Public Employees Health Benefits Act, Public Act 106 of 2007, MCL 124.73, et seq.

The Public Employees Health Benefit Act, MCL 124.71, et seq., places conditions on how public employers, including townships, may provide medical benefits to their officials and employees.

PA 106 defines a "medical benefit plan" as "a plan, established and maintained by a carrier of 1 or more public employers, that provides for the payment of medical, optical, or dental benefits, including, but not limited to, hospital and physician services, prescription drugs, and related benefits, to public employees." (MCL 124.73).

The act states that, subject to collective bargaining agreements, a public employer may provide medical, optical or dental benefits to public employees and their dependents by any of the following methods (MCL 124.75):

(a) By establishing and maintaining a self-insured plan.

(b) By joining with other public employers to establish and maintain a public employer pooled plan to provide medical, optical or dental benefits to no less than 250 public employees on a self-insured basis as provided in the act.

(c) By procuring insurance coverage or benefits from one or more carriers (an insured plan), either on an individual basis or with other public employers.  This is the most common approach, where the township contracts with a medical benefits insurance company.

Unless a township has an individual, self-insured plan, it is subject to the bid requirements of PA 106:

1) Before a township begins to offer a medical benefit plan, the township must solicit (request) four or more bids, including a least one bid from a "voluntary employees' beneficiary association" (VEBA) as described in section 501(c)(9) of the Internal Revenue Code (26 USC 501(c)(9)).

2) Once a township is offering a medical benefit plan, the township must solicit four or more bids every three years when renewing or continuing the medical benefit plan, including at least one bid from a VEBA.

A township is not required to change plans when it is subject to the bid requirements, and contracts already in place remain in effect until their normal expiration.

A township may shop around and solicit bids from different carriers, and it may also solicit bids from different plans offered by one carrier.

According to the Michigan Office of Insurance and Financial Services (OFIS), a township can meet the bid requirements by soliciting three different plans from a single carrier, including its current carrier.  For example, if a township has a traditional "fee-for-service" insurance plan with a carrier that offers other types of plans, such as a health maintenance organization, managed care network, point-of-service plan or preferred provider organization, the township could solicit bids for its existing plan, plus the other plans the carrier offers.

PA 106 places no restrictions on which bid a township accepts, and the act does not prevent a township from continuing or renewing its current plan.

A township unable to locate a VEBA may meet the requirements of PA 106 by publishing a public notice or advertisement in a trade or general circulation publication inviting VEBAs to submit bids in response to the notice.  A township is not required to actually receive a bid from a VEBA.

For more information on PA 106, visit the Michigan Department of Labor and Economic Growth Web page by clicking [here].