School districts wrestle high health care costs

Legislature could address problem this year

Little, if any, progress has been made this school year in dealing with the rising health care costs for public school employees. Some districts have taken matters into their own hands, while others patiently wait for legislative action.

"At this point, any help would be greatly appreciated," says Tom TenBrink, superintendent of Jenison Public Schools.

The boards of education for Holland Public Schools, in west Michigan, and Lakeview Public Schools, north of Detroit, both face union accusations of unfair labor practices after implementing health insurance changes for teachers that will significantly reduce costs. A Macomb County Circuit Court Judge turned down a request for an injunction from the Lakeview teachers union. It had hoped to block the new insurance plan from taking effect Jan. 1, a move the district says will reduce costs by $500,000 annually. Aside from the insurance issue, the Lakeview Education Association says the district did not bargain to an impasse, and a 3.5 percent pay raise, given in conjunction with the insurance change, is unacceptable because it occurred outside the confines of a contract.


Oakland Press, Dec. 7, 2005

“Next to fixing the state’s woeful economy, one of the most pressing problems Lansing has to deal with right now is halting the runaway health care and pension costs that are decimating our public schools.”

"It really benefits the students, the citizens and in the long run the teachers of Lakeview Public Schools," district attorney Craig Lange told The Macomb Daily after the ruling. "Lake-view’s whole approach has been in finding savings that wouldn’t require layoffs or reduction of educational standings."

At issue is the Michigan Education Special Services Association, a third-party insurance administrator affiliated with the Michigan Education Association. MESSA provides no insurance benefits, but repackages benefits from Blue Cross/Blue Shield and sells them to school districts. MESSA is a bargaining issue for the union, and covers more than half of Michigan’s public school teachers in about 75 percent of the state’s districts. School boards face difficulties because MESSA generally refuses to give claims data to individual districts. School boards, in turn, cannot obtain competitive bids because other potential providers have no claims experience on which to base offers.

MESSA health insurance can cost school districts more than $16,000 per teacher annually. The average family insurance plan nationwide, according to the Kaiser Family Foundation, is less than $11,000 a year. A package of bills in the Michigan Legislature would attempt to bring those costs under control, allowing school districts to pool resources and purchase less expensive coverage.

"It is my hope that the legislature addresses this in a forthright manner," says Bill Mayes, executive director of the Michigan Association of School Administrators. "If we don’t get this under control, the goose will die."


The Bay City Times, Dec. 6, 2005

“The leaders of Michigan’s public schools want the

freedom to save hundreds of millions of dollars in

health care costs. They should get it.”

Senate Bills 895-898 passed in the Michigan Senate on Dec. 1, and now await a vote in the state House. The legislation would allow districts to pool together for the purpose of self-insuring employees, while at the same time shifting catastrophic claims to the state in order to reduce the risk of those pools. Backers say the change would reduce costs by more than $150 million the first year and by more than $233 million by the third year, as well as provide more choices to employees. The Detroit News, Oakland Press and Bay City Times all have editorialized in favor of the plan. Also under consideration in the House is a bill to move teachers from a defined benefit plan for retirement to a defined contribution plan, such as a 401(k).

"The money this saves would go back into education – to hire more teachers, for pay raises, to buy textbooks or technology,’’ Sen. Wayne Kuipers, R-Holland, told the Associated Press. "Schools will get this money back.’’

Mayes agreed.

"Health care and retirement costs have become a real detriment," Mayes said. "It limits the number of new teachers schools can hire, and getting that new blood into the system is so valuable."

MESSA’s opposition to the changes was detailed in a recent Associated Press story.

"It’s politics,’’ Gary Fralick, a MESSA spokesman, said of the reform efforts. "I think they saw an opportunity to try and divide the house of labor.’’

The bills are supported by the state’s second-largest teachers union, the Detroit Federation of Teachers, along with the Michigan AFL-CIO.

"If MESSA provides a quality product at a competitive price, MESSA will be alive and well,’’ said David Hecker, AFT Michigan’s president.

During testimony before the Senate Education Committee, Fralick said the new legislation would allow other insurers to "cherry pick" districts that appear to have healthier employees, based on claims data.

The pool approach is getting a trial run in West Michigan, where 14 school districts from Kent, Muskegon and Ottawa counties have formed the West Michigan Health Insurance Pool. More than 1,000 employees, none of them teachers, are covered, and costs are expected to decrease 8 to 10 percent this year.

Amid mounting criticism, MESSA has taken steps recently to create an alternative to its Super Care coverage. MESSA Choices II is a PPO that has been widely accepted in recent contract negotiations. The Employment Relations Information Network, a service of the Michigan Association of School Boards, lists recent contract settlements on its Web site, where MESSA insurance figures prominently.

Iron Mountain Public Schools, for example, gave teachers a 2 percent pay increase this year and 2.5 percent for next year, along with a change to Choices II and an employee contribution of $34.50 per paycheck toward insurance costs starting with the 2006-2007 school year. Hudsonville Public Schools kept Super Care and teachers received 1.5 percent pay increases for two years. Teachers in the Parchment schools pay $1,000 toward Choices II coverage, but more than three times that, $3,100, if they opt for Super Care.


The Detroit News, Dec. 7, 2005

“School health insurance legislation pending in the state House Education Committee could save school districts up to an estimated $150 million in the first year. The bills correctly offer the districts more options in buying costly health insurance for their employees.”

The Sanilac Intermediate School District agreed to a 1.75 percent pay increase each year for three years and increased prescription co-pays from $2 to $10. Current employees were offered Super Care at no cost, but new hires will pay the difference between Choices II and Super Care if they choose the more expensive plan. Employees volunteering to switch to Choices II receive $100 a month for 12 months.

"This is not a case of administrators versus the MEA," Mayes said. "It’s the facts of life."