Michigan House Speaker Andy Dillon sparked statewide debate this summer when he proposed combining all Michigan public-sector employees into a statewide health plan. The Redford Township Democrat said the plan would save money through economies of scale, and through bringing benefits public employees receive more in line with those in the private sector.

Capping district payments and sharing premium increases are both responsible ways for school districts to gain control of expenses.

Though the debate over public employee health benefits is now occurring on the state level, it will sound very familiar in many Michigan cities, villages, counties and school districts. Governments at all levels face fiscal problems, and one cause of cost overruns has been employee benefits agreed to in collective bargaining.

In response, many school districts are finding ways to bargain for increasingly consumer-driven health care. Districts have negotiated cost-saving shifts to provider networks, office visit co-pays and higher prescription co-pays, as well as health savings accounts. A number of Michigan public school districts also have started sharing premium costs with their employees, a practice common in the private sector.

"We knew that to be fiscally responsible we needed to have employees share in insurance costs," Superintendent William Pearson of South Lyon Public Schools said in a telephone interview. The South Lyon district began sharing premium costs in the late 1990s.

Under longstanding contract language, the district pays the first 5 percent of the increase in health insurance premiums in a given year, while employees pay for any further increase. In 2008-2009, teachers and administrators paid a total of $1,235 per person, Pearson said.

In addition to capping the district's insurance costs, South Lyon's contract pegs salary schedule increases to state per-pupil funding and also requires employees to contribute to increased retirement costs, according to Pearson.

"That's always helped us to budget," he said. "It gave us stability, and that's what we were after."

A 2007 survey by the Mackinac Center, which publishes Michigan Privatization Report, showed that 75 of the 150 public school districts that participated had bargained contract agreements in which teachers or other employees paid a share of their annual health insurance premium. At the time of the survey, the monthly teacher share ranged from $20 to more than $125.

Some of those payments reflect only employees who choose voluntarily to "buy up" to a more expensive and extensive health care plan, typically the Super Care plan offered through the Michigan Education Special Services Association, a third-party insurance administrator affiliated with the Michigan Education Association. But in some districts, teachers are paying part of the annual premium for less-expensive plans, such as MESSA's Choices II.

Like South Lyon, some districts cap their expenses in the form of a "first 5 percent" limit. Others negotiate a dollar cap, sometimes benchmarked to state funding, while others split the total premium in 90/10 or 85/15 arrangements. One example is the Traverse Bay Area Intermediate School District, which recently settled a contract that continues a 10 percent health premium contribution from employees.

"Like many organizations, we're trying to create stronger wellness programs and consumer-based health care," Traverse Bay Area ISD Superintendent Michael Hill said. "When you're paying out of pocket, you pay attention to wellness."

Traverse Bay employees will switch from Super Care to Choices II, a preferred provider plan, and now will be responsible for certain co-pays in addition to the premium contribution. They will pay a deductible if they choose out-of-network providers.

Their monthly premium contribution will decrease, Hill explained, because the total annual cost for Choices II is about $257,000 less than for Super Care. That savings made possible a 2 percent pay increase in 2009-2010 and a 2.25 percent increase retroactive to the beginning of the 2008-2009 school year, he said.

"Any percent (salary) increase was based on movement to find that revenue," he said. In researching pay scales and health care plans in other districts, Hill noted, "We knew we had to hold firm with our 10 percent. We didn't see a lot of districts doing that."

Elsewhere in northern Michigan, Sault Ste. Marie Area Schools and its teachers recently negotiated a contract that puts a dollar cap on the amount the district will pay. Teachers will pay the difference between the cap and the premium total, Superintendent Daniel Reattoir said.

"Our goal was not only to control the cost, but to put ownership in their (employees') hands," Reattoir said, explaining that employees have paid part of their health care premium at least since 2001. In 2009-2010, teachers will pay about $118 in each of 20 pay periods for Choices II, or about $60 for dental and vision coverage only.

"This way it requires everybody to get involved, because if their co-pay is increasing, they want to know why," he said.

Putting these caps in place gives districts  greater control over their expenses, but perhaps more importantly, it communicates to the employees themselves the cost of benefits they receive. A dollar saved in benefits can be a dollar spent on salary.

That's the point that arbitrator Donald Burkholder made when he recommended that Leslie Public Schools and its teachers come to terms on sharing costs for health insurance. Some of the anticipated savings should be spent to give teachers a raise, he wrote.

"(N)ot agreeing to some form of limit when selecting a preferred (health) plan would be irresponsible and illogical," Burkholder wrote last fall, as the fact-finder in a case between the school district and the Ingham County Education Association. "An additional advantage (to such an agreement) is that it motivates more attention to plan selection and use by the insured."

Teacher contributions in Leslie Public Schools rose significantly in 2007-2008 and 2008-2009, due to contract language requiring them to pay any premium increase in the interim period between contracts. When their contract expired in 2007, teachers were paying about $780 a year toward the MESSA TriMed plan. By 2008-2009, with no new contract in place, some teachers were paying up to $2,460 a year, according to Scott Blankinship, the district's former business manager.

The district and teachers signed a four-year pact early in August that puts teacher contributions at $1,040 per year and includes higher co-pays and deductibles.

Blankinship echoed South Lyons' concerns about budget stability and emphasized the need for predictable costs: "Without that cap, or some control, we're very vulnerable," Blankinship said in a telephone interview.

Lansing Waverly also has negotiated an agreement with its teachers that caps the district's premium contribution in any given year, according to business manager Rob Spagnuolo. In the coming year, the district will pay a maximum of $1,280 for a two-person plan and a maximum of $1,375 monthly for family coverage.

Nationally, most workers who have insurance coverage through their employers contribute to the premium, according to the 2008 Employer Health Benefits survey conducted by the Kaiser Family Foundation. Only 7 percent of workers with family coverage and 20 percent of workers with individual coverage work for a firm that picks up the total cost, the survey showed.

On average, workers with family coverage pay about 27 percent of the premium, or $280 monthly, while those with single coverage pay about 16 percent, or $60 a month, the survey found.

As an occupational group, public school teachers "cost" more in compensation than other occupational groups in state and local government, according to a March 2009 Compensation Survey by the U.S. Department of Labor.

The survey found that all state and local government workers combined cost an average of $40 for every hour worked, made up of $26 in wages and $14 in benefits. Public school teachers at the elementary and secondary level, however, cost an average of $52 an hour, made up of $37 in wages and $15 in benefits.

The benefits packages negotiated by Michigan public school workers typically exceed those in the private sector. Despite receiving 9.5 percent more in state per-pupil revenues now than in 2004, public school districts continue to face budget trouble. Capping district payments and sharing premium increases are both responsible ways for school districts to gain control of expenses.

Lorie Shane is the managing editor of the Michigan Education Report, the Mackinac Center's online education policy journal.