Michigan ends health benefit for legislators now only available in 2 Midwest states: Ohio and Illinois

Michigan Rep. Joel Johnson says he entered elective office this year looking to save taxpayers money whenever and wherever he could. Within weeks, he found one of his first targets: a health care benefit for him and his legislative colleagues.

The state was picking up 90 percent of the health care premium of any former legislator who was at least 55 years old and who had six years of legislative service.

“That is not something you see in the private sector,” Johnson says, “or any sector really.”

The cost to the state was roughly $5.3 million a year, a drop in the bucket considering Michigan spends more than $50 billion a year.

“Five million dollars is still real money,” Johnson says. “And my feeling is that when we talk about public service, service does not mean serving yourself. At a time when people are having to get by with less things, we should do the same.”

His colleagues apparently agreed. HB 4087 — a measure similar to bills introduced in previous sessions that failed to pass — received overwhelming bipartisan support in the House and Senate and was signed into law in October.

Some current legislators will still be eligible for retiree benefits if they have served at least six years before Jan. 1, 2013. (Because of term limits, many current legislators, including Johnson, have not served long enough to meet this requirement.)

Eventually the benefit will be gone completely.
In comments submitted to a Senate committee, leaders of the Michigan State Employee Retirees Association warned the change may save $5 million a year, but could also cost the state in another way: limiting the people willing and/or able to run for office in a full-time Legislature like Michigan where lawmakers meet year-round.

“Eliminating the retiree health care benefit for future legislators will diminish, rather than enhance, the motivation of highly qualified people to run for the House and Senate,” they said in the letter.

The association had instead proposed raising the age of eligibility (from 55 to 60) and reducing, but not doing away with, the premium assistance provided to retired legislators.

Regional overview of health benefits for retired legislators, employees
Prior to the change in law, Michigan had one of the most generous health insurance plans for retired state legislators in the Midwest.

A 2007 CSG Midwest survey found that most states in the region provide either no post-retirement health benefits for legislators or no premium assistance. Michigan was one of three exceptions to that rule, with the other two being Illinois and Ohio.

In Illinois, retired members of the General Assembly who have been in the state health insurance program for four years have their entire health care premium paid for by the state.

In Ohio, former legislators with at least 10 years of service are eligible for insurance and premium assistance via the Ohio Public Employees Retirement System. They receive a monthly allowance to pay for health care coverage. Depending on how long the individual has worked in state government and when he or she retired, the allowance covers anywhere from 25 percent to 100 percent of health insurance costs.

Michigan, Illinois and Ohio are also the three states that have traditionally provided the most generous health coverage for retired public employees. In the other eight states, retired public employees must pay most or all of their insurance premiums upon retirement.

Retired workers in these states mostly just receive an “implicit subsidy”: the ability to purchase insurance through a group plan that includes younger, healthier individuals who drive down the cost of health coverage for everyone in the plan. (In most states, retired legislators are eligible to participate in these group health plans but must pay the full premium. Michigan lawmakers will not have this option under the new law.)

Some Midwestern states, though, offer other ways to help employees bridge what can be a costly gap in health care coverage between when they retire from government and when they are eligible for Medicare. In Iowa and Wisconsin, for example, retired workers are able to apply their unused sick leave to their health insurance premium. And over the past decade, Indiana and Minnesota have set up tax-free accounts that help employees save for post-retirement health care.

Article appeared in December 2011 edition of Stateline Midwest »