Chelsea has opted for the 80/20 cost-sharing health care option for its 45 full-time employees to comply with the Michigan Publicly Funded Health Insurance Contribution Act known as Act 152.

This means the city will pay 80 percent of the health care costs of full-time employees and the employees will pay 20 percent of the costs. Currently, the employees pay between 10 and 16 percent of their health care costs.

Act 152 was put in place to reduce the amount of health care costs that are paid to public employees and the city had until January to choose one of four options offered by the state.

The vote wasn’t unanimous, however. Councilmen Frank Hammer and Bill Holmberg voted against the resolution.

Hammer said he didn’t think it was fair for non-union employees to have increased costs for six months while the union employees’ health care contribution amounts wouldn’t change until their new contract takes effect in six months.

“We didn’t write the state law,” City Manager John Hanifan said, “We can opt out, but it will put us in jeopardy” of losing state revenue sharing money.

Part of the problem, he said, is that Chelsea’s budget year runs from July 1 through June 30 and the state is using a calendar year. In addition, the city's union contracts don't expire until June 30, 2012, so there will be no changes in union member health benefit costs until new contracts are negotiated.

The state mandate, however, takes effect on Jan. 1, 2012, which means non-union employees will see changes in their health care costs immediately.

In addition, because the city is half-way through a health care contract, it’s unknown what the new costs will be in 2012, Administrative Director Kim Garland said, which made the 80/20 option “the simplest and clearest option.”

Holmberg said it sounded like the city was choosing the 80/20 option “out of convenience,” and asked if city employees had been polled to find out which option they’d prefer.

Garland said the employees had not been asked about a preferred option but the city will have the ability to choose a different option next year.

“We are trying to find the best balance for the city,” Hanifan said.

If the city failed to adopt one of the first two options, either the 80/20 or a hard cap, which limits the amount of money the city can contribute to an employee's costs, it risked losing about $27,000 of the city’s total state shared revenue in fiscal year 2010-2011.

Many cities have gone with the 80/20 option, Garland said. Ann Arbor was one of them, while Saline chose to go with a hard cap next year.

Savings to Chelsea "will be minimal in the first six months," Garland said, but will amount to about $30,000 in savings once the union employees begin paying their 20 percent of the health care costs.

There are 10 non-union employees, 10 members of the Police Officers Labor Council union members and the 25 members of the Teamster’s Union.

Lisa Allmendinger is a regional reporter for AnnArbor.com. She can be reached at lisaallmendinger@annarbor.com. For more Chelsea stories, visit our Chelsea page.