Should our municipality choose the PA 152 hard cap or the 80/20 option?

Compare your plan's total annual costs to the hard caps. If costs are at or under the caps, the hard cap is almost always better: it permits the employer to pay up to 100%, while electing 80/20 caps the employer at 80% and forces at least a 20% employee share. If costs exceed the caps by less than roughly 25%, the hard cap usually still results in a smaller employee share. Once total costs exceed the caps by more than about 25% (total cost above the aggregate cap divided by 0.8), the 80/20 option permits the larger employer contribution. The 80/20 election requires a majority vote of the governing body every year; the hard cap applies automatically.

When does the 80/20 option allow a larger employer contribution than the hard cap?

The crossover is the aggregate hard cap divided by 0.8 — that is, when a plan's total annual costs run more than about 25% above the aggregate cap. Below that line the hard cap is the more generous framework, because it permits the employer to pay up to 100% of costs that fit under the caps. Above it, 80/20 permits the larger employer contribution. Everything else is arithmetic on your census.

Does the PA 152 80/20 option require an annual vote?

Yes. The 80/20 election requires a majority vote of the governing body every single year. The hard cap, by contrast, applies automatically and requires no vote — which is the procedural difference that often decides the question for smaller employers.

Hard cap vs. 80/20 — which should our municipality choose?

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Last verified: October 2026 Sources: MCL 15.563 (hard caps) · MCL 15.564 (80/20 alternative) · Michigan Treasury annual cap notices · Reviewed by EBS

The decision comes down to one comparison: your plan's total annual costs against the hard caps. If your costs are at or under the caps, the hard cap is almost always the right answer — it permits the employer to pay up to 100%, while electing 80/20 would force at least a 20% share onto employees. If costs run over the caps by less than roughly 25%, the hard cap usually still leaves employees with the smaller share. Only when total costs exceed the caps by more than about 25% does the 80/20 option permit the larger employer contribution. And remember the procedural difference: the hard cap applies automatically; 80/20 requires a majority vote of your governing body every single year.

The two paths, side by side
	Hard cap (default)	80/20 election
What limits the employer	Fixed dollar caps per employee by coverage tier, summed across the group (current amounts)	80% of the total annual costs of all medical benefit plans
Vote required	None — applies automatically	Majority of the governing body, every year
Smallest possible employee share	$0 — if costs fit under the caps, the employer may pay all of it	20% of total costs, no matter how inexpensive the plan
What moves the number each year	Treasury's annual cap adjustment (medical-CPI)	Your plan's actual renewal — the 80% tracks costs wherever they go
Best fit	Plans priced at, under, or modestly over the caps — most small-group municipal plans we see	Rich plans priced well above the caps (roughly 25%+ over), often legacy or CBA-driven designs

The math that decides it

Under the hard cap, the employer's maximum contribution is the aggregate cap — the per-tier dollar amounts multiplied by your enrollment counts and summed. Under 80/20, the maximum is 80% of total annual costs. Set those equal and you get the crossover: the 80/20 option starts permitting more employer money exactly when total costs exceed the aggregate cap divided by 0.8 — that is, when costs run more than 25% above the cap. Below that line, the hard cap is the more generous framework; above it, 80/20 is. Everything else is arithmetic on your census.

Worked example — the same six-employee village, three price points

Aggregate 2026 hard cap: $83,756.25. Crossover point: $83,756.25 ÷ 0.8 = $104,695.

At $78,500 (current plan): under the cap. Hard cap permits the village to pay 100% — employees can owe $0. Electing 80/20 here would force employees to pick up at least $15,700. Hard cap wins, and it isn't close.

At $85,565 (after the 9% renewal): $1,809 over the cap. Under the hard cap, employees pick up that $1,809 excess — about 2% of costs. Under 80/20 they'd owe at least $17,113. Hard cap still wins decisively — switching to 80/20 to "fix" a renewal overage this size would be a massive overcorrection.

At $110,000 (a rich plan, well above the crossover): under the hard cap, employees owe the $26,244 excess — about 24% of costs. Under 80/20 they owe $22,000 — 20%. Now the 80/20 election permits the larger employer share, and the annual vote earns its paperwork.

What people miss

80/20 forces a 20% employee share even on a cheap plan. Boards sometimes elect 80/20 believing it's "the generous option." If your plan fits under the caps, the opposite is true — the hard cap lets you pay all of it.
The 80/20 vote expires every year. Miss the vote and you default back under the hard cap — possibly mid-stream, with a contribution structure that no longer complies: does the opt-out require a board resolution every year?
"Total annual costs" is bigger than premium. Both paths count employer-funded HSA dollars and copay/deductible reimbursements, and the comparison changes when you count them right: what counts toward "total annual costs" under PA 152?
The caps are calculated per tier — but no individual employee is capped. The hard cap is an aggregate limit: the per-tier dollar amounts times your enrollment counts, summed. Within that total, MCL 15.563 lets the employer "allocate its payments for medical benefit plan costs among its employees and elected public officials as it sees fit" — and under 80/20, MCL 15.564 gives the same flexibility for allocating the employees' share. That's real room for tiered contribution strategies and bargaining, as long as the aggregate math holds.
Under 80/20, elected officials must personally pay at least 20%. MCL 15.564 requires each participating elected public official to pay 20% or more of that plan's total annual costs — no allocation flexibility softens it. A board voting for the 80/20 election is voting to put its own members on the hook. Under the hard cap, no such per-person rule applies.
Collective bargaining agreements complicate timing. Plans under a CBA follow their own effective-date rules for when the caps first bite — if you're negotiating, check before you promise anything.

How to decide in practice

Because the election is annual, this is not a one-time decision — it's a calculation to re-run at every renewal, with that year's caps and that year's rates. The pattern we see across Michigan's small municipal groups: most plans sit under or near the caps, where the hard cap quietly wins, and boards that elected 80/20 years ago are often paying for a decision nobody has re-examined since. Five minutes with your census and the current cap table answers it: 2026 & 2027 hard cap amounts.

Want this handled for you — free, every year, automatically?

EBS runs the hard-cap-vs-80/20 math against your actual census at every renewal, and prepares the board resolution language if the vote is worth taking. It's part of how we work as your agent — there's no fee for it.

Call EBS toll-free · (866) 793-2764 or send us a note