A version of this commentary was published in The Detroit News on Aug. 24.
A proposal in the Michigan Senate would establish a state-run health insurance pool for all Michigan public school employees. This plan, according to the much-discussed Hay Group report released in July, could save the state between $146 million and $281 million in this school year alone.
However, a statewide health insurance pool is at best a partial solution that carries risks of its own. A better solution is to make it possible for school districts to shop around for employee health insurance by giving them access to their general claims history — the same access any other employer would have.
But districts typically cannot access such data because MESSA, Michigan’s largest administrator of school employee health insurance benefits, frequently refuses to provide it. MESSA was established by the Michigan Education Association, the state’s powerful school employees union, and as a widely publicized 1993 study by the Mackinac Center for Public Policy noted, the union long used mandatory collective bargaining to pressure school districts to purchase MESSA coverage. The MEA is technically prohibited from doing that now, but MESSA still withholds aggregate claims information that would permit districts to solicit bids from MESSA’s competitors.
The savings could be considerable: In 2004, the most common MESSA family plan cost $15,834 per year for each employee, while the typical employer-paid family policy nationwide was $9,602. By one estimate, open competition could save Michigan school districts as much as $400 million each year.
In contrast, a state-run school employee health insurance system, despite diminishing MESSA’s inflationary influence on insurance costs, is an imperfect solution. It would put billions of health insurance dollars under the control of a politically appointed board, and it would centralize benefits choices, thereby allowing lobbyists to manipulate a single entity, the state, rather than negotiate with hundreds of local districts. Because districts would be required to participate, competition would be limited even further than it is under the current system.
School districts can confront rising health care costs by opening the process to competition. MESSA should be able to compete, of course, but it should be required to provide a district’s aggregate claims data — just as the state’s other insurers do — while protecting individual privacy. A bill in the state House would mandate such disclosure, and this proposal is more likely to reduce the schools’ health insurance costs in the long run.
Ryan S. Olson is director of education policy the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich.