The state of Michigan could soon be viewed as a model for the country when it comes to keeping government health care costs in line.
With the state school system and employee system employing more than 500,000 workers, state officials a few years ago quietly started ushering new hires into programs other than the open-ended, post-retirement health insurance benefits variety that have so drastically overloaded systems in other states across the country.
As a replacement option, new hires in Michigan are offered supplemental contributions to their retirement savings plans.
The Michigan Supreme Court also ruled in May that Macomb County is not contractually obligated to provide retirees lifetime health care benefits. It is speculated that the decision will impact how other governments handle retirees' benefits.
The Mackinac Center for Public Policy argues it’s all aimed at getting around the long-standing problem of government’s not paying for benefits as employees accrue them but rather as insurance premiums come due, essentially leaving current taxpayers paying payroll expenses incurred by government employees years or even decades prior.
Mackinac adds while the gap for retiree health insurance was smaller at $627 million in 2016, fewer dollars have been set aside to pay these future benefits. Complicating the situation all the more is the unpredictability of rising health care costs and premiums.
By comparison, only three of 24 major private sector employers in Michigan provided any retirement health insurance benefits, according to a 2011 Mackinac Center study.
In addition, only six of the state’s 30 largest cities and townships offered new employees open-ended retiree health benefits as of 2016.
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