PA 152 Explained: Hard Cap, 80/20, and Opt-Out Choices

Michigan’s Public Act 152 of 2011 gives every public employer in the state three ways to limit what it spends on employee health insurance each year: a hard dollar cap, an 80/20 cost-sharing split, or a full opt-out available to most local governments. The choice is made annually, before the medical plan year begins, and it applies to school districts, counties, cities, townships, libraries, and other government entities. Which option fits depends on what kind of employer you work for and what the governing body is willing to vote for.

The Hard Cap

The hard cap is the default. It sets a maximum dollar amount the employer can pay toward an employee’s medical benefit plan in a calendar year, and anything above that falls on the employee.

For the 2026 plan year, the Michigan Department of Treasury set the caps at $7,942.09 for single coverage, $16,609.38 for individual-and-spouse or individual-plus-one-dependent coverage, and $21,660.30 for family coverage, a 2.9 percent increase over 2025.¹ For 2027, Treasury announced caps of $8,108.35 for single, $17,107.66 for individual-and-spouse, and $22,310.11 for family, a 3.0 percent increase.²

The caps rise each year based on the medical care component of the U.S. Consumer Price Index, using Bureau of Labor Statistics data for the most recent 12-month period available.³ Treasury publishes the updated figures by April 1 each year.

“Total annual costs” under the cap is broader than the premium. It includes employer reimbursements for co-pays and deductibles, and employer payments into health savings accounts, flexible spending accounts, health reimbursement arrangements, or similar health care accounts.⁴ Dental, vision, and disability insurance are excluded from the calculation.

The 80/20 Option

An employer can instead agree to pay no more than 80 percent of the total annual costs of all medical benefit plans it offers, with employees picking up the remaining 20 percent. To use this option, the employer’s governing body must pass a resolution by majority vote each year before the plan coverage year begins.³

Employers have some flexibility in how they allocate the 20 percent employee share across staff, but there is one firm rule for elected officials: each elected public official on the plan must individually pay at least 20 percent of the total annual costs of their coverage.

The same broad definition of “total annual costs” applies here as under the hard cap, so account contributions and co-pay reimbursements count toward the employer’s 80 percent share.⁴

The Local Government Opt-Out

Local units of government — counties, cities, villages, and townships — can exempt themselves entirely from PA 152 by a two-thirds vote of their governing body.⁵ The vote must be taken separately each year; it is not a one-time waiver.

Two groups cannot use the opt-out. Public school districts were excluded from the exemption authority when the law passed, so school employees have been subject to either the hard cap or the 80/20 option since 2012 with no alternative.⁶ Public Act 184 of 2014 added a second exclusion: any city with a population greater than 600,000 is barred from opting out, a provision that applies to Detroit alone.⁷

Choosing an Option Each Year

The choice between the three options is annual. Whether the governing body is passing the majority-vote resolution for the 80/20 or the two-thirds-vote resolution for the opt-out, that action has to happen before the start of the medical benefit plan coverage year. The Michigan Department of Treasury’s Revenue Sharing and Grants Division publishes sample resolutions and a frequently asked questions document for employers walking through the choice.²

Collective bargaining agreements don’t override the law. Any contract in effect on September 27, 2011, that conflicted with PA 152 was grandfathered until it expired, but every contract signed after that date must comply with the hard cap or the 80/20 limit.⁴ When a contract expires, the employer must hold wages and benefits at the expiration-date level but cannot push its health care contributions above what the expired contract allowed; employees carry any premium increases until a new agreement is ratified.

What Happens If an Employer Doesn’t Comply

Enforcement runs through state agencies, not through employee complaints. The State Treasurer can reduce payments under the Economic Vitality Incentive Program by 10 percent during a period of noncompliance. The Department of Education is required to assess a penalty on School Aid Fund payments to a noncompliant school district. Under a 2012 amendment, the Michigan Department of Transportation may withhold Michigan Transportation Fund distributions from local road agencies that are out of compliance.⁴ The law provides no mechanism for individual employees, residents, or third parties to sue over noncompliance.

Why the Hard Cap Pinches School Employees

More than 80 percent of traditional K-12 districts use the hard cap as their compliance method, and because districts can’t opt out, hard-cap math shapes their employees’ paychecks directly.⁶ The cap moves with the medical care CPI, but actual health insurance premiums often rise faster. When they do, the gap lands on the employee.

The 2025 plan year showed how sharp the squeeze can be. The hard cap went up by just 0.2 percent, giving districts room to add only $15 more per year to a single-coverage plan and $42 more to a family plan. If actual premiums rose by 8 percent, an employee on a family plan could face an estimated $1,878 increase in out-of-pocket costs, a 63 percent jump in their share of health insurance expenses in a single year.⁶

A Pending Fix That Hasn’t Taken Effect

House Bill 6058, introduced on November 12, 2024, by Representative Mai Xiong, would raise the hard cap amounts, establish a floor requiring public employers to pay at least 80 percent of total health care costs, and set future annual cap increases at the greater of 3 percent or the average health care insurance increase.⁸ Companion Senate bill SB 1130 proposed replacement hard caps of $8,258.54 for single coverage, $17,271.17 for individual-and-spouse coverage, and $22,523.34 for family coverage.⁹

The House passed HB 6058 on December 13, 2024, but the bill was never transmitted to Governor Gretchen Whitmer. Incoming House Speaker Matt Hall declined to send HB 6058 and eight other bills to the governor after Republicans took control of the chamber, and the Senate sued. The Michigan Court of Appeals ordered the House to transmit the bills, Speaker Hall appealed, and the Michigan Supreme Court heard oral arguments on May 6, 2026, with no decision issued as of mid-2026.¹⁰ PA 152 has not been amended since 2018, so the Treasury-published caps and the three-option structure remain the law.

Some school districts have responded to the uncertainty by locking current Treasury cap figures as specific dollar amounts in their contracts, protecting against a sudden jump if HB 6058 is enacted. Others have negotiated local cap clauses that hold future increases to a set percentage no matter what the legislature does.¹¹

1
Michigan Department of Treasury. Public Employer Medical Plan Contribution Limits Notice
2
State of Michigan. Publicly Funded Health Insurance Contribution Act
3
Michigan Municipal League. PA 152 Medical Contribution Caps Fact Sheet
4
Michigan Department of Treasury. Public Act 152 of 2011 FAQ
5
MichiganVotes.org. 2011 Senate Bill 7
6
Citizens Research Council of Michigan. Teacher Attraction and Retention Will Be Further Challenged by Inflation and Health Insurance
7
MichiganVotes.org. 2014 House Bill 5569
8
Michigan House Democrats. Xiong Introduces Bill Safeguarding Employee Health Benefits
9
Michigan School Business Officials. ISD Legislative Update
10
Michigan Advance. Michigan Supreme Court Hears Arguments on Whether Nine Approved Bills Must Be Sent to Governor
11
Michigan School Business Officials. Collective Bargaining Trends