the other time restrictions are at all realistic. Another set of concerns, coming from both Republicans and Democrats, is whether the legislation does not set up a new, large bureaucracy to set up a plan that would not be implemented if the savings are not demonstrated.

AFT Michigan and other unions have rightfully criticized the bill as introduced because it removes the design of health care plans from collective bargaining. The new bill allows bargaining over whether employees take both medical and prescription plans, which plans will be offered to employees from the small number set up by the state and how much employees have to pay in premiums and copayments. Employers and employees may opt out if they negotiate a plan with "comparable benefits to public employees at a lower cost." Apparently, state policy would forbid a union for deciding their best option was to have "incomparable" benefits, albeit at a lower cost or even the same cost.

Also, public employers can opt out for a plan that costs "more than the illustrative average annual program premium" - with a huge "however": if they do so, the "The public employee shall bear any costs above the illustrative average annual premium costs for the program...to provide alternative health benefit plans." The legislation defines these costs as including "all overhead and administrative costs and fees, including costs, paid by the public employer to design, purchase, manage, and administer the health benefit plans." Thus, unions would not be able to negotiate health care benefits against wage increases - or if they did so, their members would end up not only getting smaller paychecks but also picking up added health care costs.

Under the provisions mentioned above, retirees presumably would have to pay 100% of the additional cost as well. Another big disappointment with this version of HB 5345 is that it still includes all public sector retirees. To AFT Michigan, this makes no sense, particularly when you consider that all public school and community college retirees - and some university retirees - are already in a single large statewide plan. This plan, the MPSERS plan, is already well position to take advantage of bulk purchasing. Most importantly, because this plan represents solely retirees and their beneficiaries, it has been able to negotiate financially favorable arrangements with Medicare. Retirees have avoided bearing even greater cost shifts as a result of the ability to move in and then out of Medicare Advantage.

As a recent Lansing State Journal editorial said: "So, first the Legislature is to enact a huge new program, with no independent, detailed financial analysis. Then, after it becomes law, the state will begin gathering the information to make sure the new program will save money. And if the information doesn't show enough savings, the whole thing will come to a halt. . . Dillon and his supporters don't have the details to carry the argument."

Please communicate again with your area legislators to urge Speaker Dillon not to move HB 5345 forward, but if he does, vote "NO."

 

Michigan Public School Employees' Retirement Board Reappointments

Governor Granholm has recently reappointed both John Olekszyk, former president of Roseville Federation of Teachers, AFT Local 1071 and Michael Riguette, retirement plan consulting actuary with Watson Wyatt Worldwide to the Michigan Public School Employees Retirement Board. John Olekszyk is designated as a representative of retired teachers (very appropriately, given his role with AFT Michigan retirees) with a term ending March 30, 2014. Michael Ringuette will continue to represent the general public with experience in health insurance or actuarial science, with his term also ending March 30, 2014. The School Employees' Retirement Act has specific designations for these and other categories.

The twelve members of the Michigan Public School Employees' Retirement Board oversee the Michigan Public School Employees Retirement System administration through their representation of active and retired public school employees. Their most important tasks include approving modifications of the details of the retiree health care plan, including determining copayments and deductibles, approving duty and non-duty disability pension benefits, determination (along with DMB)of actuarial assumptions, and taking policy positions regarding legislation that affects members of the plan. Eleven members are appointed by the Governor and one - the State Superintendant of Public Instruction - serves ex officio by virtue of office. Unless disapproved by the Senate within sixty days, these appointments will stand confirmed.

Ellen Hoekstra
Capitol Services, Inc.
June 25, 2010