News Story

School Districts Dodging Health Care Cost Savings

Despite state law, many school districts paying more than 80 percent of costs

On the day before a state law mandated that school districts pay no more than 80 percent of teacher health care costs, the Flushing Public School Board signed off on a two-year union contract that forced taxpayers to pay up to 90 percent of those costs.

Flushing is one of a number of school districts that signed multi-year deals that spared its teachers from having to contribute more to their health care as required by Public Act 152. That law, which took effect Jan. 1, allowed a hard cap of $15,000 for districts to pay on health care costs for a family plan or the district could opt to pay no more than 80 percent of the total costs of the medical plan. Any contract signed on or after Sept. 15, 2011, had to include Public Act 152’s cost-saving mandates.

In 2009, prior to the law, teachers in 300 Michigan districts paid nothing to the costs of their own health insurance premiums and their average contribution to the health insurance premium for a family plan was 4 percent. According to the Kaiser Family Foundation, the Michigan private-sector average is 24 percent while the average for federal employees in Michigan is about 27 percent.

In fact, according to the Michigan Department of Education, as of July 2012, hundreds of school districts were paying more than 80 percent of their teacher's health care costs. There were 367 school districts that met four of the five "best practices" to qualify for extra state money but didn't meet the 10 percent minimum cost sharing best practice for employees. Some of those contracts were already in place and not subject to PA 152 until they expired. But many districts signed off on new deals before the Sept. 15 deadline.

Amanda Fisher, assistant state director for the National Federation of Independent Business, said that is why Proposal 2, which would enshrine collective bargaining into the Michigan Constitution, is such a concern.

"If Prop 2 passes, 80/20 goes away," Fisher said. "That’s why Prop 2 is such a problem. A lot of these laws to help cost effectiveness will go away."

Flushing school district officials agreed to pay 90 percent of its teachers’ health care costs in 2011-12 and 85 percent of those costs in 2012-13.

If school employees paid the same amount toward their health care costs as federal employees in Michigan (27 percent), taxpayers would save at least $500 million a year.

Flushing Superintendent Tim Stein said the district agreed to pay more because it saved more than it expected.

"First and foremost, our projections at the time showed over a half-million savings in the first year of the agreement and nearly a half-million in the second year of the agreement over no contract agreement and 20 percent taking effect on January 1, 2012," Stein said in an email. "The majority of the savings for the district was due to lower cost insurance package negotiated, the teacher's paying 10 percent for the full year rather than 20 percent half the year of more costly insurance and wage/step freezes in both years."

Stein said the previous contract expired Sept. 1, 2011 and that the district would have been obligated to pay nearly $400,000 in teacher salary step increases if an agreement had not been reached.

"We also negotiated a change to an Aug. 1 termination date so we would not have to worry about any automatic step increase issue in the future," he said.

But Michael Van Beek, education policy director at the Mackinac Center for Public Policy, said Public Act 54 of 2011, would have solved that problem. Public Act 54 would have prevented the district from having to pay step increases once the contract expired.

"He might be implying here that they wouldn't be able to get the union to concede on the salary side of things if they 'went all the way' on the health insurance side. This might be true, but it's not a valid reason for skirting around the law," Van Beek said.

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.