The Forest Hills Public Schools paid its employees $1.7 million in 2010-2011 to opt out of its health insurance package in a lucrative setup that one small business lobbyist said was unrealistic.

At that time, the district offered to pay about $5,000 — the cost of that employee being on the district’s single-subscriber insurance plan — to not take the health care plan in which the district paid 100 percent of the employees' health care premiums.

"So if I don't buy the insurance, you are giving me money I didn't have to pay because the school district paid it?" said Charles Owens, Michigan director of the National Federation of Independent Business. "That's not a business model. That's a government model."

The Grand Rapids school district also pays 100 percent of the premiums for dental, vision, long-term disability and life insurance for those who opt out.

Overall, there were 351 school districts that spent $39 million in 2010-2011 on "cash-in-lieu" payments where the school offers the employee money to opt out of its health insurance plan, according to state records.

The Forest Hills school district changed its plan in the next teacher's contract so that the offer was lowered to 75 percent of a single-person plan in 2011-12, and 80 percent in 2012-13. The teachers also paid 10 percent of their health care premiums in 2011-12 and 11 percent in 2012-13.

Forest Hills Superintendent Dan Behm said cash-in-lieu payments dropped to $885,634 in 20012-12 while total employee benefit costs were $11.6 million.

"Paying insurance-eligible employees a stipend when they elect not to accept health insurance is a long-standing practice on the part of many employers," Behm said. "The idea is to save dollars by having fewer eligible employees on insurance rolls. Why incur the costs of health premiums if the employee is covered by a spouse or does not need the insurance?"

Behm said the language in the contract had been in "for some time" and predated his tenure as superintendent.

Michael Van Beek, education policy director of the Mackinac Center for Public Policy, questioned why Forest Hills even had to have a deal that was so lucrative.

"There are other school districts that pay no cash-in-lieu benefits or that pay substantially less," Van Beek said. "Why is it Forest Hills thinks it needs to spend $5,000 per employee for this perk?"