District shortfalls spark employee insurance debate

Conflict erupts over benefits, classroom spending

In some of Michigan’s largest cities — Lansing, Detroit, Grand Rapids — and even in villages like Vanderbilt in Otsego County, public schools are facing diverse challenges such as student emigration, job cuts and building closures.

Financial challenges come in different forms for different districts, but a comprehensive plan to create a state pool for school employee health insurance is being proposed in the state Senate, in hopes of relieving some financial pressure. Two education bills introduced in January, which would greatly alter how school district employee health insurance plans are administered, are at the center of a brewing school health insurance controversy. Proponents of the measures, among them Republican endorsers Sens. Shirley Johnson and Ken Sikkema, see Senate Bills 55 and 56 as tools to cut a substantial amount of excess spending on insurance administration from school district budgets.

Disputed proposal

Under Senate Bill 55, a state school employee health care board consisting of two members nominated by the governor, two by the Senate majority leader and two by the speaker of the House of Representatives would be created. This panel would take on the responsibility of designing optimal and stable health insurance plans to be offered to certain school and community college employees, similar to the plans covering other state workers. School districts or community colleges choosing to provide health insurance for their employees would be allowed to provide only the insurance plans determined by the new state board. All plan-providing districts would be required to transfer to the state plan after their current plans expire. The Department of Civil Service would "implement and administer a medical insurance plan for school employees and community college employees as determined by the board." Supporters of the revised approach note that the state spends substantially less to insure its employees for comparable levels of benefits than school districts typically do for their employees. By adding school employees into a state plan, school districts would be able to spend a smaller proportion of education funds on health insurance.

If Senate Bill 55 becomes law, Senate Bill 56 would amend 1947 PA 336 — Public Employment Relations Act — to stipulate that collective bargaining agreements involving a public school employer or board of a community college district are subject to the insurance plans administered by the Civil Service.

In July, a $292,000 study commissioned by the state Senate and performed by the Virginia-based Hay Group projected that a health insurance pool for Michigan’s 190,000 public school employees could save the state between $146 million and $281 million in the 2005-2006 school year. According to Gongwer News Service, the study also concluded that health insurance benefits could improve for as many as 90 percent of the state’s public school teachers.

Benefits for salaries?

Senate Republicans believe these bills will allow school districts to spend more education funds in the classroom and not on the administration of employee benefits.

The opponents of the bills, however, see the issue differently. The Michigan Education Association — largely aligned with Democratic legislators — has criticized the proposal. MEA President Luigi Battaglieri made it a cornerstone of his Lansing Lobby Day speech in February. "It’s time to stand up and proclaim that public school employees are not the cause of the education funding problem in this state, and raiding our benefits is not the solution," he said, urging union members to petition their legislators.

The MEA asserts that in the past teachers have accepted lower salaries in exchange for benefits, and that Michigan will not be able to recruit good teachers without providing appealing benefit packages. Battaglieri told Michigan Information and Research Service in March that he "can give … names and places of where (education employees) took less salary in order to maintain the insurance."

Nonetheless, several data sources, including Education Week, the American Federation of Teachers, and the National Education Association indicate that Michigan ranks between second and fourth nationwide in average yearly teacher salary at around $52,000-$54,000.

Michigan Education Special Services Association, the MEA’s health insurance administrator that manages health insurance services for the majority of Michigan school districts, has posted a link to a Web page called "stopthetakeover.net," a site that decries the proposed Senate action.

Still, MESSA has been under scrutiny for over a decade. In 1994, MESSA was ordered to return $70 million of excess reserves to Blue Cross/Blue Shield by the Michigan Insurance Bureau. An influential 1993 Mackinac Center for Public Policy study called MESSA the MEA’s "money machine" for using "unusually costly" health insurance to subsidize the union’s basic operations.

More questions were raised when former Superintendent of Public Instruction Thomas Watkins projected in a report last December that 53 percent of Gov. Granholm’s planned $300 per-pupil funding increase would be spent on employee health care plans, greatly reducing the classroom impact of the proposed increase.

Former MESSA Executive Director Frank Webster has criticized the cost of the most common MESSA family plan, which, according to the Kaisar Family Foundation, is about 50 percent more expensive per year than a typical family plan purchased by employers across the nation. The price of this plan was scheduled to increase by 16 percent to $18,464 in July, according to an Impact HealthCare summary earlier this year.

Also, unlike many typical insurance providers, MESSA will not provide school districts with certain claims histories that are a crucial requirement for shopping around for the optimal plan. Accordingly, some critics believe that part of the reason for the crisis is that many school districts have not been able to seek competitive bids on health insurance plans.

Questions over high costs and the percentage of education funds that many Michigan school districts spend on health insurance plans appear to have given impetus to the Senate’s interest in the issue. On Lobby Day, Battaglieri had his own explanation, "No one in education denies that health insurance has been going up as a result of the national healthcare crisis." According to MIRS, Battaglieri maintains, "MESSA is good coverage at an affordable price. We are very competitive."

Government oversight

Related considerations about public school financing may come to the fore as the Senate considers the legislation. On the Website MichiganVotes.org, one anonymous school employee commented on the bill by asking, "My paycheck does not say ‘State of Michigan’ on it, why should the state dictate my insurance options?" The School Aid Fund, by far the largest source of state aid to schools, is financed by a combination of sales and use taxes, education taxes, income taxes, tobacco taxes, liquor taxes, real estate transfer taxes, lottery profits and other tax sources. Teacher salaries are tied directly to per-pupil "foundation grants," which are paid out partially from this fund. This government-to-school relationship will undoubtedly raise questions about the possible implications of government supervision of teacher benefits, which the Senate will consider when data from the commissioned analysis becomes available.

Alternatively, a bill introduced by Sen. Barb Vander Veen requiring claims history disclosure from Third Party Administrators to school districts upon request could become part of the dialogue.

Insurance pooling explored

Senate Republicans believe their approach will save school districts money on health insurance so that available funds can be used for instructional activities; controlling spending and getting the most value out of every education dollar.

Opponents argue that the current system is fair, and that other sources are to blame.

In a May Battle Creek Enquirer interview, Olivet Community Schools Superintendent Dave Campbell explained that he believed the rising cost of education employee health insurance is hurting school districts across the state, telling the paper he could be using his time better by focusing on curriculum instead of worrying about how "to stretch state dollars when fixed costs are rising."

The National Center for Policy Analysis reports, "At least six other states are considering health insurance pooling plans for school districts as a way of holding down increasing health care costs," and that unions in Oregon and Minnesota are supporting plans on the basis that they limit medical costs which might otherwise cause other cuts to school district budgets.