Public Act 152: Caught Between a Rock and a Hard Place

In 2011, the Governor signed into law PA 152 of 2011, known as the Publicly Funded Health Insurance Contributions Act, which caps the amount of money public employers, such as colleges, cities, townships and villages can pay towards employee health care. The law provides employers with two options for cost sharing. The default option is a monetary “hard” cap based on an employee’s marital and family status. Employees would be required to pick up the difference if insurance exceeded the “hard cap.” The second option allows the public employer to opt out of the monetary “hard cap” and institute an 80/20 split in the cost for health care benefits. The Act imposes severe penalties for failing to comply with its requirements.

The decision to opt out of the “hard cap” must be made annually by the public employer’s governing body. The governing body’s annual election is not required to be negotiated with collective bargaining units. In Decatur Public Schools and Van Buren County Education Assoc, et al, the Michigan Court of Appeals recently ruled that a public school district had no duty to collectively bargain with a collective bargaining unit regarding the school district’s choice between the “hard cap” or the 80/20 election regarding expenditures for total employer annual health care costs for employees. Health care benefits (and, presumably, plan design, deductibles, out-of-pocket maximums, etc.) continue to be mandatory subjects of bargaining and a public employer may not may not make unilateral changes to these benefits without first meeting its bargaining duty.

Despite the fact that the governing body’s election between the “hard cap” and the 80/20 options must occur annually, and is within the sole discretion of the governing body, a MERC Administrative Law Judge in Garden City Public Schools, has held that a public employer may not unilaterally change from an 80/20 contribution to a “hard cap” during the term of a collective bargaining agreement, when “hard cap” was included in the agreement. The Administrative Law Judge held that a school district’s decision to unilaterally change from an 80/20 contribution to a “hard cap” during the term of a collective bargaining agreement, when hard cap was included in the agreement, violated the Michigan Public Employment Relations Act (“PERA”). Instead, a public employer must wait until the collective bargaining agreement expires before implementing the governing body’s election to move between the “hard cap” and the 80/20 options.

Patrick R. Sturdy is a partner in our Livonia office where he concentrates his practice on education law, employment and labor law, and business law. He may be reached at (734) 261-2400 or psturdy@cmda-law.com.