The premiums may be paid by the policyholder:
(1) Wholly from funds contributed by the insured public employee, by payroll deduction or otherwise;
(2) Wholly from funds contributed by the public employer; or (3) Partly from each. No payment of premium by the public employer shall constitute compensation to an insured public employee for the purposes of any statute fixing or limiting the compensation of such an employee; any premium or other expense incurred by the public employer shall be considered a proper cost of administration.