The recently enacted Publicly Funded Health Insurance Contribution Act ("Act") significantly changes the landscape of public employer-provided health insurance.  This legislation was signed by Governor Snyder on September 27, 2011, and provides that it is effective immediately.  Key provisions include:   

• To the extent permitted by the Constitution, the Act applies to medical benefit plans of all public employees and elected public officials, whether or not such public employees are members of a collective bargaining unit.

• If the Act's requirements are inconsistent with a labor contract or other agreement in effect on the effective date of the Act, the Act's requirements do not apply until the labor contract expires.  The Act's requirements apply to any extensions or renewals of labor contract.  Labor contracts executed on or after September 15, 2011 may not include terms inconsistent with the Act.

• "Hard cap" option: Limits the amount a public employer can pay (for its employees' or public officials') annual costs or illustrative rate, and any reimbursement payments for co-pays, deductibles, or payments into health savings or flexible spending accounts to not more than a total amount equal to $5,500 times the number of employees with single person, $11,000 times the number of employees with individual and spouse coverage, plus $15,000[1] times the number of employees with family coverage, for a plan coverage year beginning on or after January 1, 2012.

• Public employers can allocate their payments for medical benefit plan costs among employees and elected officials as they see fit.

• Alternatively, instead of the "hard caps" set forth above, a public employer could, by majority vote of its governing body, elect to pay not more than 80% of the total annual costs for all the medical benefit plans it offers or contributes to for its employees and elected officials.  Each public official who participates in a medical benefit plan offered by a public employer shall be required to pay 20% or more of the annual costs of the plan.

• The Act permits a local unit of government to exempt itself from the Act's requirements for the next year by a two-thirds vote of its governing body.  Such an exemption would have to be renewed each year by a two-third vote.

• Public employers can deduct these costs from a covered employee's compensation, and may condition eligibility for the medical benefit plan upon authorization of the employer to deduct the costs.

• If a public employer does not comply with the Act's requirements, a 10% penalty in the employer's economic vitality incentive payments under 2011 Public Act 63 and School Aid payments will be imposed.