How to Save $500 Million on Michigan Schools

Michigan could save around $500 million if public school employees contributed the same percentage toward their employer-provided health insurance benefits as federal workers do, on average. The reform would generate savings of more than $300 per pupil.

According to figures from the Michigan Department of Education, in the 2008-2009 school year, school districts statewide spent $1.989 billion annually on employee health insurance. Also, the U.S. Office of Personnel Management reports that the average federal employee health insurance benefit plan requires a 27 percent employee contribution. Applying the same employee share to school employees comes to $537 million.

However, the potential savings figure must be adjusted downwards because some school employees already contribute to their coverage. But, MDE data show that 63 percent of the total state expense for school health benefits is for teachers, and teachers contribute nothing in more than 300 school districts according to a 2009 Mackinac Center survey. Noninstructional (and especially non-unionized) employees are more likely to pay for some of their health care costs.

On the other hand, if a 27 percent contribution were required from all school employees, it’s likely their demands for gold-plated coverage would be muted, resulting in greater savings. Based on the Center's 2009 survey, schools paid 44 percent more for family plan health insurance premiums on average than the private sector average of $10,341 in 2009. When school employees start bearing more of the burden, they would think twice before holding out at the bargaining table for the most costly coverage. 

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.