Once a school district decides upon a benefit design, it must select the insurance provider and/or “third–party administrator” of the insurance benefits. Third–party administrators implement the health plan designed by the school district. Often, an insurance provider such as Blue Cross/Blue Shield of Michigan will serve as the administrator as well, but this is not always the case. If the insurance provider is selected as administrator, then it obviously precludes the need for a third–party administrator.
School districts should solicit competitive bids for the insurance provider and the third–party administrator (if needed) among the various insurance providers available. Currently, many school districts almost blindly grant MESSA a contract to administer benefits, rather than opening up the process for competitive bidding. If competitive bidding were implemented, there certainly would be cost savings. Districts that have switched from MESSA to other insurance carriers have saved from 6 percent to 28 percent on the cost of providing identical coverage to their employees, which has translated to savings of as much as $500,000 per year.
In short, employee benefits should reward the good work of teachers and other school staff, allowing districts to recruit and retain quality individuals, but not be so lavish that districts price themselves out of the insurance market. With just a few effective reforms, districts can start to control their health benefit costs.