Retirement, auto insurance reforms among Snyder goals

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – Michigan Gov. Rick Snyder is setting an ambitious agenda for the remainder of this year, acknowledging a limited window for action ahead of an election year when voters will decide his replacement and a new Legislature.

“The most active period should be this fall, because next year will be more challenging,” Snyder said in a Wednesday interview with The Detroit News editorial board, foreshadowing his lame-duck status in 2018. “As you get closer and closer to an election, you have to be pragmatic.”

With the legislative session set to resume in September, the term-limited Republican governor will urge action on local government pension and retirement health care reform, recycling, technical education and no-fault auto insurance reform.

Some priorities could be a challenge. Snyder has called for changes to drive down the cost of no-fault auto insurance since at least 2013, but reform has proved elusive over proposals that could affect various industries and those injured in car crashes.

Local government retirement reform may also prove complicated. A task force appointed by the governor released a report this month that proposed a series of policy options but warned against a “one-size-fits-all solution” for cities, villages and counties facing unique challenges.

But some Snyder priorities appear to align with the Legislature, where the House GOP led by Speaker Tom Leonard of DeWitt is taking the lead on auto no-fault auto reform this session. Senate Majority Leader Arlan Meekhof, R-West Olive, has also long supported changes.

While the devil will be in the details, the motivation is clear: “Our insurance rates are too high,” Snyder said.

The governor backed a 2013 plan that would have put a $1 million cap on lifetime medical benefits for people catastrophically injured in auto accidents, ending the state’s unlimited lifetime benefit. But Snyder made clear Wednesday he does not want to go down that path again.

“There are issues and challenges around that,” he said. “And it’s actually not the highest cost piece.”

Instead, Snyder and House Republicans both appear to be focusing on addressing health care costs associated with treating auto accident victims, including medical charges that are often much higher than claims submitted through traditional health insurance.

Snyder cited the potential for a medical fee “schedule” or similar approach to managing costs “so it’s not just sort of a different charge model than everything else.”

“How can it correlate to either a private insurance model or some other kind of schedule? (Those) are good reforms we should be looking at, not just in terms of the hospital side, but also what do you do for longer-term care.”

The Michigan Legislature last month finalized an overhaul of the state’s teacher pension system, and Meekhof has identified local government retirement reform as a likely follow-up in the Senate. A House plan introduced late last session would have forced many local government retirees to pay more for their health care, but it stalled amid protests from police and firefighters.

Snyder established a task force this year to address what he has called “growing financial problems” in local units across the state. Michigan municipalities and counties have a combined $10 billion in unfunded health retiree health care liabilities, $7.4 billion in unfunded pension commitments and $4 billion in bonded debt, according to a recent report.

The reform process should start with better accountability and transparency requirements for local government, Snyder said. The next step should be creating an “early warning” system to help identify local governments facing potential problems, he said.

The state should provide local governments with “a series of best practices that you need to seriously look at doing,” Snyder said. “And if you don’t look to do that, you need to be talking to your citizens about raising taxes and having your citizens involved in some fashion.”

Asked if there should be a “hammer” to force retirement reforms, Snyder said he wants to avoid an emergency-manager model and noted his task force recommended creation of a Municipal Stability Board to help local governments develop a corrective action plan.

Pension and retiree health care costs are not a major problem in many cities, and the long-term cost curve is improving in many others, the governor said.

“And then there’s a handful that are in trouble,” he said, noting he does not have the answer right now but sees an opportunity to address their troubles in “a thoughtful fashion.”

The task force identified some trouble spots. The city of Lansing has more than $431 million in unfunded retiree health care liabilities, the largest in the state. Health care liabilities top $275 million in Warren, $240 million in Flint, $232 million in Taylor and $231 million in Pontiac.

Detroit’s municipal pension system is 65 percent funded, with liabilities of $2.9 billion, according to the report. Pension liabilities top $564 million in Wayne County, $306 million in Lansing, $279 million in Warren and $185 million in Genesee County.